Housing rentals surge by 4.1% QoQ as demand outstrips supply

With demand for rental homes steadily surging, home rents are increasingly rapidly in India’s top cities. The growing demand for rental homes in major cities has resulted in demand outstripping supply of rental homes and, as result, making them costlier over the last three months, latest data shows.

As per data available from real estate marketplace Magicbricks, average home rentals in the January-March quarter in the top 13 markets have surged by a whopping 4.1 per cent over the previous quarter. In cities like Gurugram, Noida, Hyderabad and Mumbai, average rent has gone up by 8.2 per cent, 5.1 per cent, 4.9 per cent and 4.2 per cent, respectively, in Jan-Mar period compared to December quarter. Out of the top 13 markets, 11 witnessed sequential surge in rentals last quarter. It was only in Thane and Ahmedabad, where marginal fall in rentals were recorded.

The steady surge in rentals is primarily attributed to the demand-supply gap that has been observed in recent months. Data shows, in 12 out of the 13 cities, demand remained much higher than the supply of rental homes during Jan-Mar quarter. While IT hubs Chennai (14.3 per cent), Bengaluru (12.2 per cent), and Hyderabad (10.8 per cent) and Pune (7.8 per cent) recorded the highest growth in rental demand. It was only in Greater Noida (-10.3 per cent), Delhi (-1.8 per cent) and Kolkata (-0.9 per cent) where demand declined along with supply. Only in Noida (-0.7 per cent) supply surged by 4.2 per cent even as demand fell. Rentals, however, surged 5.1 per cent in spite of falling demand of rental homes.

"The Indian rental housing market is demonstrating a buoyant revival and the macroeconomic trends affirm that this is expected to persist through the coming quarters," said Sudhir Pai, CEO, Magicbricks. "It is noteworthy that major southern cities have exhibited resilience as they continue to attract talent from across the country. Gurugram and Pune are other notable cities with promising rent-trends as they continue to attract a migratory talent pool. Overall, these market dynamics suggest a swift progression towards "business as usual scenario" for the real estate industry and sustained growth trajectory of the Indian rental housing market."

On a year-on-year basis, demand for rental homes in these 13 cities grew 3.3 per cent but supply fell by a whopping 18 per cent resulting in an overall shortage of rental homes. Continuing the trends from previous quarters, 2BHK units continue to lead the show in terms of both demand and supply with 42 per cent of tenants searching for 2BHKs, followed by 3BHKs and 1BHK with 36 per cent and 17 per cent shares in total demand, respectively. The demand for 3BHK increased to 36 per cent in Q1 2023 from 30 per cent in Q42022, while the demand for 2BHKs dropped from 47 per cent in Q4 2022 to 42 per cent in this quarter, indicating a higher preference for spacious homes to accommodate work from home/study needs, it noted.