Rental market heats up: Bengaluru tops cities with highest yield of 4.45%

India's rental market, led by Bengaluru, has experienced a significant surge in rental yields and values since the onset of the pandemic. Bengaluru emerged as the leader in rental yield with a remarkable 4.45% in the first quarter of 2024, representing a 24% increase from pre-pandemic levels in 2019. This surge is attributed to the strong post-pandemic demand for rentals, particularly in IT-centric cities like Bengaluru, Mumbai, and Gurugram. Anarock's data reveals a nationwide uptick in rental yields, with cities like Pune, Noida, Delhi, Navi Mumbai, and Thane all witnessing improvements compared to pre-pandemic times. This positive trend extends to rental values, with significant year-on-year growth exceeding 30% in India's top cities during 2023, followed by a continued momentum in the first quarter of 2024. However, while this bodes well for landlords, it raises concerns about cost-of-living inflation for tenants, especially considering the significant 4-9% average jump in residential rents observed in the first quarter of 2024, surpassing the typical annual increase of 5-10%.

Bengaluru leads the charge in rental values as well, experiencing substantial growth in prominent localities like Sarjapur Road and Whitefield, where average monthly rents for a standard 2 BHK flat saw an impressive 8% increase between the fourth quarter of 2023 and the first quarter of 2024. Similar trends are observed in other key cities, albeit to a lesser extent. For instance, Noida's Sector 150 saw a 9% rise in average rents, Mumbai's Chembur and Mulund witnessed 4% growth each, and Kolkata's Rajarhat saw a 3% increase. Overall, the rental inflation trend shows no immediate signs of slowing down, with expectations of further acceleration in the next few quarters, as rental activity typically remains high in the first two quarters of the fiscal year.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.