Mint Primer: Why rents will spiral again this year

Rents are expected to get pricier this year too (AP)
Rents are expected to get pricier this year too (AP)

Summary

  • After sky-high hikes in 2023, 2024 might see a similar trend in rents for metro cities

Rents went through the roof in 2023—the rise was the highest in a decade—as demand outstripped housing supply in many cities. Will this change this year? If so, to what extent? Mint explains how the rental story may play out:

How much did rents spiral in 2023?

Residential rents have seen a remarkable turnaround post-pandemic. Last year, average monthly rentals in parts of the top 7 cities soared over 30%, according to Anarock Property Consultants. Bengaluru saw the steepest rise, with high demand due to the ‘back to office’ mandate by firms, and low supply of ready projects. Other IT-dominant cities such as Hyderabad and Pune too saw a sharp rise. After a long dry spell, Gurugram and Noida/Greater Noida saw high double-digit rent appreciation along with a rise in capital values. Monthly rents accelerated faster than property prices in many prime cities.

Should we brace for more rent hikes?

Yes. Rents are likely to build up further steam in 2024. The increase in rents is a demand-supply game. The fact is that ready housing inventory remains in short supply and the spike in demand continues. On a high base, the escalation is likely to be in the range of 10-15% this year, as per estimates by Housing.com. Rents may start picking up in the current quarter, and gain momentum in the June quarter, when people usually relocate for better job opportunities—a new financial year typically sees new hiring in many industries. The sustained growth in rents signals promising opportunities for investors.

Have house rents set a new benchmark?

Home rents scaled a peak in 2023. The unprecedented rise in the last two years has led to a re-rating of rentals across cities and are unlikely to come down in some neighbourhoods. But there’s always scope for negotiation if renters offer a higher deposit. However, newer homes near a metro, expressway or airport will command a higher rent.

Which cities are likely to see a rise this year?

Bengaluru, already in the limelight for its astronomic rents, continues to stand out. Likewise Hyderabad and Pune. Within cities, certain localities and gated communities or homes near major employment hubs will see higher rise. Noida, which saw rapid growth monthly rents, is expected to attract more global companies with the Jewar airport. This could lead to a further rise in rents. Rental values along Golf Course Road, Golf Course Extension and Cyber Hub in Gurugram are projected to maintain an upward trajectory.

When will rents stablize?

As the gap between demand and housing supply eventually narrows, it could lead to a more controlled increase in rents. The slew of residential project launches in the last two years will bring in new inventory, but that is still two-three years away. Until then, the momentum in rental demand will persist—it will continue to be an owner’s market. Rents may stabilize sooner in cities such as Kolkata and Chennai, than in other major employment hubs such as Gurugram and Bengaluru where demand will remain high.

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