Not many takers for plush rental flats

Economic downturn, lower pay rises, uncertainty in jobs said to be among the reasons

Rajiv Shah, a retired banker, was looking to rent out his three-bedroom apartment in a plush residential complex at the Lower Parel area of this city. However, he is yet to get any tenant, though he approached three brokers around four months earlier.

"I have not got many enquiries, though I am willing to reduce the rent and deposit," he says.

Shah's one of the many owners/investors struggling to rent their premium apartments in the south, central and western suburbs here.

With a lacklustre economy, uncertainty about jobs and mediocre pay rises, people are not opting for high rent apartments.

According to sectoral estimates, the Bandra West area in Mumbai, home to movie stars and other VIPs and once a much sought destination, has around 85 ready-to-move in apartments on rent but not many takers. Similarly, the Parel-Lower Parel area, the new business district in Mumbai, has over 50 such apartments available for rent.

"Capital values have gone up and investors want high rentals but nobody wants to rent at the rates demanded by owners," says Om Ahuja, chief executive, residential services, at Jones Lang LaSalle, a property consultant.

"The problem is that there is more supply than demand in markets such as south and central Mumbai," Ahuja says, adding the suburbs are doing well in lease deals.

Gurgaon and Noida in the National Capital Region tell a similar story in premium rental housing. The huge supply of residential units which is expected to hit the market next year is also expected to put pressure on rents, says Amit Bhagat, chief executive and managing director of ASK Property Investment Advisors.

According to JLL, rents have gone down by 20-25 per cent in Gurgaon and south Delhi in the past year or so.

"The supply-demand gap will go up once more supply hits in south and central Mumbai and Gurgaon and Noida in the coming years," Bhagat says.

According to Pankaj Kapoor, chief executive of Liases Foras, a real estate research firm, while capital values doubled in Mumbai between 2009 and 2014, rental values have gone up four to five per cent every year.

"Rental yields have gone down. Health residential yields should be five per cent but they are two per cent now, which indicates that the capital values are speculative," said Kapoor.

Added Santhosh Kumar, chief executive, operations, at JLL: "People are still cautious and do not want to rent out at high prices or buy on their own."

LACKS LUSTRE

• Bandra, home to movie stars, has over 85 ready-to-move-in apartments but not many takers
• Parel and Lower Parel have 50 such flats
• Rents have declined by 20-25 per cent in Gurgaon and South Delhi
• Economic downturn, uncertainity in jobs said to be the reason for slow movement in the sector
• The huge supply of residential units expected to hit the market next year is also expected to put pressure on rents