Amidst various industry reforms in the past seven years, multiple new trends emerged in the Indian residential real estate market. Strikingly, housing rentals in key luxury markets saw better year-on-year (y-o-y) growth between 2014 and 2020 than average capital prices in the same localities. The growth rate of rentals in the top-7 luxury housing markets in India surpassed the rise in luxury property prices in the same localities during the same period, says a note from Anarock Property Consultants.
Anuj Puri, chairman of Anarock Property Consultants, says, "The average rentals for a house of minimum 2,000 sq. ft. size in the top seven cities' key luxury hotspots rose anywhere between 17% to 26% in 2020, as compared with 2014. In the same period, average capital prices in these micro-markets saw a maximum rise of 15% - and some even saw a marginal dip."
According to the note, among the top-7 cities, Hyderabad's HITECH City saw the highest rental appreciation of 26% during 2014-2020, while the average price growth was 12%. Bengaluru's Rajajinagar saw the highest capital price appreciation at 15%, while average rentals here rose 22%, the report says.
On the other hand, Gurugram's Golf Course Road saw capital prices decline marginally during the seven-year period. While average rentals in this area rose 17%, the average prices in the area currently are at Rs13,150 per square feet (sq ft), and rentals are at Rs70,000 per month.
It noted that 2020 was an outlier year for all rental markets with almost no change in monthly rentals compared to the preceding year.
Citing Anarock data, Mr Puri said also reveals that from 2014 to 2020, rental prices in the top luxury markets saw consistent y-o-y growth, averaging between 3% and 6% annually.
"In contrast, capital appreciation in this period either remained range-bound or varied each year. Some years saw a decent yearly rise, even as high as 7%, while prices dropped by around 5% in other years, particularly in 2017, when many micro-markets saw capital prices plunge against the preceding year," he added.
In 2017, various structural reforms like the Real Estate (Regulation and Development) Act, 2016 (RERA) and goods and services tax (GST) were implemented. After this, most localities only saw a marginal capital price rise averaging between 1% and 3%, while rental markets continued their growth run.
Due to the pandemic, 2020 was an outlier year for Indian rental markets, with most luxury localities recording either no change in average monthly rentals compared with the preceding year or seeing some decline. Without a doubt, COVID-19 impacted luxury rental markets amidst the growing work from home (WFH) culture. Average property prices showed little or no change in 2020 over 2019, Anarock says.
As per the report, the luxury residential rental market saw a setback due to COVID-19, but now appears to have recovered with demand for rental luxury properties back almost to pre-COVID levels, said the report, adding that monthly rentals in some of the localities have begun heading north.
In Bengaluru, the luxury residential hotspot JP Nagar saw average monthly rentals appreciate by 24% in 2020 over those in 2014, while capital prices in the period rose by 8%. Likewise, Rajajinagar saw rental prices rise by 22%, and capital prices by 15%, the report says.
In Mumbai Metropolitan Region (MMR), luxury rentals in Tardeo rose 23% in this period, while capital prices increased by 8%. Similarly, Anarock says, in Worli, the average monthly rentals for a minimum 2,000 sq ft area home rose by 21%, while capital prices rose by 6%.
In the National Capital Region (NCR), rentals in luxury hotspot Golf Course Road increased by 17% while capital prices saw a meagre decline. In contrast, Golf Course Extension Road saw rentals increase by 18% and capital prices by 7% in this period.
Luxury rentals in Chennai's Anna Nagar rose 17% in this period, while capital prices increased by 10%. Similarly, in Kotturpuram, the average monthly rentals rose by 19% while capital prices rose by 7%.
In Hyderabad, the luxury residential hotspot Jubilee Hills saw average monthly rentals appreciate by 15% in 2020 over those in 2014, while capital prices in this period rose 10%, while HITECH City saw the maximum rental price rise of 26%, where capital prices increased by 12%.
Koregaon Park in Pune saw rentals increasing 19% in this period, while capital prices increased by 14%. Similarly, on Prabhat Road, the average monthly rentals rose by 23% while capital prices rose by just 5%.
In Kolkata, luxury home rentals in Alipore rose 20% in 2020 against those in 2014, while capital prices increased by 13%. Similarly, in Ballygunge, the average monthly rentals rose 19% while capital prices rose by 13%, Anarock says.
