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Changes in Residential Rentals
Is it a good time for those living in rented apartments? Your location could well be the answer to that. While some pockets in the country are showing an upswing in rentals, other micro-markets are witnessing a reverse downward movement. Leading real estate consultants say that the residential rental market has been moving in tandem with the demand-supply dynamics of a particular area, rather than the property prices. Pankaj Jain, executive director of Realistic Realtors, a North-Indian real estate consulting firm says while rentals in some areas have come down, certain pockets are showing an upswing due to the limited supply. “In the national capital region for instance, lack of supply has led to an increase in rentals in some areas. These include east Delhi, south Delhi and the university campus areas in north Delhi. However other areas in NCR such as Noida, Greater Noida and Gurgaon, have seen the opposite trend.” Agrees Subhash Kumar, a resident of east Delhi whose rent just got higher last month. “I was paying Rs 9,000 per month till last month for a 2BHK apartment. The landlord has recently increased it to Rs 14,000. I tried negotiating but he did not reduce the rent.”
While the upswing in residential rentals have impacted the mid-segment across cities such as Delhi, Mumbai and Bangalore, the high-end segment has seen a downward correction in most of these markets across locations. According to Cushman & Wakefield (C&W), in Delhi NCR all micromarkets witnessed correction up to 4% over the last quarter. In Mumbai too rental values for high-end apartments witnessed a downward movement across most micro markets in Q1 ‘09. Chennai, on the other hand, saw no movement during the quarter as genuine demand continued to exist. However, a new trend in the city saw clients wanting to consider mid-end options in prime locations such as RA Puram and Poes Garden. In contrast to Chennai, Hyderabad witnessed significant quarterly correction between 10-23% in the high-end segment. Reduced hiring by IT/ITeS companies, speculation regarding lay-offs and tenants becoming more selective towards rental commitment led rentals in the top-end segment to further drop in January, with these remaining stable over the last two months.
Like Hyderabad, Bangalore too saw a correction in the range of 17-20% in the high-end segment largely due to declining leasing activity. South Bangalore, in fact, has been most affected in the high-end sectors, with rental depreciation of around 19%, due to the decreasing demand. Jones Lang LaSalle Meghraj (JLLM), too, sees the top-end residential rental market in Delhi slowing down. Transactions are happening, but there are significant time lags between them and volumes have gone down. Expatriate movement is at an all-time low. Landlords are not getting the kind of rentals they did during the peak phase, but there is no likelihood of a further fall. In Mumbai, according to the consultancy, the residential rental markets have shown a decline in overpriced and speculative areas and in most areas that have seen more supply than demand can absorb. However, rentals have displayed a remarkable level of inflexibility in areas where there is no supply and demand is high. Kolkata has not shown much of a decline and continues to look good. In fact, the residential rental market of Kolkata seems to have escaped the worst of the slowdown dynamics, according to JLLM.
Rajiv Sahni, partner, real estate practice, Ernst & Young agrees that while there has been a significant rental correction in the upper end of micro-markets that witnessed unprecedented growth in the last few years, there has been a strong resistance in markets that have healthy demand-supply dynamics and strong fundamentals. But are people more inclined towards renting now or to buy/sell options? Sanjay Dutt, CEO (business), JLLM says the demand for rental homes continues to be high in prime areas with little or no new supply, and in locations that have witnessed a more rational supply rate in the past. “In areas that have witnessed oversupply, the accent is currently more on outright purchase. This is because investors who had bought units in such areas have, to a large extent, failed to respond to the new market dynamics by coming down sufficiently on their rental expectations. There is also an increasing trend among property owners to sell rather than rent out their properties, since there is still scope for correction in many areas.”
While some developers feel that people are opting more for rent at present due to the uncertainty in the job market, others are of the view that end users will derive more benefit if they buy their own flat rather than stay on rent. Ajay Midha, director, SEZ & commercials, Raheja Developers feels that a lot of people are opting more for rent owing to uncertain economic conditions and overall confused market sentiments. Rajeev Rai, V-P, corporate, Assotech, says rental property is currently being preferred by those who are not looking to stay in their city of residence for a longer duration. “Those who have the means and better jobs to back their decision of buying property are going ahead with their plans of buying it. As far as rents are concerned, while the high-end apartments have been affected, the rentals of low and medium-range apartments are moving ahead.” The current situation, many feel, has led landlords to bargain hard with existing tenants to revise the rent in line with the market scenario.
News Published Under: Chennai, Mumbai | No Comments »