Amidst the evolving landscape of India’s real estate market, a striking trend emerges—a surge in rental rates sweeping across the country’s metropolitan hubs. This surge, far from coincidental, mirrors the profound shifts underway within the property sphere.

From the soaring property prices nationwide to the discernible consumer preference for newly-constructed and ready-to-move-in homes, the signs are clear. Yet, a stark reality looms large—a glaring disparity where only 21% of available inventory aligns with this coveted category. This pronounced imbalance, particularly evident in prime locations adjacent to central business districts, exerts notable upward pressure on rental rates, resulting in a significant surge in monthly.

Unveiling the Surge

The surge in rental rates across India’s top cities is not a mere coincidence but a reflection of the underlying forces driving the property market’s transformation. Since the pre-pandemic era, property prices have witnessed a staggering 15–20% climb, propelled by tighter monetary policies and escalating home loan rates.

Interestingly, our bi-annual consumer sentiment survey indicates a strong preference, with 59% of homebuyers leaning towards newly-constructed, ready-to-move-in properties. However, the stark reality remains—only 21% of available inventory falls under this coveted category. This supply-demand imbalance, especially pronounced in prime locations near central business districts, is exerting upward pressure on rental rates, leading to a noteworthy surge in monthly asking rents.

Also Read: Plot vs Flat: Should you invest in a plot or buy an apartment? Find out

Insights from the Data

Delving into the data reveals a compelling narrative of growth and resilience. The IRIS index of Housing.com which tracks online search trends of key real estate markets and a barometer of high-intent search volume, highlights a significant trend—since 2022, the rental index consistently outstripped the buy index, culminating in a remarkable 23-point difference by the end of 2023.

This surge in rental demand is not just a statistical anomaly but a tangible reality, translating into a rapid escalation in monthly asking rents. Notably, localities adjacent to commercial hubs in cities like Gurugram, Bengaluru, and Hyderabad have experienced a staggering 55–60% spike in rents compared to pre-pandemic levels, signalling a profound shift in rental preferences and market dynamics.

What Lies Ahead

Amidst this meteoric rise in rental rates, the burning question lingers—will the growth taper off or continue at the same rapid pace? The answer lies in a delicate interplay of factors reshaping the rental landscape. The soaring demand for ready-to-move-in homes, coveted by both buyers and renters, alongside the constrained supply, paints a complex picture. With capital values appreciating by 15–20% since 2019, many aspiring homeowners find themselves priced out of the market, fuelling the surge in rental demand and consequent upward trajectory in monthly rents. 

This scenario, characterised by dual pressure on the limited ready-to-move-in inventory, is expected to sustain the upward momentum in rental prices, albeit not necessarily at the exponential rate witnessed in property prices.

Also, the road to rental housing prosperity is paved with promise and opportunity. However, challenges loom large, primarily driven by a constrained supply of ready-to-move-in inventory, rising property prices, and intensifying competition between buyers and renters.

Consequently, we anticipate sustained upward pressure on both property prices and monthly rents over the next 2–3 years, as the market grapples with the complex interplay of supply-demand dynamics and evolving consumer preferences.

Conclusion: Navigating the Path Forward

India’s rental housing sector stands at the cusp of a transformative journey, fuelled by resilience, innovation, and opportunity. As the market adapts to the changing landscape, it offers a fertile ground for investors and stakeholders willing to embrace the dynamic terrain and capitalise on the emerging trends. In this landscape of promise and potential, the rental housing sector emerges as a beacon of opportunity, ushering in a new era of growth, stability, and prosperity for landlords, tenants, and investors alike.

(By Amit Masaldan, Chief Revenue Officer, Housing.com)

Disclaimer: Views and facts expressed above are those of the author. They do not necessarily reflect the views of financialexpress.com.