RENTAL MARKETS TO PICK UP PACE IN 2023
Rental market in 2017 to 2020 had been stagnant and during Covid the rental market slowed down as a lot of people left the city for their hometown due to work from home and so the owners were forced to let go of 1-2 months of rent.
But in the last 2.5 years, Housing Rent in Mumbai rose by 25% to 30%. And after Covid, people not only wanted bigger spaces but also other amenities, indoor facilities, and premium features when buying homes, but this change also applied to rental homes as well.
The average rental has jumped from approximately Rs. 50-80 to Rs. 65-100 per sqft in the western suburbs, and from Rs. 40-60 to Rs. 50-75 per sqft in the eastern suburbs. Rentals in central Mumbai have spiked roughly from Rs. 90-120 to Rs. 110-135 per sqft, and from Rs. 120-155 to Rs. 135-185 per sqft in south Mumbai.
In the luxury markets like Juhu, Khar & Bandra rental has jumped from Rs. 110–Rs. 170 to Rs. 135–Rs. 200. A 3BHK and 4BHK luxury apartments are now being rented out for Rs 3-5 lakh from Rs. 2-3.5 lakh in the previous years. Demand is such that hardly any units are left in the market. All other markets like Andheri (East), Goregaon, Kandivali, Borivali & Dahisar saw 15%-25% rise in the rental market.
These are the many reasons for rental hike in the last 2.5 years;
- Rental demand increased substantially in 2022 and will continue to rise in 2023 as post Covid people started returning to the city from their hometown and with more companies calling their employees back to the office, at the very least in the hybrid model, rental demand rose last year after softening considerably during the worst of the pandemic. Rental market demand surpassed pre-pandemic levels, and many housing societies have a few or no vacancies. Rentals rose by 20-25 per cent against pre-pandemic levels on an average in 2022, with some of the more popular areas seeing more than a 30 per cent increase.
- Secondly, in the western suburbs many development projects have increased as several dilapidated old buildings have gone for redevelopment in Mumbai, micro-markets in the city have seen up to 15 percent increase in rentals.
- Increase in the rate of interest in housing loan have resulted for more rental demand in the market.
- In 2021, the Maharashtra government had announced various discounts for builders to undertake housing projects. 2021 saw a surge in the construction of new buildings as builders rushed to take advantage of the government-sponsored benefits.
- As supply is dwindling and demand is rising as most of the new buildings that are started now take 24-36 months to complete.
- Due to increase in, property prices & bank loan interest rates, the investors investing in residential properties hike the price of the rent in order to get a high return on investment.
- This also happens because there are huge opportunities in Mumbai; and hence, you have people moving to the city.
Questions
- Do you see further rise in rental, moving forward?
I believe the current rental has already grown by 30%. So, moving ahead by December 2023 many projects will be ready and more supply will be available every year. And hence, I do not see any further rise on rental.
- Are millennials shifting towards rental because of rise in rate of interest?
Maybe for a short period of time, but once interest rate comes back to 7%, again there will be a demand in buying from millennials.