by THO
Rents in Bengaluru have increased by more than 20% to 30% over the last few months after several companies decided to scrap work-from-home leading to the ‘floating’ employee population returning to their offices from their hometowns. This has led to a situation wherein there are far too many tenants chasing fewer properties. There have also been instances of more than four prospective tenants vying for the same property. This has led to rental inflation in the IT city to touch almost 24%, so much so that it now competes with global cities like Singapore.
In a city starved of rental properties, tenants have been struggling to cope with ever-changing demands of the landlords, some of whom have gone to the extent of checking out LinkedIn profiles of their prospective tenants. There have also been instances of property brokers allotting slots to tenants for apartment tours and interviews with prospective landlords. A few tenants have even jocularly remarked that cracking a ‘rental’ interview is tougher than getting through a job interview.
1 Average rental inflation in Bengaluru has surpassed that of Singapore
The average rental inflation in India has surpassed that of Singapore and Dubai. The average rental inflation in Singapore has been around 29% and Dubai has been 20% Y-O-Y. However, some pockets of major cities such as Bengaluru are witnessing an exponential rent increase of 30% and above, a study by NoBroker has said.
A report by Anarock Group had also pointed out that India’s IT hub has seen a surge of up to 31% in residential rent. “Rents will once again build up steam when renting picks in the January to March 2024 as Indians usually relocate for better job opportunities amid increased hiring in the new financial year,” it said.
Also Read: Bengaluru real estate: 70% realty assets in the city developed through joint development agreements
2 Rents surge along Metro corridors; Localities along the metro line witness 7-10% higher rental inflation
With offices opening in Bengaluru, the demand for properties around IT parks and office hubs has increased manifold. Also, with the new metro corridor now becoming fully operational, there is an increase in demand for homes along these connectors.
With the demand rising, properties in proximity to metro corridors in the IT city have witnessed 15-18% rent inflation.
“The housing rents have seen a massive jump in Bengaluru in the last year. The average rent inflation in the IT capital has been 24%, with rent inflation in certain areas of the city reaching 30%,” said Akhil Gupta, co-founder and chief product and technology officer, NoBroker.
Another trend is that of rental demand spreading to areas that may not be in proximity to office complexes but are commutable by metro.
“The return-to-office mandate has prompted a significant migration of people back to their work cities, consequently driving up the demand for residential properties. The demand-supply mismatch, as a result of the pandemic, coupled with the need to buy a house, has increased demand for residential houses. This in turn has driven up rentals and prices,” said Gupta.
He also pointed out that Mumbai rentals are way higher than most cities and metro connectivity has contributed to that. A comparison with Mumbai and Delhi would not be fair as their metro connectivity is much better compared to Bengaluru.
“The IT city is notorious for its traffic and metro connectivity has come in as a major relief. We have observed in our annual report that Bangalore has experienced the highest rent inflation this year. Localities along the metro line have experienced about 7-10% higher rental inflation compared to other areas,” he said.
It should be noted here that the Metro corridor connects Kengeri in the western part of the city to the eastern IT corridor of Whitefield.
According to Kiran Kumar, vice president of Bengaluru-based Hanu Reddy Realty, rentals in East and North Bengaluru have touched the roof ever since the Metro became operational .In prime areas along the purple line such as Indiranagar, Koramangla, Whitefield, rentals have increased by around 20%.
A 2BHK near the Indiranagar Metro corridor that was available for ₹30,000 per month, now commands a rental of ₹45,000 per month. A 5BHK independent bungalow in the same area is going for ₹3 lakh per month. The rent was around ₹1.9 lakh per month last year. A 3BHK in a gated community in the same area today commands rents between ₹80,000 to ₹1 lakh per month compared to around 70,000 per month last year. A 1 BHK property (with no car park) that was priced at ₹10,000 per month is now being rented at ₹22,000 per month.
“Enhanced metro connectivity between the east and the north has led to rentals increasing in areas located along the metro corridor. People are willing to pay higher rent for properties located close to the Metro because there are fewer properties available compared to demand,” he said.
In Whitefield (located close to the IT corridor) as well, a 3BHK is going for ₹50,000 to ₹70,000 per month and a 3BHK villa that was going for around ₹80,000 before the metro became operational, today commands a rent of around ₹1.5 to almost 2 lakh, he told HT Digital.
3 Are tenants negotiating hard for rents?
If one were to look at the rental landscape, the demand is still outpacing the supply. Tenants are focused on getting a good house in a gated society. “So, in gated societies there are still many takers even at high rentals. Deals are closing so fast that there is hardly any time to negotiate. Therefore, even though tenants may want to negotiate, the reality is that there is always another tenant waiting who’s willing to pay higher,” explained Gupta.
Also Read: Bengaluru ranks 8th and Mumbai 9th in annual housing price growth index across Asia Pacific region
4 Has the rental deal closure cycle increased or reduced?
The transaction timelines have become considerably shorter due to inventory crunch. There have been instances where deals have closed within a day. Tenants are not even waiting till the weekend to see the property, said Gupta.
5 New draft notification
Prospective tenants should keep in mind that Bruhat Bengaluru Mahanagara Palike (BBMP), the body responsible for civic and infrastructural requirements of the city, is preparing to implement guidance value-based property tax from April 1. Under the new system, properties that are on rent may be subject to twice the tax amount than that of properties that are self occupied. This may put further pressure on tenants who are in any case paying high rents due to the existing supply-demand mismatch.
