Residential rental price slows down in key cities as supply increases

After hitting a major peak post Covid, the rentals across major cities in India have settled down. This comes as housing supply keeps hitting the real estate market. The rentals are still growing, however, the rate of growth is hit with cities reporting 2-4% growth during April-June quarter in comparison to 4-9% growth in the previous quarter.

Rental surge in India

As per Anarock data, rent for a 1,000 sq ft 2BHK in Bengaluru’s Whitefield was Rs 20,000 in 2019 but dipped to 18,500 by end of 2020 due to the pandemic. It jumped to Rs 30,200 in 2023 end and Rs 32,500 in Jan-Mar quarter of 2024 and further moved to Rs 33,700 in the current quarter.

The Economic Times report quoted experts and said that with more new supply entering the markets, highly speculative residential rental spike is coming to a halt. As per Anarock Bengaluru’s Whitefield and Noida’s Sector 150 witnessed highest 4% quarterly growth each in Q2 2024 against preceding quarter.

“In India, the second quarter of most years typically sees rents increase more than in other quarters due to the commencement of the new academic year and the employment of new staff. This year, declining rental value growth coincides with substantial new housing supply entering these markets,” said Santhosh Kumar, Vice Chairman, Anarock group.

Meanwhile, the average rents in Noida’s Sector 150 rose by a mere 4% - from approximately Rs 24,000 a month in Q1 2024 to Rs 25,000 a month in the current quarter. The quarterly hike stood at 9% in Q1 2024 against Q4 2023.

Similarly Sohna Road in Gurgram and Dwarka in Delhi saw their respective quarterly rents increase by 3% and 2% in Q2 2024; in Q1 2024, the hikes stood at 4% and 6% respectively.

In Mumbai's Chembur and Mulund the average rent increased by just 2% against the preceding quarter (Q1 2024); in Q1 2024, they rose by over 4% against Q4 2023. Hyderabad's HITECH City and Gachibowli saw avg. rents rise by 3% each in Q2 2024 to date over the preceding quarter. In Q1 2024, the quarterly avg. rent hike in both these markets was 5%.

Housing supply surge

Meanwhile, the top 7 cities are set to deliver 5.31 lakh new units in 2024 while in 2023, these cities saw approximately 4.35 lakh units hit their markets. This would be a 22% annual supply increase this year if delivery schedules remain on track.

Among the top 7 cities, MMR is slated to see the highest completions at approximately 1,60,900 units in 2024. In 2023, the region saw approx. 1,43,500 units completed. NCR is expected to see 1,44,315 units delivered in 2024, against 1,14,280 units in 2023.

Also watch: After a double digit increase, rents in metro cities set to rise even higher