The Indian rental market in India has been affected with the downturn, the market fell around 10 per cent in the last one year and only now is it slowly reviving.

“Residential rentals are displaying varying dynamics across cities, but there is no generalised rise. To a large extent, this market segment is driven by the employment situation and therefore, a lot depends on the degree to which each city is generating jobs,” explains Raminder Grover, Jones Lang LaSalle Meghraj (JLLM).

Until recently, the Indian rental market did not look too healthy because of the recent economic downturn. Inbound expatriate movement was subdued, due to lack of employment opportunities and companies restricted their rental allowances, as part of their cost-cutting measures. In contrast to the first quarter, middle-class home seekers are showing a marked preference towards buying their own homes, thanks to vastly improved home loan rates, he adds.

According to the observations from JLLM, Mumbai’s market showed no signs of the expected correction in rental values because of the continued shortage of supply. “Rental rates have increased by seven to 10 per cent in the suburbs, most notably, in Bandra and in other areas including south Mumbai. They have remained more or less at the previous levels in the financial capital,” Grover elaborates.

The Indian rental market is likely to go through a rough patch, at least till next March and this correction is a much-needed one, observes realtor Sandeep Sadh. “A majority of the population who go for rental accommodation belong to the working class and in the last one year, when there has been no major salary hike and bonuses given, the want of migrating to a bigger space has been curbed,” he points out.

There are a lot of other factors, as well, for the stagnation in the Indian rental market. Middle-class individuals, who are planning to settle down in Mumbai, are opting to deal with EMIs, rather than the yearly appreciating rentals and landlord problems.

“Although, according to government rules, one can sign a contact of upto five years with the landlord, this seldom happens because of the vested interests of the broker and indecisiveness of the landlord. Also, the contract might stipulate a five to 10 per cent hike in the rental values, each year, which the home seeker might not be wanting to give as markets have become volatile,” Sadh adds.

Grover, however, maintains that the demand for rental space has risen over the last few months, in tandem with the improving economic scenario and increased employment rates. “The improvement since April is between 12 to 15 per cent, depending on the economic drivers of each city.

Indain rental rates are likely to rise by at least 10 per cent over the next few months as demand improves further, along with the economy,” says Grover. Sadh also expresses optimism: “The next financial year is when I expect the market to revive.” Places like Goregoan and Powai have become hot spots, as many offices have moved to suburbs. The rates in these spots are high but connectivity is what rental homeseekers are looking for.

Many realtors point out that the commercial rental market has taken a bigger beating than the residential one, as many projects fell halfway through. “The commercial market fell as much as 40 per cent in the last one year. Consequently, the recovery time needed will be substantially more,” says a realtor from the western suburbs.

In Delhi, there is a lot of availability in NCR region, resulting in stagnancy in rental rates. Kolkata and Chennai, on the other hand, remain quite steady on the rental rates scale. In Bangalore, there is enough demand for rental accommodations, but rentals have remained stagnant in the CBD region. However, they have come down, in the outskirts of the city, by around 10 to 15 per cent. Pune represents a definite oversupply and the rental market may show signs of correction soon.

The slowdown in property sales has fuelled a surge in the rental market in Delhi.

Delhi and NCR

On an average, the residential rental has gone up 25% in the last one year in Delhi and NCR. In many areas, it went up by even 40%,” says Anu Gupta of Century 21 India. Ashok Chauhan, a North Delhi-based broker adds: “The rental for a two-bedroom set in Delhi was about Rs 8,000 per month a year ago. However, today, it is very difficult to get a decent two-room set on the same rent even in remote localities.” According to industry officials, the high cost of properties and slackening supply of houses have fuelled rentals in Delhi. “People need a house to live in, and not everyone can buy one. With prices still beyond the reach of a large section of the middle class, staying in a rented accommodation is the only option left,” Anu Gupta says.

Sales Down – Rents Up

The other reason is that many people are shifting from South Delhi to East and West Delhi for the simple reason that rentals in South Delhi are at least 20-25 % higher compared to other parts of the capital. The economic slowdown has hit home sales and sent prices plummeting. The flip side – house rents have shot up. Rents went up by around 30% in major cities including Delhi and the National Capital Region (NCR) last year, as more and more consumers, hit by the slowdown, preferred living in rented houses to investing huge sums in properties, industry officials say.

Office Rentals

A similar phenomenon has been witnessed in the office rental market in India with many companies no longer wishing to buy office space but instead renting it. It works out cheaper to rent serviced office space and pay for what companies need and grow as and when its affordable as opposed to taking on costly overheads and leases.

Navyroof.com now offers serviced offices in 22 locations all over India.

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