Tag Archives: Bengaluru’s real estate

Tenant news to rejoice about! The April-June quarter saw an average price correction of 5-10% in Bengaluru’s rental housing market

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Bengaluru’s rental housing market saw an average price correction of 5-10% during the April-June quarter of the current calendar year, according to local brokers who spoke with HT.com. This news should cheer up tenants in the city. The primary reasons for this are the large number of tenants who have relocated to the city’s outskirts, where new housing stock is available at lower rental prices than in desirable neighborhoods, and the growth of co-living options, which provide better value for the money.

The second quarter of the year usually sees an increase in rental activity due to several factors, including families moving before the start of the new school year, a new wave of professionals moving into the city, and so forth.

The price correction is the result of several factors. According to Manoj Agarwal, founder of Agarwal Estates, “many tenants  are shifting to the outskirts of the city where rents are lower compared to the prime areas surrounding IT corridors given a more specific hybrid work culture in place.”

He continued, “The average vacancy rate in his portfolio of rental properties throughout the city has increased to 5% from the previous 2-3%.

With a decline in rental rates of more than 10%, the trend was most noticeable in areas bordering the IT corridors, such as Whitefield in East Bengaluru and Sarjapur Road. According to a local brokerage firm, a 1 BHK apartment rented out for Rs28,000 per month in the first quarter of the year is currently rented for Rs 25,000.

However, data from prop-tech company  Square Yards revealed that a 750-1,175 square foot, 2BHK that was previously available for between Rs 28,900 and 45,200 per month is now listed for a rental cost between Rs 33,600 and 40,300.

Property consultants saw less evidence of this trend shift in the areas surrounding the central business districts. They added that contrary to standalone Grade B buildings, rents in Grade A projects built by well-known brands have decreased less. 

Multiple justifications

Vice president of Hanu Reddy Realty Kiran Kumar noted that the previous modification also addresses Bengaluru’s growing inventory levels as developers counter the city’s real estate demand surge. 

In Bengaluru, 12,432 residential units were introduced in the June quarter of 2024, an 8% yearly increase, according to a Knight Frank India report. 14,271 units were sold then, an 11% increase from the previous year. According to brokers, many purchasers who reserved their homes during the COVID-19 pandemic are now getting their possession.

According to Saurabh Garg, co-founder and chief business officer of proptech unicorn NoBroker, “Bengaluru’s rental market is returning to normalcy this year.”

Other participants noted that the number of co-living options in the city has also reduced the share of the rental housing market. This quarter, Kumar predicts a further 10% decline in rent, especially in the city’s periphery. 

Trends in Q2 2024

Bengaluru had the highest rental yield (4.5%) in the first quarter of 2024 out of the top 7 Indian cities, according to a report from a real estate consulting firm.

A property’s rental yield is the proportion of its total value that is rented out earned in rental over a year.

Rents have risen by over 40% in some prime areas of the city after the COVID-19 pandemic as workers returned to work and landlords attempted to recover annual price increases lost. 

How are the landlords reacting?

 It is common to refer to Bengaluru as a landlord’s market. They have recently gained notoriety due to a number of their unusual demands. Nevertheless, they appear to take note of the changing tide.

“In Bengaluru, landlords are starting to recognize that tenants do not want to pay exorbitant rent.

A local broker said, “Instead of keeping the property empty for months while searching for the perfect tenant, we suggest they reduce the rent slightly.”

In a recent instance, a landlord in East Bengaluru’s Indiranagar locality, who had originally hoped to receive Rs1.20 lakh/ month for his 4 BHK apartment, revised the rental amount to Rs 1 lakh, the person cited. 

Do rents still stay the same?

While local brokers reported a drop in overall rentals and rising for properties on the outskirts, some stakeholders insisted that prices have stayed steady.

According to data from Square Yards, and the integrated prop-tech platform, a 950-1,200 square feet 2BHK in Electronic City is currently available for Rs 32,600-41,400 per month during the first quarter of 2024. The original price was Rs 32,500 – 40,800. In the meantime, the monthly rental cost of a one-bedroom apartment that was previously available for Rs 21,000 -22,100 is now Rs 21,900– 23,000. 

By 2030, Bengaluru will possess 330-340 million square feet of office space in India: report

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The primary demand generators for Bengaluru’s office market are anticipated to be the technology, engineering, manufacturing, and BFSI sectors. 

