House rents are surging across the country with offices calling employees back to work leading to a spurt in demand which had crashed during the first two years of the pandemic.
A study conducted by consultancy Anarock found up to 23 per cent rise in monthly rent across the top seven cities. In Calcutta’s top two renting destinations, Rajarhat and EM Bypass witnessed 11 and 16 per cent jump in monthly rent in 2022.
In contrast, the spike in the luxury end of the market appears to be more pronounced on an absolute basis. Renting a 2,000 square foot apartment in upscale Alipore and Ballygunj will cost Rs 65,000 and Rs 97,000 a month, up by Rs 4,000 and Rs 11,000 respectively, the study revealed.
“Rental demand increased substantially in 2022. With more companies calling their employees back to the office, including in the hybrid mode, rental demand is rising across the seven top cities, after plummeting during the two worst Covid-19 waves,” Anuj Puri, chairman of Anarock Group, observed.
The consultancy predicted rent may still go up in 2023.
Given the hybrid working model and rise in home loan interest rate, there is a propensity among buyers, especially the younger generation, to defer purchase of properties. As a consequence, they would look to seek rental homes.
Even though the rental home segment in India is not institutionalised — developers here prefer to sell apartments rather than looking at holding the asset for rental income — the market is growing with work related domestic migration.
“Higher the floating population, stronger the demand for rental property. As a consequence, IT hubs such as Bangalore, Hyderabad, Pune are some of the top destinations when it comes to rental homes. In contrast, Calcutta is not a big rental market,” Jitendra Khaitan, chairman & managing director of citybased property brokerage Pioneer Property Management, said.
Mumbai and Delhi have traditionally been strong rental markets because of high capital value which makes home buying unaffordable to a large section of populace.
In Calcutta, established large gated projects do get steady customers looking for rent but apartments on rent usually constitute only 8-10 per cent of the total stock.
One of the factors that draw investment in a residential development meant for rent is yield, which is a factor of annual rental income to the property’s capital value. In India, it is usually 2.5 to 3 per cent, which translates to Rs 250,000 to Rs 300,000 annual rent in a property of Rs 1 crore.
“It is a big market in the US but not started in India. High cost of capital and low rental yields are major factors for not picking it up here,” said Abhijit Das, director east of Knight Frank India.
In the luxury end, Tardeo and Worli are two Mumbai locations that saw appreciable jump in rent to Rs 315,000 and Rs 238,000 for a 2,000 square foot property, while Golf Course Road in Delhi was at Rs 80,000 a month, Anarock said.
