A recent report by Anarock showed a significant increase in rental housing demand across major Indian cities over the past year. This has led to steady growth in both average rental values and rental yields. Bengaluru topped the list with a rental yield of 4.45% in Q1 2024, followed by Mumbai and Gurugram. Yields in Bengaluru, Mumbai and Gurugram have risen 24%, 19% and 17% respectively since 2019. Cities with large IT sectors like Bengaluru, Gurugram, Pune, Noida and those in the Mumbai Metropolitan Region witnessed considerable increases in rental values and yields due to more employees returning to offices.
A recent report from Anarock, a real estate consultancy firm, stated that there has been a significant rise in rental housing demand in major cities. As a result, average rental values as well as rental yields have steadily increased. Rental yield is the annual return on investment (ROI) investors earn from capital invested in a property. It's essentially a way to measure the profitability of an investment property.
Bengaluru topped the list with a rental yield of 4.45% in Q1 2024, followed by Mumbai at 4.15% and Gurugram at 4.1%. Bengaluru's rental yield in pre-Covid 2019 was 3.6%, representing growth of 24% till date. Mumbai's yield grew 19% from 3.5% in 2019 to 4.15% in Q1 2024. Gurugram saw yields rise from 3.5% in 2019 to 4.1% in the last quarter.
IT dominated cities including Bengaluru, Gurugram, Pune, Noida, and also MMR (Mumbai Metropolitan Region), have seen considerable upticks in their rental values, and therefore in rental yields as well. This was primarily on account of corporations asking their employees to return to work.
Rental rates increased an average of 4-9% across prominent localities in the top seven cities in Q1 2024 compared to the previous quarter. In Bengaluru, Sarjapur Road and Whitefield saw rents rise 8% each to INR 34,000 and INR 32,500 per month respectively for a 2BHK flat of 1,000 sq ft. Compared to end-2022, top localities saw staggering rental hikes of over 40%.
Noida's Sector 150 witnessed a 9% rental hike, while Delhi's Dwarka saw 6% growth. In Mumbai, rents in Chembur and Mulund grew 4% each to INR 62,500 and INR 60,000 respectively. Kolkata's Rajarhat saw the lowest increase of 3%. Rents rose 4% each in Chennai and Mumbai, and 5% in Hyderabad's HITECH City and Gachibowli.
The data suggests a nationwide uptick in rental yields. Cities like Pune, Noida, Delhi, Navi Mumbai, and Thane have all seen improvements in their rental yield compared to pre-pandemic times. Residential rental yields in India had chronically stagnated before the Covid-19 pandemic, with the national average at just 3% for many years. However, residential rental values in India's top cities resurged tremendously after the pandemic, with 2023 seeing them soar by over 30% Y-o-Y.
In the last quarter of 2023, rental values stabilized in most cities as renting activity usually abates in the last quarter of the year. However, the rental real estate market picked up momentum again in the first quarter of 2024.
As per Santhosh Kumar, Vice Chairman ? ANAROCK Group, the current momentum in the rental inflation trend is not expected to slow down immediately. In fact, he believes that the rates would go up further in the next few quarters, as rental activity typically remains high in the first two quarters of a fiscal year.
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