The Rental Market Is Expected To See A Gradual Increase Of 10-15 Per Cent This Year

Surninam Singh, a businessman, took up an apartment on rent for Rs 1.25 lakh a year

ago in Gurgaon. Last week he shifted out to another apartment in the same area, but at a rent of Rs 90,000.

Radhika Malik, working with an advertisement agency, moved into an apartment in the Vaishali area recently, for which shes paying a rent of Rs 8,500. The previous tenant was paying Rs 6,500.

During the slowdown months, the changes in the residential rental markets had mirrored the correction in the capital market. Today, with the economy improving and the IT sector expected to do well, rents have gone up in some mature markets but corrected in areas where there is excessive supply or less demand for a particular housing category. Rents have also gone up in some areas as a result of the infrastructure push, limited supply and proximity to work place areas.

Thanks to the depressed expatriate movement and reduced relocations last year, landlords were willing to bargain with existing tenants or new ones and revise the rents in line with the market instead of leaving their properties vacant. If the tenant was not in a position to pay more, the landlord too was not willing to wait longer for transactions to happen. Both were ready to tone down their expectations. This year, however, landlords are hiking up the rents, leading to expectations of a 10 to 15 per cent rise in the Delhi NCR rental market, which had witnessed no significant changes last year.

Rental values have been increasing steadily since the beginning of the year due to improved economic conditions and a better demand scenario, says Ashish Jindal regional director north, Knight, Frank India private limited.

Landlords will push for increase in rentals this year led by this quarter. If capital values are expected to increase by another 10-15 per cent, the increase in the rental market will be the same (between 10-15 per cent) throughout the year, points out Abhishek Kiran Gupta, head of research and real estate intelligence service, Jones Lang LaSalle Meghraj. In some pockets, there is oversupply and hence rental values are low. There is a huge gap between rental values and EMIs. Capital values are up by 30 per cent whereas rentals have gone up by only 10 per cent, says Sam Chopra, chairman and managing director, REMAX India.

Market analysis

Where Gurgaon is concerned, the rentals went down from august to December, last year, but picked up again, especially in the affordable category of Rs 15,000, to 20,000. According to Ajay Sharma, an independent broker dealing with properties in Gurgaon, builder flats going for Rs 15,000 in Sector 56 and along Sohna Road have seen an increase of Rs 2000 more. A three bedroom apartment in a private developers society that commanded a rent of Rs 22,000 has now increased to Rs 25,000. However, it is the high end category that has seen prices correcting significantly. Brokers point out that with a majority of rental deals being signed during the school vacations, rents will see an automatic increase of 10 per cent from the earlier rate. A four bedroom apartment in Noidas Sector 44 that currently commands a rent of Rs 25,000 will cost Rs 2,500 more if a new rental deal is signed in the next few weeks, points out Satish Sachdeva, a broker who operates out of Noida, adding that the Metro effect has already been factored in the rentals.

In Noida, the supply is poorer than in Gurgaon. There is hardly any new supply being delivered. The apartment inventory remains what it was 12 months ago and so the demand is steady. Also, the real impact on rentals in the area will be felt once the Metro is operational in South Delhi, says Vineet Singh of 99acres.com.

Rentals values along the Noida Expressway have increased by Rs 4,000 to Rs 6,000. Apartments in the ATS Greens Complex, earlier available for Rs 20,000 a month, are now going for Rs 26,000. In the Parsvnath complex, apartments that were earlier available for Rs 19,000 are now going for Rs 23,000, points out Ajay Rathore, CEO, Integrated Pan Realty Solutions, a real estate brokerage firm.

Rentals in some markets, earlier going for Rs 35 Rs 40 per sq. ft, are now pegged at Rs 22-Rs 25 per sq ft. This is largely due to the oversupply phenomenon and a huge demand for ready-to-move in flats. Oversupply, in fact, has brought down rental values by 25 per cent in some areas, says Samir Jasuja, CEO of PropEquity.

If one were to analyse the rental values in Vaishali, Vasundhara and Indirapuram areas, one will find that there has been a slight improvement in rentals. According to Santosh Kumar, a three bedroom apartment that commanded a rent of Rs 12,000 a few months ago in the Indirapuram area is now available for Rs 15,000. A two bedroom apartment in Vaishali that was earlier going for Rs 6,000, now commands a rent of Rs 8,500. This is primarily due to infrastructure development, in and around the area. In Vasundhara, a three bedroom apartment that earlier went for Rs 8,000, now commands a rent of Rs 12,000. This is primarily due to the fact that an increase in rentals was long overdue in the area. Besides, these areas of Ghaziabad are mature and established markets with almost 80-90 per cent occupancy.

Courtesy HT Estate dtd. 08-05-2010

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