Bengaluru's Rental Housing Market Records 5-10% Average Price Correction in April-June Quarter

Bengaluru’s rental housing market has brought some cheer to tenants, with an average price correction of 5-10% during the April-June quarter of 2024 as per Hindustan Times Report. As per the report, the local brokers attribute this trend to several factors, including tenants moving to the outskirts of the city for more affordable housing options and the rise of co-living arrangements that offer better value for money.

Shifting to Affordable Outskirts

One significant factor contributing to the price correction is the shifting trend of tenants to the outskirts of Bengaluru. With the hybrid work culture becoming more established, many professionals are choosing to live further from the city center, where rental prices are lower. Manoj Agarwal, founder of Agarwal Estates, noted that the vacancy rate in his portfolio of rental properties has increased from an average of 2-3% to 5%. This shift is primarily driven by the availability of new housing stock at more affordable rates compared to prime areas surrounding the IT corridors.

Localities such as Sarjapur Road and Whitefield in East Bengaluru have seen a notable decline in rental rates. For instance, a 1 BHK unit that was rented out for ₹28,000 per month in the first quarter of the year is now available for ₹25,000. Similarly, a 2 BHK unit of 750-1,175 square feet, previously rented for ₹28,900-45,200 per month, is now available for ₹33,600-40,300, according to data from proptech firm Square Yards.

High Rental Activity in Q2

The second quarter of the calendar year typically registers higher rental activity due to several factors. These include the fresh influx of professionals into the city, families switching accommodations before the start of a new academic year, and other seasonal factors. Despite this traditionally high rental activity period, the market correction indicates a broader trend of tenants seeking more cost-effective living arrangements.

Variations Across Different Areas

While rental rates in the outskirts have seen significant corrections, this trend has not been equally reflected in Bengaluru’s central business district areas. Property consultants point out that rents in Grade A projects developed by well-known brands have decreased by a smaller margin compared to standalone Grade B buildings. This suggests that premium properties are still in demand, albeit at slightly lower rates.

According to a Knight Frank India report, 12,432 residential units were launched in Bengaluru during the June quarter of 2024, marking an 8% annual increase. Simultaneously, 14,271 units were sold during this period, up 11% year-on-year.

Landlords Adjusting to Market Trends

As per Hindustan Times Report, Landlords in Bengaluru are also beginning to acknowledge the changing market dynamics. In recent times, several unconventional demands by landlords have earned them infamy. However, the current market conditions are prompting them to be more flexible. Local brokers are advising landlords to lower rents slightly rather than keeping properties vacant for extended periods while waiting for the ideal tenant.

For example, a landlord who initially sought ₹1.20 lakh per month for a 4 BHK apartment in Indiranagar has revised the rental fee to ₹1 lakh. This adjustment reflects a broader trend of landlords becoming more accommodating to maintain occupancy rates.

Stable Rental Prices in Some Areas

Despite the overall trend of price corrections, some areas have seen stable rental prices. Data from Square Yards shows that a 950-1,200 square feet 2 BHK in Electronic City, previously rented for ₹32,500-40,800 per month in the first quarter of 2024, is now available for ₹32,600-41,400. Similarly, a 1 BHK that was rented for ₹21,000-22,100 per month now commands ₹21,900-23,000.

Future Outlook

Looking ahead, industry experts anticipate a further drop in rents, especially on the outskirts of the city. This prediction is based on the continued increase in housing inventory and the sustained popularity of co-living options. The rental yield in Bengaluru, which refers to the percentage of a property’s overall value received annually through rental earnings, remains the highest among the top-7 cities in India, at 4.45% for the first quarter of 2024.

Conclusion

The current trends in Bengaluru’s rental housing market present a mixed picture. While some areas have seen significant price corrections, others have maintained stable rental rates. The overall market is adapting to new realities brought about by the hybrid work culture, increased housing inventory, and the rise of co-living arrangements. For tenants, these changes offer more options and potentially lower rental costs, making it an opportune time to find housing in Bengaluru.

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