Property Prices Come Down, But House Rents Heat up 20%

Chennai witnessed a modest increase of 5%

Property prices have cooled down significantly in the past one year. So, has this led to a lower rental bill for tenants? No, rents in most cities have increased in the last one year, with some localities even witnessing hikes of up to 20%.

Data from online real estate listing portal Commonfloor.com show that rents are up, on an average, by over 10% in Delhi&Mumbai in a year, while the southern cities of Bangalore & Chennai witnessed a modest increase of 8 and 5 per cent, respectively.

House rents have seen a steady rise even as property prices captured by the NHB (National Housing Bank) Residex have dropped by 3% in regions such as Delhi in the past one year.

One reason rents in the cities are rising despite property prices cooling off is limited supply, say market watchers.

Many new houses in areas like Delhi’s NCR are still in the construction phase and have not hit the market yet, says Mr. Sukhijinder Singh, a broker with REMAX, a global property agency.

In the meantime, those migrating to the region are propping up the demand for rental houses.

Vacant Houses..

Many existing houses also remain unavailable to tenants. About 1.10 Crore houses, against the urban shortage of 1.80 Crore, are vacant as per a report from the Ministry of Housing and Urban Poverty Alleviation.

The procedures involved in sewing up a contract and getting it terminated act as barriers to rent out a property, says Mr. Amitabh Kundu, a professor at Jawaharlal Nehru University, who authored this report.

Also, while property markets have been dull due to speculators staying away, the rental market has no speculation. Landlords quickly adjust rents with rising demand and rental houses find takers within a short time.

For instance, home listings in Bangalore, where rental properties make up over 50% of the houses, remain active for only around a month, says online property portal HomeShikari.com.

While rising rent has been the norm across cities, better infrastructure & the presence of corporate parks nearby have led to steep rent hikes in some localities.

For instance, rents in areas like Whitefield & North Bangalore appreciated by 15% to 20% past year riding on demand from the IT workforce, says Mr. Sundar Prakasham, CEO of HomeShikari.com.

Likewise, rents in Andheri, Malad &  Bandra in Mumbai are up by over 10% as these areas are becoming industrial hubs, says Mr. Prateek Sukla, Co - founder and CEO of Grabhouse.com, an online house-hunting site.

Local Factors..

Local issues also hurt rents in some cases. The rents around Gurgaon are down 15% to 20% in one year as ready for possession houses are on the rise, says Mr. Nakul Seth, broker & owner of Pearls Spaces.

In Bangalore, where launches and inventory levels are low & there are expected project delays, rents could increase further, say experts.

However, as a tenant, you can still hope for relief from higher rent by following a few expert tips. 

Avoiding gated communities, choosing suburbs over heart-of-city locations and opting for smaller complexes without many amenities can lower your bill, say real estate brokers.

Src: BL Research Bureau by Meera Siva

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