Understanding India’s Rental Housing Market: A Look At Its Various Aspects
India’s Rental Housing Market- There has been a discernible shift in trends as evidenced by the growth in online rental search activity, which has outpaced buying activity. About 27% of households in India choose to rent their housing, particularly in urban areas, making the rental housing market a sizable portion of the real estate sector. The value of India’s home rental industry was estimated by the International Monetary Fund (IMF) to be approximately USD 20 billion in 2016, underscoring the market’s significant economic contribution. With about 500 million people living in metropolitan areas today, the Indian rental housing sector offers stakeholders and investors a profitable opportunity.
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Influential Factors Shaping Rental Dynamics
The dynamics of rental demand, price, and returns in the Indian housing market are influenced by a wide range of factors. These variables include the state of the economy, shifts in policy, migration patterns, demographic trends, property values, interest rates, and the supply of available housing. India has a special problem because interest rates are higher than rental yields, which affects the profitability of investments in the sector. This is in contrast to more developed economies like the US, where lower interest rates frequently outpace rental yields.
Evolving Trends
The rental housing market has seen substantial changes as a result of the COVID-19 outbreak. Rising real estate costs have forced many would-be purchasers to consider renting as a feasible option. Interestingly, more people are searching for rentals online than are purchasing them, which indicates a clear shift in the trend. The rental index is currently moving 23 points higher than the purchase index, demonstrating an increasing preference for rental properties among Indian people and outpacing the buying index.
Rental Activity and Urban Hotspots
The top eight cities in India, Bengaluru, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai (MMR), Pune, and Bengaluru, are important economic centres that draw a sizable immigrant population. The concentration of residential activity in these eight major metropolitan hubs is indicative of the socio-economic fabric. These cities have seen a rise in demand for both purchases and rentals since the epidemic, with the latter seeing a more marked increase. Our IRIS Index, which tracks highly-intent search activity on our platforms for buying and renting, validates this trend. The trend of increasing rental rates also applies to monthly rates, indicating a notable increase since 2021.
High-intent online searches for rentals are most common in cities like Bengaluru, Hyderabad, Pune, and Gurugram. Bengaluru and Gurugram also lead in monthly rent growth, with several micromarkets seeing double-digit hikes. Notably, Bengaluru and Hyderabad have the greatest rental yields (3.5–4.0%) among big cities.
The rental markets in these urban centres have experienced a notable revival due to strong demand.
Values of Median Rentals
| Cities | Median Rental Values (INR/sq ft) |
| Mumbai | 65000-70000 |
| Pune | 25000-30000 |
| Bengaluru | 55000-60000 |
| Noida | 27000-33000 |
| Hyderabad | 35000-40000 |
| Gurugram | 55000-60000 |
Momentum for Post-Pandemic Growth
The need for rental accommodation has been fueled by the growth of office work, professionals returning to physical workplaces, and a sizable student population. IT-heavy cities like Bengaluru have seen increased competition for rental properties, which has resulted in significant increases in rent. In addition, the slowdown in the number of new residential developments combined with growing demand has caused rents to rise quickly.
Average monthly rental rates have increased by 25–30 percent in 2023, while property values in the top eight cities have increased by 15–20 percent from pre-pandemic levels in 2019. Certain important areas in service-oriented cities have experienced even larger spikes exceeding 30 percent during the same period.
Therefore, even if worldwide trends point to decreasing rental yields, the recent rise in rents presents investors with encouraging returns.
Perspective for the Future
Future projections indicate that India’s major cities’ rental housing markets will continue to be strong. Demand will continue to be driven by consumers’ shifting desires for larger living areas as a result of hybrid work arrangements. The scarcity of ready-to-move-in homes, and the excellent investment potential. The most expensive rents are found in city centres, but as costs rise. There is a discernible shift towards more outlying locations. In general, India’s rental housing industry is expected to continue growing steadily and resiliently for the foreseeable future.
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