The Confederation of Indian Industry and CBRE report projects that Bengaluru, the country’s IT hub, will maintain its dominant position in its commercial real estate market by 2030, with 330-340 million square feet of office stock.

Bengaluru has seen its office stock more than double to over 223 million square feet as of June 2024, from 100 million square feet in 2013, to comprise the highest share in the segment among all major cities in the country, according to a report titled “Karnataka Horizon: Navigating Real Estate Excellence in the South,” which was released on July 10.

The total stock in India as of June 2024 was 880.7 million square feet, with Bengaluru contributing the most at 25%, according to the report. It also stated that over the previous few years, the city’s annual absorption of roughly 15016 million square feet had occurred on average.

Bengaluru is anticipated to grow significantly in the periphery over the next few years. According to Anshuman Magazine, Chairman and CEO-India, South-East Asia, Middle East and Africa, CBRE India, “the commercial sector is slated to expand significantly in the northern, eastern, and southern parts coupled with the availability of large-sized land parcels and multiple upcoming infrastructure initiatives.”

Which sectors are driving demand?

Technology, engineering and manufacturing, and BFSI are predicted to be the main sectors driving demand for Bengaluru’s office market until 2030. Emerging sectors like life sciences, aviation, and automobile are also anticipated to contribute to the rise in demand.

According to the report, the technology sector currently makes up 30-35% of the city’s annual absorption, mostly in the commercial centers of Outer Ring Road and Whitefield.

According to the report, between 2022 and June 2024, Bengaluru accounted for 41% of demand among India’s global capability centers (GCCs). It attributed this achievement to several of Garden City’s offerings, such as its highly qualified talent pool, first-rate Grade-A assets, and a robust  IT ecosystem.

Karnataka’s thriving IT sector needs to keep developing if it wants to stay competitive. According to Ram Chandani, Managing Director of Advisory and Transactions Services at CBRE India, “developing premium, sustainable tech spaces with cutting-edge facilities will be the key.”

Shailendra Naidu, a senior executive director of advisory and transaction services at CBRE, lists a few of the market’s long-term challenges ease of doing business, the high cost of land, and effective space utilization. “Many development companies in this area use joint ventures to purchase land. In that model, there can be challenges going ahead,” he said.

Home goods, fashion, and entertainment drive demand in the retail sector.

Bengaluru’s retail real estate stock, which held the second-highest share among the top Indian cities at 24%, more than doubled to over 16 million square feet as of June from 7.2 million square feet in 2013, according to the report. According to the research, this measure will rise to 20-30 million square feet by 2030, a 1.4-fold increase.

According to the report, the main drivers of absorption in Bengaluru’s retail market are department stores, fashion and apparel stores, and entertainment. Together, these segments account for roughly 20-30% of the city’s annual demand. According to the statement, the capital city’s average yearly absorption in this sector is between 1.5 and 2 million square feet.

As per the report, Bengaluru is a high-achieving city that houses three of the 17 listed malls in the country.  

Gurgaon and Dwarka are leading the premium real estate boom, with prices rising by up to 53%

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The average capital values of completed and under-construction properties in Gurgaon reached a new high of 30% and 37%, respectively, with year-over-year growth recorded at the city level. 

According to an analysis by global consulting firm Savills India, the top-performing micro real estate markets in the nation are New Gurgaon and Dwarka Expressway, with average capital values of under-construction properties growing by 34% and 53%, respectively, annually over the past year. 

The consulting firm also noted that due to the rise in “work from anywhere” or remote working and relatively high rental yields, North Goa, the second home location, saw a sharp increase in villa prices of 28% over the year. 

The average capital values of completed and under-construction properties in Gurgaon reached a new high of 30% and 37%, respectively, with year-over-year growth recorded at the city level. The average capital value of residential plots increased by 43%, the Dwarka Expressway saw the biggest price increase. 

In Noida, the average capital values of completed and under-construction properties saw notable annual increases of 29% and 30%, respectively. Sector 150 in Noida had the largest growth in capital value for properties still under construction, a growth of 43 percent annually. 

With an annual growth rate of 43%, the sector 150 micro market has the biggest increase in capital value among properties still under construction. 

The average capital value of luxury floors increased by 16 percent annually in Delhi. With luxury floor prices rising by 27% annually, South-East Delhi saw the largest price appreciation. The South-West, which saw a year-over-year increase of 21%, comes next. 

At the city level, the average capital values of residential plots increased by 25% annually. The micro-markets in the South-Central and South-West regions drove this trend, registering the highest YoY growth rates at 29% for each. 

