by Mr.
Ashutosh Limaye, Jones Lang LaSalle India
Over the decades, Mumbai has been and
continues to be the destination of countless migrants from all parts of India.
This steady influx of people has also been driving perhaps the highest demand
for rental housing in Mumbai than in any other Indian city.
Close to one-third of
these migrants hail from towns and cities while the remaining come from rural
areas (as per UNDP's Mumbai Human
Development report
and Indian Ministry of Housing). The primary reason for Mumbai's ceaseless
attractiveness as a destination for migrants is, of course, employment.
 |
| Ashutosh Limaye, Jones Lang LaSalle India |
Understanding the
rental housing market in Mumbai is like solving a complex web of matrices.
Nevertheless, if we trace this web on the basis of certain fixed criteria, what
emerges is near-clear visibility of tenants’ location preferences:
Preferences change
according to levels of seniority within the organized (corporate) segment of
Mumbai’s employment landscape. A senior executive would give high priority to
quality of life, followed by homemaker/family needs, whereas a junior executive
would first consider budget constraints, followed by commute time.
Based on these
factors, it emerges that the rentals across various popular rental localities
in and around Mumbai reflect the element of desire of each category of
executives. However, minor changes in the rental dynamics can also be foreseen
in near future, based on certain externalities.
In every sub-market
within Mumbai, we have identified precincts which are popular for rental
housing based on available supply and current trend dynamics. The table below
lists 14 such localities and ranks each on the basis of the four dominant
parameters. Based on the overall scores, it is then possible to assign the
degree of importance of each locality to the three categories of migrant
working population.
Ø
Rental Market For Senior Executives
Out of the fourteen
precincts considered in table-1, we assign five prominent South/Suburban
locations (refer table-2) that are most suitable for senior executives. The
assignment criteria are that at least two of the four factors considered must
have ‘Very High’ or ‘High’ score, with high importance assigned to ‘Quality of
Life’ and ‘Family Needs’.
While we see rentals
across these five locations reflecting the balance between preferences and
rentals, we do observe a few disconnects. For instance, while the overall score
of Napean Sea Road is equal to that of Worli and Bandra, its rentals are much
higher. The former commands high rentals merely because of its high ranking in
terms of quality of life / status value and a generally better neighbourhood
profile.
However, we do not believe that this
disconnect will prevail for much longer because:
1. Previously, offices were largely
concentrated around Mumbai's CBD. They are now increasingly penetrating into
the deeper suburbs, so there is every likelihood that commute times from Napean
Sea Road will increase.
2. Worli has been receiving a massive
face-lift with launches of high-end apartments. Along with its improved connectivity
to the Suburbs, it will soon command a premium even over Napean Sea Road.
Bandra will see a faster rise in rents than Napean Sea Road for similar
reasons, although it may take longer before they match or exceed them due to
its distinct suburban qualities.
Ø Rental Market For Mid-Level Executives
The rental homes
market for mid-level executives is relatively larger, although disconnects are
also wider. We compare the overall scores of various short-listed precincts to
rentals of 1000 sq. ft. 2-BHK apartments. Precincts which have an overall score
of above 3.0 have been identified, although the low rank of commute time has
been avoided. Featured precincts are predominantly well-connected suburban
locations.
This category of
executives generally prefers to maintain a balance between all four selection
criteria. Irrespective of any factor scoring less, a location is acceptable if
the other factors score high enough. However, ‘Commuting Time’ still gets a
marginally higher score since mid-level executives usually are dependent on
public transport and if not so, still commuting time is a big consideration
when they expect frequent longer hours of work and therefore try to achieve
shorter commuting time.
Rentals for these
precincts (see table-3) convey that any location is better than the other if it
manages to strike a workable balance between all four factors. One observed
disconnect is between the rentals of Juhu and Powai. They appear exceedingly
high and therefore act as outliers, considering their relatively poor scores in
the most important factor for this executive category – commuting time. Seen in
this light, the heavy rental budgets required for these localities should
logically make them unattractive. However, the mid-level executive class is
wide - these two outlying localities are still suitable to upper mid-level
executives, considering they offer a high quality of life.
Going forward, we
foresee a radical change in the rental dynamics of precincts identified in
table-3. This is because there are currently a number of infrastructure
projects in various stages of progress in and around these localities. These
projects have direct implications on the commuting time factor.
For instance, the
anticipated completion of the monorail in the near future and the recent
inauguration of the Eastern Freeway will boost demand for rental housing in
areas such as Wadala and Chembur. Another factor is the rapidly improving
quality of construction and neighbourhood profiles of precincts such as Powai,
Goregaon, Wadala, etc. These areas may soon challenge Juhu, which currently
commands a premium on rent purely based on these factors.
Ø Rental Market For Junior Executives
As already mentioned,
budget constraint is an important criterion for junior executives, followed by
commuting time. Junior executives are usually new entrants in the job fray, or
having a maximum of 1-3 years of work experience, resulting in relatively low
salaries. The preferred locations for this category therefore include those in
the deeper suburbs such as Kandivali-Borivali, Thane, Kharghar, and
Dahisar-Mira Road.
However, localities
such as Andheri, Chembur and Goregaon do manage to accommodate this cadre to a
certain extent, mostly because of their supply of smaller apartments.
Availability of such apartments is much lower in South Mumbai and the immediate
suburban locations (excluding poorly-maintained tenements and chawls).
A unique
characteristic of junior executives is that they are more mobile than the other
two categories. This helps them to more easily satisfy the second-most
important factor after budget – Commuting Time. Thus, while Senior and
Mid-level executives would be stickier as well as more stable in their choice
of location and apartment quality, junior executives provide opportunities for
developers and landlords offering options in newer, cheaper locations of the
deeper suburbs. These options provide a reasonable quality of life and an
acceptable degree of connectivity. Overall, the rental market for junior
executives is relatively more sorted.
Conclusion
For a city like
Mumbai, rental housing is estimated to house about 33% of its population,
rental housing as an independently catered-to market segment is not yet
prevalent in Mumbai or for that matter in India, largely due to poor yields as
against high capital appreciation. For instance, while annual rental yields in
Mumbai are in the range of 3-5% in Mumbai, annual capital appreciation is much
higher at 10%, forcing investors to focus on the latter. However, the market
for rental housing is mature, as can be observed through the near-perfect match
between monthly rentals and locations' offering across various precincts in
Mumbai.
Currently, each of
the city's precincts offers distinct features in terms of quality of life,
commuting time, budget and other amenities. With improving infrastructure,
rising quality of construction and deeper penetration of facilities across
various precincts, rental dynamics in Mumbai are going to undergo a radical
change in the near-to-medium term.
For Media Contact
Mr. Arun Chitnis
Head – Corporate
Communications & Media Relations
Jones Lang LaSalle
India,
Level 6, Amar Avinash
Corporate Plaza
Bund Garden Road,
Pune - 411 001.
Tel: (020) 30930441
Fax: (020) 40196101
Mob: +91 9657129999
Website:
www.joneslanglasalle.co.in
Blog:
www.joneslanglasalleblog.com/realestatecompass
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