Rental market waiting for an upswing

In Mumbai, the decreasing demand and cost optimisation from corporations have prompted landlords to lower their rent expectations in order to secure tenants.

Demand for premium homes in the rental segment has weakened in past few quarters across markets in India. Employers are increasingly restricting the housing budget for their employees, which is resulting in lower demand for rented premium accommodations. Cost cutting is the priority for most multinational corporations and they try to negotiate hard on rentals for their expatriate and senior-level staff. With tenants getting more cost conscious, landlords are now more open to rent negotiations. A lot of landlords have taken a view that it is better to ‘meet the market’ rather than sit with a vacant property. In some cases landlords are not accepting reductions but are including amenities such as air conditioning, new appliances etc. in a comprehensive deal which makes it a win-win situation for both.

In Mumbai, the decreasing demand and cost optimisation from corporations have prompted landlords to lower their rent expectations in order to secure tenants. The rents for premium properties declined in the range of 1-7 per cent quarter-on-quarter during the second quarter of calendar 2014 in most of the micro-markets. The exceptions to this trend are Bandra, Khar, Juhu and Powai, where rents rose marginally in the range of 1–2 per cent. Similarly, in Delhi, the leasing market slowed considerably due to limited hiring by multinational companies, embassies and international organisations. As a result, rents for prime residential properties in Delhi witnessed a decline in the range of 6-10 per cent in almost all the micro-markets. The Gurgaon market is witnessing a stable rental scenario in the premium segment while there is an upward pressure in mid-segment properties, the reason being relatively fewer options available for mid segment housing. The rentals for mid-end properties witnessed an increase in the range of 1-3 per cent quarter-on-quarter. On the other hand, reduced demand amidst a large inventory of completed housing stock led to a downward pressure in rental values across the premium/luxury and high-end properties located on Golf Course Road, Sohna Road and MG Road.

 

About the author

Surabhi Arora, leads the research team in India and has more than 13 years of experience in carrying out multi-disciplinary research and analysis in the area of finance and real estate industry. Surabhi specialises in real estate economics, policies, commercial and residential real estate research with in-depth knowledge of market dynamics across major markets in India.

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