“As new launches offered newer amenities and configurations, the under-construction projects in the top 3 cities of Delhi, Gurgaon, and Noida witnessed higher price appreciation of up to 30% over the year compared to ready properties.” The premium housing market is experiencing strong demand, as evidenced by the ongoing price movement. Savills India claims that the RBI’s decision to keep interest rates unchanged for the sixth consecutive time is another element bolstering the rising demand and should support the expansion of the residential market. 

Price patterns: 

  • In Mumbai, the increase in capital values for properties still under construction is greater than that of ready properties, which saw a 3% year-over-year rise, and under-construction properties saw a 5% YoY increase. 
  • The capital values of Central Mumbai and Western Suburbs (others) experienced a noteworthy YoY increase of 12% -21% due to new launches at prices exceeding the current market average. 
  • The demand for the luxury segment saw notable growth in the market. 
  • The growing trend of hybrid working, particularly among professionals in the financial services and legal domains, made larger spaces in bungalows and premium residences more desirable. 

Bengaluru 

  • Capital values in Bengaluru’s upscale residential market increased by 5-6% YoY during the year. Due to strong demand and higher prices for newly launched projects, under-construction projects experienced higher growth, averaging 7.2% YoY, compared to just completed projects that saw an increase of roughly 5.2% YoY. 
  • After East Bengaluru, which grew by 6.2%, Central Bengaluru saw the largest increase in capital values of completed projects, at 7.5%. 
  • The main drivers of capital appreciation in these markets have been the completion of the new metro route in Eastern Bengaluru and the high demand from HNIs in Central Bengaluru. 

North Goa 

  • North Goa’s average capital villa values increased by a major 28% year-over-year increase. Due to its high rental yields, growing appeal for gated villas, and demographic shift towards younger, lifestyle-focused buyers, it is becoming increasingly popular among homebuyers as a second home location, which is why prices have increased. 
  • The market is seeing a trend of young professionals relocating to Goa, particularly from big cities like Bengaluru, Delhi, and Mumbai. These professionals frequently pursue better work-life balance as digital nomads or in creative industries. 
  • Gated villas in coastal belt areas like Anjuna, Arpora, Baga, Calangute, Candolim, and Vagator were preferred by buyers.
  • The availability of villas in North Goa has drastically changed due to growing land prices. Over the previous five years, the typical size of a villa has decreased by nearly half, from 5,400 square feet to 2,700 square feet.  

The following were the main trends these cities saw all year long: 

Mumbai 

  • Rental values increased in all micro-markets, with estimates ranging from 3% to 8% year over year. The pent-up demand for rental properties brought on by the city’s abandoned building redevelopment can be partially blamed for the increase in rental values. 
  • The market grew as more and more end users began considering renting larger homes in amenity-rich projects. 
  • Real estate near metro stations saw a sharp rise in rental values. The convenience of a quick and reliable commute to major business hubs and entertainment districts is highly sought after by homebuyers.  

Bengaluru

Premium residential developments in South and North Bengaluru witnessed a notable 3% year-over-year increase in rental income. The rate of premium property growth in East and Central Bengaluru was also 2% YoY. 

Delhi

  • At the city level, rental values rose by 31% YoY in H1 2024. 
  • The Central 1 micro market saw a 36% year-over-year rent rise, while the South-Central micro market saw the largest annual at 38%. 

Gurgaon

  • The average rental rate increased by 18% YoY in the city. 
  • The two roads with the largest rental increases were Golf Course Road and Dwarka Expressway, with 19% and 28% YoY growth, respectively. 

New launches across key cities: 

  • There were 1,300 new luxury apartment launches in Delhi in H1 2024, an X4 increase. 
  • In H1 2024, Gurgaon saw a 1–2X increase in new launches, totaling roughly 9,500 luxury units. 
  • Noida has seen a significant increase in newly constructed luxury apartments, with an expected 2,200 units added in H1 2024. 
  • With 5,632 new units introduced, Bengaluru’s premium segment experienced a 156% year-over-year growth in H1 2024. 23% of new launches occurred in North Bengaluru and 55% in East Bengaluru. 

