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Real Estate » Wide Angle

Posted at: Mar 18, 2017, 12:45 AM; last updated: Mar 18, 2017, 12:45 AM (IST)REAL TURF

Rental trends that will define residential realty in 2017

Rise of demand in spill-over markets of key office hubs

  • With the development of key office spaces across metros, these markets are well-established and already commanding high rentals. As a result, they are creating spill-over demand in nearby areas. For instance, in Bangalore, Kundalahalli, KR Puram and far-away areas in Sarjapur Road are seeing spill-over demand from Whitefield and Outer Ring Road markets while in Mumbai, Kandivali East is seeing spill-over demand from BKC as against Andheri where rentals are much higher. In this, most markets are offering rentals at affordable prices as compared to the neighbouring established markets.

Mir Jaffer Ali

Considering recent trends in the Indian realty market, rental demand has seen a significant rise over the past few years. With property prices escalating, particularly in metros, owning a home has become a distant reality. A recent survey indicated that demand for rental properties has gone up substantially across metros as against the previous years. In fact, Tier 2 and 3 cities have also seen a decent rise due to better job opportunities and influx of population from nearby smaller towns and villages. 

Interestingly, a significant number of people prefer to rent a property in the present scenario as against buying. As many as 38 per cent respondents stated that they prefer to rent a property in prime locales and live closer to workplaces or near schools and hospitals. This was largely seen in MMR, NCR and Bangalore where property prices are skyrocketing.

Backed by this rising demand for rental properties, it becomes imperative to understand the multiple trends that will define the Indian residential realty space in 2017. Some of these trends include: 

Improved infrastructure boosts demand in affordable rental destinations: Lack of viable physical infrastructure earlier posed a major challenge for renters across metros. As a result, people opted to rent places closer to their workplace or their children's school even if it commanded higher rentals. But, with improving connectivity in major cities via metro, monorail, flyovers, expressways or likewise, it is no longer a challenge to travel to affordable destinations either in the peripheries or the suburbs. For instance, in MMR, people in BKC earlier preferred to live in close vicinity in markets such as Andheri East or West. But with improved connectivity via Western Express Highway (WEH) they can now travel easily to more affordable areas like Mira Road. Moreover, data suggests that affordable destinations are seeing a spurt in rental demand in most cities in India.

Start-ups driving rental demand: With increasing number of new ventures across cities, the rental markets of several micro markets in major metros is seeing remarkable signs of upward trajectory. For instance, in Bangalore, Koramangala, HSR Layout and Indiranagar have emerged as the start-up hubs in recent times. While in MMR, Powai has emerged as a major start-up hub of that region.

Start-ups make a beeline for independent houses as office spaces: With increased rental demand by start-ups across metros it is interesting to note that most of these prefer to rent independent houses in the beginning. This could be essentially because these homes are more affordable as against large office spaces. Additionally, these homes can be customised as per the tenant requirements and accommodate the lower bandwidth of employees. For instance, in Bangalore, most start-ups begin their journey by renting independent homes either in Koramangala or at HSR Layout where rentals are not significantly higher and yet are areas within the city limit.

Quest for better lifestyle prompts youngsters to rent in gated communities: Increasing aspirations of youngsters for better lifestyle and good amenities is prompting more and more such people to opt for gated communities for renting in metros. These youngsters are mostly bachelors or spinsters who have higher disposable incomes. Rather than living in PGs, they prefer to rent a flat. Moreover, the amenities that they aspire include a swimming pool, a fully-functional gym, tennis court, among others. Unlike earlier, when most communities barred youngsters from living in them, many are now open to have them within the community provided they don't break the norms of the society.

Spurt in residential rentals around major schools: If we go by the recent trends, then several parents are opting to rent a place closer to their children's school instead of their workplaces. This was substantiated by our survey which indicated that more than 50 per cent people prefer to rent a place closer to their child's school as against their workplaces. Much like the global western markets, the new-age parents are very apprehensive about their children travelling long distances. For instance, data indicates that there is significant rental activity along Sarjapur Road since it is home to most popular schools in Bangalore.

Gross rental yield - Global vs. Indian markets: Interestingly, one key trend is that most of the localities with high gross rental yield are located towards the peripheries of the city. This is in contrast to developed international markets such as Sydney, New York, etc. where city centres command maximum gross rental yield. One key reason for this significant trend could be due to the affordable property prices in these suburban localities and proximity to the work places.

—The writer is Founder and CEO, PropUrban

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