Bengaluru's rental income highest in Q1-2024, Mumbai next: Anarock report

With a steep rise in rental housing demand in the top cities, average rental values have soared, and rental income has been heading steadily north. Rental income is the annual rate of interest investors earn from capital invested in a property.

The latest data from real estate consultancy firm Anarock indicates that as before, IT-dominated Bengaluru tops the list with a rental yield of 4.45 per cent in the first quarter of 2024.

Backed by strong post-pandemic rental demand, rental values in the city's key areas have been rising inexorably after IT companies' return to office calls. Bengaluru's rental yield in pre-Covid 2019 stood at 3.6 per cent.

Mumbai comes next among the top cities with a rental yield of 4.15 per cent in 2024 as against 3.5 per cent back in 2019 - a 19 per cent growth. Gurugram is close behind with a rental yield of 4.1 per cent in the last quarter against 3.5 per cent in 2019.

"Residential rental yields in India had chronically stagnated before the Covid-19 pandemic, with the national average at just 3 per cent for many years," said Santhosh Kumar, Vice Chairman -ANAROCK Group.

"With post-pandemic rental demand soaring after offices resumed, rental yields are heading north too. IT-dominated cities including Bengaluru, Gurugram, Pune and Noida, and also MMR (Mumbai), have seen considerable upticks in their rental values, and therefore yields," Santhosh Kumar added.

Residential rental values in India's top cities have resurged tremendously after the pandemic, with 2023 seeing them soar by over 30 per cent. In the last quarter of 2023, rental values stabilized in most cities as renting activity usually abates in the last quarter of the year.

However, the rental real estate market picked up momentum again in the first quarter of 2024. In the prominent localities of the top seven cities, there has been an average jump of 4-9 per cent jump in residential rents in the first quarter of 2024.

Considering that the typical annual increase is 5-10 per cent, this is very significant and while it certainly bodes well for landlords, it signifies a worrisome element of cost-of-living inflation for tenants, Anarock said.

India's Silicon Valley Bengaluru leads this trend. As per Anarock data, the average rental values in Sarjapur Road and Whitefield rose by 8 per cent each in the first quarter of 2024 against the previous quarter.

A comparison of rental values between 2022-end and the first quarter of 2024 shows that top localities in Bengaluru saw a staggering hike of 40 per cent and above. The trend is not limited to Bengaluru; other key cities have also witnessed rental values inflation, though not to the magnitude seen in Bengaluru.

In NCR, Noida's Sector 150 saw average rents rise by 9 per cent, and in Delhi's Dwarka by 6 per cent. In Mumbai, Chembur and Mulund saw 4 per cent growth each in rental rates.

"Going by the current momentum, there are no immediate prospects of the rental inflation trend slowing down," said Santhosh Kumar.  "In fact, it is expected to pick up in the next few quarters, as rental activity typically remains high in the first two quarters of as fiscal year."