“Buyer confidence was high in the first half of 2024, with investors showing a preference for recently launched properties and end users looking for properties ready for them to move into. Buyer and tenant demand for older developments in grade A corridors increased. Large balconies and green spaces improved the sales velocity of villas and apartments. More attention was also paid to the 4-BHK in the luxury market, which is relevant to both primary and secondary markets. A growing number of new developments in Delhi and Gurgaon indicates a rising need for luxury homes. Shveta Jain, Savills India’s Managing Director of Residential Services. “It is noteworthy that picky purchasers also pursued green buildings, indicating an increasing desire for high-end, eco-friendly living beyond conventional conveniences.” 

Bengaluru’s rental market: Will zero deposit rentals alleviate tenants’ woes?

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The return-to-work mandate has resulted in a significant migration of people back to their work cities, driving up demand for rental properties. As a result, city rentals have skyrocketed, particularly in Bengaluru. The IT city’s rent has increased by nearly 30%, requiring prospective tenants to pay landlords a security deposit of 7 to 10 month’s rent.  

Tenants in Bengaluru have struggled in recent years to keep up with landlords’ ever-changing demands, with some even checking tenants’ LinkedIn profiles. There have also been instances where property brokers have scheduled appointments for tenants for interviews with landlords, prompting many tenants to comment that passing a ‘rental’ interview may be more difficult than passing a job interview. 

Recently, the zero deposit rental scheme was launched in Bengaluru. Under the scheme, the prospective tenant enters into a rental bond with the landlord and the third party who executes it for a small one-time fee. The rental bond serves as a guarantee to landlords, providing financial security in the event of tenant default by covering unpaid rent, utility bills, violation of lock-in periods, and property damage. 

How does the zero-deposit rental scheme work? 

Harish, who works for a business processing outsourcing firm in Bengaluru, had difficulty renting homes and had to pay large rental deposits each time he moved. He recently opted for the zero-deposit rental scheme for an apartment in Sarjapura. The scheme requires him to sign a Rs 3,000 rental bond  (instead of Rs 50,000) and pay a monthly Rs 13,000. 

The zero deposit model requires tenants to pay an upfront yearly premium, typically around  6% of the probable deposit or bond value, equivalent to the minimum return on investment. In addition, tenants pay up to a 10% rent premium for access to zero-deposit properties. Rent increases and credit-verified tenants can entice landlords to increase rents.

For example, if the rent is Rs 10,000 per month, the tenant must pay Rs 10,500, nearly Rs 500 more each month, and a one-time payment of Rs 3600 when signing the rental bond. Landlords will no longer need to collect a 60,000 security deposit from tenants upfront. 

“This financial product aims to bridge the trust gap between landlord and tenant by providing much-needed security to the landlord. Amit Kumar Agarwal, CEO and Co-founder of NoBroker.com explains that the tenant only pays a one-time fee when executing the rental bond. 

The company has launched the rental product in Bengaluru and is testing it in other cities, including Mumbai and Delhi-NCR. 

Rental bonds are also popular in international markets like Brazil. QuintoAndar, a rental property startup, had previously launched a similar product in the country. The business model was based on connecting those looking for apartments with those renting them out. 

“While the problem of high rental deposits faced by tenants in Brazil was similar to that faced by them in Bengaluru, we attempted to localize the product for the Indian market,” said Agarwal. 

“We discovered that nearly 40% of Bengaluru resident’s salary is spent on rent. This often puts a financial strain on anyone moving to a new city for work. There have also been reports of people asking if they can get a personal loan to pay for high rental security deposits,” he said, adding that the rental bond aims to address these issues by requiring the tenant to pay only about 6% of the amount he would have paid upfront as a security deposit.  

The rental bond is valid for six to eleven months, depending on the length of the lease agreement. It has to be renewed every year. 

“The rental sector has seen unusually high inflation, and Bengaluru tenants, already dealing with rental inflation, are now facing exorbitant deposits. A Bengaluru landlord typically requests a deposit of four to ten months’ rent. Agarwal stated that zero deposits are a solution that meets the needs of both landlords and tenants.  

How has the zero-deposit rental scheme performed so far?  

According to a recent NoBroker survey, 35% of Bengaluru tenants are willing to rent with no deposit. The city leases 5% of its rental properties through the rental bond. The product has been available in the market for merely a year. 

However, some real estate believe won’t want to rent a property without a security deposit. No landlord will rent out a property without a security deposit because it is collateral for any wear, tear, or damage the tenant may cause. It also allows the landlord to recover dues if the tenant fails to pay them in any way, and it can be set aside as a fixed deposit for the duration of the tenancy to earn some interest,” said Prashant Thakur, Regional Director & Head- Research, ANAROCK Group.