Bengaluru’s Rental Housing Market Sees Price Correction
Bengaluru’s rental housing market experienced an average price correction of 5-10% during the April-June quarter of the current calendar year, according to local brokers who spoke with HT.com. This should be welcome news for tenants in the city. The primary reasons behind this trend are the movement of many tenants to the outskirts, where new housing stock is available at lower rates, and the rise of co-living options, which provide better value for money.
Factors Driving the Price Correction
The second quarter of the year typically sees an increase in rental activity due to various factors, including families moving before the new school year starts and an influx of new professionals into the city.
The price correction can be attributed to several factors. Manoj Agarwal, founder of Agarwal Estates, noted, “many tenants are shifting to the outskirts of the city where rents are lower compared to the prime areas surrounding IT corridors given a more specific hybrid work culture in place.”
He also mentioned, “The average vacancy rate in his portfolio of rental properties throughout the city has increased to 5% from the previous 2-3%.”
Specific Areas Affected
The trend was most noticeable in areas bordering the IT corridors, such as Whitefield in East Bengaluru and Sarjapur Road, with rental rates declining by over 10%. According to a local brokerage firm, a 1 BHK apartment that rented for Rs28,000 per month in the first quarter is now available for Rs 25,000.
However, data from prop-tech company Square Yards showed that a 2BHK rental cost of 750-1,175 square feet, which was previously available for between Rs 28,900 and 45,200 per month, is now listed for Rs 33,600 to 40,300.
Property consultants observed less evidence of this trend shift in areas surrounding the central business districts. They added that unlike standalone Grade B buildings, rents in Grade A projects built by well-known brands have decreased less.
Multiple Justifications
Vice president of Hanu Reddy Realty Kiran Kumar noted that the previous modification also addresses Bengaluru’s growing inventory levels as developers counter the city’s real estate demand surge. According to a Knight Frank India report, 12,432 residential units were introduced in the June quarter of 2024, an 8% yearly increase. Additionally, 14,271 units were sold during the same period, an 11% increase from the previous year.
According to Saurabh Garg, co-founder and chief business officer of proptech unicorn NoBroker, “Bengaluru’s rental market is returning to normalcy this year.”
Other participants noted that the number of co-living options in the city has also reduced the share of the rental housing market. This quarter, Kumar predicts a further 10% decline in rent, especially in the city’s periphery.
Trends in Q2 2024
Bengaluru had the highest rental yield (4.5%) in the first quarter of 2024 out of the top 7 Indian cities, according to a report from a real estate consulting firm. A property’s rental yield is the proportion of its total value rented out earned in rental over a year.
Rents have risen by over 40% in some prime areas of the city after the COVID-19 pandemic as workers returned to work and landlords attempted to recover annual price increases lost.
How are the Landlords Reacting?
Bengaluru is often referred to as a landlord’s market. However, they seem to be taking note of the changing tide. “In Bengaluru, landlords are starting to recognize that tenants do not want to pay exorbitant rent. Instead of keeping the property empty for months while searching for the perfect tenant, we suggest they reduce the rent slightly,” said a local broker.
In a recent instance, a landlord in East Bengaluru’s Indiranagar locality, who initially hoped to receive Rs1.20 lakh/ month for his 4 BHK apartment, revised the rental amount to Rs 1 lakh.
Do Rents Still Stay the Same?
While local brokers reported a drop in overall rentals and rising rentals on the outskirts, some stakeholders insisted that prices have stayed steady. According to data from Square Yards, and the integrated prop-tech platform, a 950-1,200 square feet 2BHK in Electronic City is currently available for Rs 32,600-41,400 per month during the first quarter of 2024. The original price was Rs 32,500 – 40,800. Meanwhile, the monthly rental cost of a one-bedroom apartment that was previously available for Rs 21,000 -22,100 is now Rs 21,900– 23,000.