Rents to increase in next 12 months

Even as Buy vs Rent remains the ultimate dilemma for Indian buyers ,demonetisation is going to be good news for the rental market, especially in the residential segment. This is because more prospective buyers will prefer to stay in rented premises for some more time while waiting for prices to drop further, at the same time sellers in the secondary market, too, are likely to find renting out their properties more profitable than selling those in view of price correction in this segment post-demonetisation. The rental values of residential properties are, thus,  going to see 

an upward thrust over the next few months in view of increase in demand.   Overall, the average price of a house in the main cities across India has increased by 3.6 per cent compared to last year while rental values have grown at a faster rate of 4.9 per cent for the same period. This trend is expected to continue and rentals would see a greater increase.

“We expect to see a correction in the price of real estate over the next 6 to 12 months. Customers would hold on to their buying decisions for this period.  As a result, we expect to see upwards pricing pressure on rental properties as customers would look to rent out for a bit more time and wait it out,” says Nitin Vyakaranam, CEO of ArthaYantra, that released the 5th edition of its annual Buy vs Report earlier this week. 

With a likley spur in the home rentals business the online property portals, too, have increased their stakes in it. The most recent one to accelerate activities in this segment is housing.com. The realty portal has decided to re-enter the segment from early 2017. “Last year, we had taken a strategic decision to close rentals in order to focus the company on home buying and selling segment, but now we have started preparing for the re-entry and plan to launch it early next year,” its Chief Executive Officer Jason Kothari said.

“While we had planned to relaunch rentals towards end of next year, the recent demonetisation move has led to an advancement in the plans. Demonetisation is expected to cause a slow-down in the home buying and selling, while it will likely spur growth in the home rentals space, making it an opportune time to relaunch the rentals business,” he said.

ArthaYantra has developed a patented composite score "ArthaYantra Buy vs. Rent Score" (ABRS)™ to quantify the Buy v/s Rent decision and also explains the reason to buy or rent in a particular city. It uses a host of parameters including salaries, savings, tax and prices to arrive at a recommendation. ABRS addresses the important questions including how much a professional should spend for buying a home, and at what income can a professional comfortably take a decision to buy a house as against renting.

The previous editions of ABRS covered the real estate buy and rental markets of 8 cities, including Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune. In the latest edition four new cities Indore, Kochi, Jaipur and Lucknow have been added.

The four cities added in this edition were found to be more affordable for buying or renting a house. However, Hyderabad and Ahmedabad were found to be just as affordable. Mumbai continues to be the most expensive city for buying or renting a house followed by Delhi.

Affordability factor

Buy

Bengaluru

The garden city is an affordable buy destination for people with an annual income of over Rs 16 lakh

Hyderabad

Most affordable for buying as anyone with an annual income of over Rs 8 lakh can consider buying a residential property here

Ahmedabad

Ahmedabad is an affordable city for both buying and renting a residential property.  People with an annual income of Rs 10 lakh and above can consider buying a residential property in this city.

Pune

Pune has been in demand for both buying and renting a residential property. People with an annual income of above Rs 18 lakh can consider buying a residential property.

Rent

Mumbai

Most suitable for renting as even someone with an annual income of Rs 25 lakh cannot afford to buy a residential property. 

Delhi

Suitable for renting as buying a property here is only suitable for people with an annual income of Rs 22 lakh

Chennai

Rental values here have increased by 9.10 per cent over last year as buying a property here is only suitable for people with an annual income of over Rs 22 lakh