The Evolving Rental Landscape in India: Trends and Projections

The real estate landscape in India has transformed significantly in recent years. Far from being a fluke or a statistical anomaly, this is the result of a series of intertwined factors, such as demographic shifts, changing investment dynamics, and attitudes towards home ownership.

For instance, the surge in urbanisation has led to many aspiring professionals moving to cities and burgeoning micromarkets for better opportunities, infrastructure, and an overall elevated lifestyle. This, in addition to the flexibility and increased mobility afforded by rental properties, has led to a boost in demand for rentals, especially in urban areas.

The return to work and growing preference for real estate assets such as co-living and co-working spaces have also worked to further fuel the demand for rental assets. A recent report by a leading real estate consultancy has reaffirmed this by revealing a whopping 17.4% YoY surge in rent across India’s 13 major cities. Gurgugram was listed as the city with the highest increase, with a 31.3% surge as compared to the previous year, followed by Greater Noida with a 30.4% YoY surge and Bangalore with a 23.1% YoY surge. 

Further, the report also revealed that the rent has increased by 1.6% this quarter as compared to the previous one, whereas there was an increase of 4.6% QoQ between July and September 2023. A survey by the aforementioned real estate consultancy also stated that despite surging rentals, rental demand has intensified in cities like Greater Noida, Ahmedabad, and Chennai, with the latter witnessing the highest rental demand increase of 4.1% YoY.

As opposed to this, rental supply has witnessed a significant decrease, with exceptions like Noida, Greater Noida, and Hyderabad observing an increase in rental supply. The report also revealed that the ideal rental range in India’s real estate landscape lies between Rs 10,000 and Rs 30,000 per month, with 76.7% of demand and 66.8% of supply falling within this range.

While rental demand has gone up markedly in 2023, owing to factors such as increased urbanisation, influx into the Tier 1 market, increased per capita income, etc., rental supply has gone down significantly as well owing to the increased interest rate, which has led to investors and property owners being less inclined to invest in the real estate market.

Nonetheless, with reports implying that the RBI is likely to cut down on the REPO rate, the year 2024 is predicted to be a game changer for the rental real estate market, with rental supply rebounding significantly to meet demand. Stakeholders must remain flexible to seize emerging opportunities in this evolving landscape. Understanding the interconnected factors driving rental demand is crucial for navigating this transformative period with confidence. In essence, the trajectory of India’s rental market underscores the enduring significance of rental housing within the broader real estate sector.