April 26, 2023
Housing rentals surge by 4.1% QoQ as demand outstrips supply
With demand for rental homes progressively, home rents are increasingly rapidly in India’s top cities. The growing demand for rental homes in major cities has resulted in demand outstripping supply of rental homes and, as result, making them costlier over the last three months, latest data shows. According to data from online real estate marketplace Magicbricks, average house rentals in the top 13 markets increased dramatically over the prior quarter by a staggering 4.1% in the January-March quarter. In comparison to the December quarter, the average rent in cities like Gurugram, Noida, Hyderabad, and Mumbai increased by 8.2%, 5.1%, 4.9%, and 4.2%, respectively. 11 of the top 13 markets had sequential increases in rentals throughout the past quarter. Only in Thane and Ahmedabad were there slight drops in rent observed.
The recent demand-supply imbalance is mostly to blame for the steady rise in rental prices. Statistics indicates that during the January to March quarter, demand for rental homes remained much higher than the availability in 12 of the 13 cities. Although the largest growth in rental demand was seen in the IT centres of Chennai (14.3%), Bangalore (12.2%), Hyderabad (10.8%), and Pune (7.8%). Only in Greater Noida (-10.3%), Delhi (-1.8%), and Kolkata (-0.9%) did demand and supply fall at the same time. Only in Noida (-0.7%) did supply increase by 4.2% despite a decline in demand. Despite a decline in the demand for rental properties, rentals nevertheless increased by 5.1%.
According to macroeconomic trends, the Indian rental housing industry is showing signs of a strong recovery, and Sudhir Pai, CEO of Magicbricks, expects this to continue during the upcoming quarters. "Notable is the resilience displayed by large southern cities as they continue to draw in talent from all around the nation. Other significant cities with optimistic rent trends include Gurugram and Pune, which continue to draw a talented migrant workforce. These market characteristics all point to a rapid transition to a "business as usual situation" for the real estate sector and a sustained development trajectory for the Indian rental housing market."
In these 13 locations, rental home demand increased by 3.3% year over year, but supply actually decreased by a startling 18%, creating a general housing scarcity. Following previous quarters' trends, 2BHK units continue to dominate the market in terms of both supply and demand, with 42% of tenants looking for 2BHKs. 3BHKs and 1BHK are next, with 36% and 17% of the market share, respectively. The demand for 3BHKs climbed to 36% in Q1 2023 from 30% in Q4 2022, while the demand for 2BHKs decreased to 42% in this quarter from 47% in the previous quarter, indicating a preference for more roomy homes.