Renting a home may not get cheaper even as demand slows: Report

During the October-December quarter, rental demand fell 2.4% compared to the previous quarter, but rents still increased by about 2.2% across India

If you’re planning to rent a home in a major Indian city, you may still find rents holding firm — even though overall rental demand has cooled slightly.

 

According to the Magicbricks Rental Index (October–December 2025), India’s rental housing market is entering a phase of “recalibration”, where property prices are rising faster than rents, changing how both tenants and investors experience the housing market.

 

Property prices in India continued to rise at a faster pace (2.2 %) pan-India while rental demand declined by 2.4% quarter-on-quarter even as rents increased by 2.2%, indicating a market adjusting to yield compression rather than a broad-based slowdown, according to the latest Magicbricks Rental Index.

 

 

What it means for property investors

 

For property owners and investors, the market is shifting toward capital appreciation rather than rental income growth.

 

Across major cities, property values are rising faster than rents, leading to “yield compression” — a situation where rental returns become smaller relative to property prices.

 

Among major cities:

 

• Chennai recorded the highest rental yield at 4.16%
• Ahmedabad followed at 3.98%
• Hyderabad reported 3.93%
• Bengaluru and Kolkata were at about 3.88%

 

The relatively small differences in yields across cities suggest India’s rental market is becoming more mature, with returns increasingly linked to long-term price appreciation rather than rental income alone.

 

Further, tenant preference during the quarter remained firmly tilted towards mid-sized homes. Units ranging between 500 and 1,500 sq ft accounted for nearly 78% of rental demand, highlighting a clear inclination towards efficient layouts that balance affordability with livability. Semi-furnished homes continued to dominate both demand and supply, accounting for 54% of tenant demand and 55% of available listings, effectively emerging as the standard rental format across major cities.

 

  “The data indicates that India’s rental market is not slowing, but recalibrating. While demand has moderated sequentially, rental values continue to show resilience in micro-markets where supply is constrained. The growing divergence between capital values and rental growth reflects a maturing market, where investor focus is gradually shifting from yield-led returns to long-term capital appreciation, while tenants remain highly selective about configuration, size, and affordability," said Prasun Kumar, CMO, Magicbricks.

 

The index also highlights a growing demand–supply gap at the affordable end of the rental spectrum. While demand remains concentrated in lower and mid-rent categories, a significant share of listings continues to be positioned in higher ticket sizes, limiting choice for value-seeking tenants and intensifying competition for appropriately priced homes.

 

Overall, the Magicbricks Rental Index OND’25 suggests that India’s rental housing market is entering a more balanced and discerning phase, shaped by micro-market performance, configuration suitability, and the evolving relationship between capital values and rental income.