Rents surged in major Indian cities during Q1 2024, Bengaluru led the pack with an increase of 8% in select communities during Q1 2024. Other localities with notable hikes include Noida (9%), Delhi (6%), Hyderabad (5%), and Mumbai (4%). Chennai saw a more moderate increase of 4%, while Kolkata experienced the smallest rise (3%) in Rajarhat. Market sources say, that many companies asking employees to return to the office, was a key reason for this trend. The significant rise in rent is certainly favorable for landlords.
Rental yield is a key metric for real estate investors; it expresses the annual rental income a property generates as a percentage of its purchase price. Bengaluru’s rental market has seen significant growth. In 2019, rental yields sat at 3.6%. By Q1 2024, that number had jumped to 24%, according to market sources. This trend is reflected in specific localities like Sarjapur Road and Whitefield, where average rents for a standard 2 BHK flat rose 8% in Q1 2024 compared to the previous quarter. In Sarjapur Road, this translates to an increase from ₹31,600 to ₹34,000 per month, and in Whitefield, from ₹30,200 to ₹32,500 per month. A comparison of rental values between the end of 2022 and the first quarter of 2024 reveals a staggering increase of 40% or more in the top localities of Bengaluru. In Mumbai, rental yield jumped to 4.15% in Q1 2024, up from 3.5% in 2019 (a 19% increase). Gurugram followed closely at 4.1%, also showing growth from 3.5% in 2019.
Hot Markets Beyond Bengaluru, Where Rents Are Rising
While Bengaluru takes the crown for the most dramatic rent surge, other major cities haven’t been immune to rising rental values. Other cities have also witnessed rental value inflation, though not to the magnitude seen in Bengaluru. These cities included Gurugram, Noida, Delhi, Pune, Mumbai, Navi Mumbai, Thane, Kolkata, Hyderabad, and Chennai. In NCR, Noida’s Sector 150 saw average rents rise by 9%, and in Delhi’s Dwarka by 6%. In Mumbai, Chembur and Mulund saw 4% growth each in rental rates. In Chembur, the average rental rates in Q1 2024 stood at approximately ₹62,500 per month, as against ₹60,000 per month back in Q4 2023. In the prominent localities of the top 7 cities, there has been an average jump of 4–9% in residential rents in Q1 2024. Considering that the typical annual increase is 5–10%, this is significant, and it certainly bodes well for landlords.
Among the major cities, Kolkata’s Rajarhat witnessed the most modest increase at just 3%. Rents there edged up from ₹18,500 to ₹19,000 per month between Q4 2023 and Q1 2024. Meanwhile, both Chennai and Mumbai saw a more moderate rise of 4% in their average rents. Hyderabad, however, experienced slightly higher growth, with prominent localities like HITECH City and Gachibowli registering a 5% increase in rent each for the quarter.
The Rental Rush: Decoding the Forces Behind Skyrocketing Demand
According to market sources, as offices have reopened post-pandemic, there has been a significant surge in demand for rentals, leading to a corresponding increase in rental yields. Cities such as Bengaluru, Gurugram, Pune, Noida, and Mumbai, dominated by the IT sector, have witnessed notable rises in rental values, consequently boosting rental yields in these regions. With notable year-on-year increase of over 30% recorded in 2023. While the final quarter of 2023 typically witnesses a slowdown in rental activity, leading to a stabilization in rental values across most cities, the rental real estate market regained momentum in the first quarter of 2024. It is anticipated that the rental market will strengthen over the next few quarters, as rental activity typically peaks in the first two quarters of a fiscal year.