Rental prices in India's major cities are witnessing a significant rise, with Bengaluru leading the pack. According to a report by real estate consultancy ANAROCK, Bengaluru boasts the highest rental yield of 4.45% in the first quarter (Q1) of 2024, followed by Mumbai at 4.15% and Gurugram at 4.1%. This growth is attributed to a surge in rental demand post-pandemic, particularly with the return of office work culture in IT-driven cities.
The report highlights a pre-covid stagnation in rental yields across India, with the national average hovering around 3% for years. However, the post-pandemic scenario paints a different picture. Rental values have skyrocketed, with key areas in Bengaluru experiencing a staggering 40% increase between 2022 and Q1 2024. Locations like Sarjapur Road and Whitefield witnessed an 8% jump in rents each in Q1 compared to the previous quarter.
The trend isn't limited to Bengaluru. Other major cities like Delhi, Noida, Mumbai, Pune, and Hyderabad have also seen rental value inflation, albeit not as drastic. NCR's Noida Sector 150 saw a 9% rise, while Delhi's Dwarka experienced a 6% increase. Mumbai's Chembur and Mulund witnessed a 4% growth in rental rates each.
While this growth bodes well for landlords, it presents a challenge for tenants. The typical annual increase in rental rates is around 5-10%, but the recent surge signifies a potential rise in the cost of living. Experts predict that the rental market will maintain its momentum in the coming quarters, with the first two quarters of the fiscal year usually witnessing high rental activity.
This surge in rental yields presents a unique opportunity for investors in the Indian rental market, particularly in IT hubs like Bengaluru. However, potential tenants should brace themselves for the possibility of continued rental inflation in the near future.