 "rent, real estate")
A recent report by NoBroker, the property discovery platform, found that landlords had increased rentals by over 20 per cent in the first half of 2023. The reasons seem to range from an increase in demand for rental to making up for lost rent during the pandemic lockdown.
The data for NoBroker's "Half-Yearly Real Estate Report 2023" was collected from the platform after examining the preferences of around 34,000 consumers. The report looks at rental and buyers as well as landlord preferences in major cities, including Bangalore, Mumbai, Delhi-NCR, Chennai, Hyderabad, and Pune.
Rise in rental prices
One of the most prominent trends observed was the clear preference people had to reside near their workplaces as the transition back to a five-day workweek gained momentum.
This shift in living preferences has fueled a surge in demand for properties in proximity to offices and tech parks. However, this increased demand has collided with a limited supply of properties in such prime locations, resulting in intense competition for available housing, particularly in regions like Bangalore's eastern belt.
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In response to these market conditions, a substantial portion of landlords have seized the opportunity, escalating their rents by over 20 per cent. This surge in rental prices is not confined to specific areas; rather, it's a nationwide phenomenon.
City-wise rent inflation
Rent inflation across major cities has ranged from 8 per cent to 16 per cent this year. Bangalore witnessed the highest surge at 16 per cent, followed by Pune (12 per cent), Hyderabad (11 per cent), Delhi NCR (10 per cent), Mumbai (9 per cent), and Chennai (8 per cent).
In Bangalore, demand-supply disparities and higher EMIs influenced by interest rates (40 per cent) played a significant role. Mumbai showcased a "bandwagon effect" (30 per cent), where a ripple effect from other landlords triggers rent hikes. This means most landlords (35 per cent) increased rent because they believed other landlords had done the same.
In Pune, increased demand (40 per cent) was a prime driver, while "To make up for the lost rent during the pandemic years" was the prominent contributor in Hyderabad (30 per cent) and Chennai (30 per cent).
Other key trends among renters noted by the report include:
1. Demand for spacious accommodation
A notable portion of people is seeking more spacious accommodations. This shift likely mirrors a broader transformation in residential choices across Indian cities, potentially influenced by extended hybrid work arrangements.
2. Demand-supply mismatch
Many home seekers are facing issues finding accommodations that fit their particular set of preferences, signalling a mismatch in the demand and supply of rental accommodations. This issue is particularly present in urban centres such as Bengaluru, Delhi-NCR, and Pune. A multitude of factors, including rent hikes, scarcity of properties within gated communities, and demand-supply discrepancies, contribute to these challenges.
3. Proximity to workplaces is the top priority
A striking preference has emerged among 64 per cent of individuals, favouring rental properties closer to their workplaces or children's schools. This inclination is particularly prominent in Pune (71 per cent), Delhi (55 per cent), and Bangalore (63 per cent). This trend shows the importance of minimising commute times in making rental choices.
Property purchases
With monthly rentals approaching home loan EMIs, 65 per cent of tenants are contemplating property purchases in the current year. In the report released by NoBroker at the end of 2022, 77 per cent of respondents expressed their desire to purchase a home in 2023. This continued interest in buying property signifies growing confidence in the real estate market's stability and its growth potential.
Seventy-two per cent of survey participants also expressed an inclination to invest, anticipating higher returns, in real estate. Over 70 per cent of respondents expect further escalation in real estate prices, with Bangalore (81 per cent), Delhi (77 per cent), and Hyderabad (78 per cent) residents exhibiting particularly strong convictions about the future upward trajectory of property prices.
Emerging preferences for resale units
In the realm of preferences, a growing preference for resale units, particularly among homebuyers, is evident due to the scarcity of primary residential options and a decline in ready-to-move-in homes. Additionally, the preference for 3BHK units is clear among potential buyers in Bangalore, Chennai, and Delhi-NCR, possibly influenced by hybrid work culture and a penchant for more spacious living post the Covid era.
Outlook of real estate in the second half of 2023
As the Indian real estate market continues to evolve, the first half of 2023 witnessed a whirlwind of trends and dynamics, including inventory crunch, rent surges, and shifting consumer preferences. The year brought a reduction in inventory overhang across key cities, aligning with healthier financial profiles of real estate companies.
With increased rental yields and soaring property prices characterising the initial half of the year, the stage is set for robust growth in investor interest in the real estate market. This trajectory is expected to drive substantial investment into the Indian real estate sector as promising returns and resilient market dynamics reshape the investor landscape.
The shift from renting to buying homes, observed in 2023, is poised to extend into 2024. Driven by the converging costs of rentals and EMIs, this paradigm shift is set to influence real estate market dynamics significantly. Reduced inventory overhang, leading to new launches, adds further momentum to the Indian real estate sector's promising trajectory.
