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If you think that leasing residential houses and apartments are not profitable enough or a thing of the past, read on. It would appear a trifle awkward that in today’s time and age when people, especially couples, prefer to own their places rather than look for residentials, the value of leasing has in no way declined. In fact it has picked up like never before.
Latest statistics reveal that rentals for Delhi and NCR, Mumbai, Pune, Chennai and Bangalore have undergone a big leap forward, if figures available for 3 BHK residential apartments of the second quarter of 2010 as compared to the same period last year are taken into account.
Consider this. A study by 99acres.com, a real estate portal, reveals that 3 BHK houses in key locations of south Delhi and Dwarka have witnessed substantial appreciation. Saket has seen a whopping 31 per cent increase in rentals in Q2-2010, that is, April, May and June, as compared to the same period of Q2-2009. Following close on heels is South Extension, Safdarjung and Malviya Nagar at 24, 22 and 21 per cent respectively. Vasant Kunj, the quintessential middle class Delhi Development Authority (DDA) hub in south Delhi. Further south near the Delhi airport, Dwarka has seen a jump of about 12 per cent, emerging as a favourite affordable rental destination for the middle-income group.
Key localities in east and west Delhi have seen an up trend in prices with localities of Patparganj, Vasundhra Enclave and Mayur Vihar witnessing a 12 per cent jump in rentals. All these localities are very popular with people who work either in Delhi or Noida because of their strategic location.
While old established areas have seen relatively smaller increases in rents, it is the new colonies with their better connectivity, thanks to the Delhi Metro, which are attracting hefty raise in rents. A well established commercial centre like Connaught Place has seen a modest 8 per cent increase as compared to Noida in the National Capital Region (NCR) where sectors like 93, 53, 61 and 62 have seen escalations anywhere between 18 to 25 per cent. In Gurgaon, prime localities like Sohna Road and Sushant Lok have been witness to 16 per cent appreciation in rental values.
Says Ashish Jindal, regional director, Knight Frank, “There is no doubt that there is an upward trend in rentals. The sentiment is good, markets are picking up and metro connectivity has done wonders for areas like Dwarka, Noida and now Gurgaon, where people find it easy to live and commute. Connectivity is the key. And with increasing connections, it is but natural that rents will go up.”
The increases in the last one year have managed to bust one theory though: leasing is not merely about affordability, integral as it is to the scheme. According to a survey by CB Richard Ellis, rentals in high end Delhi too have been moving up. In plushest of the plush Aurungzeb Road and Prithviraj Road, home to industrialists, politicians and civil servants in the heart of Lutyen’s Delhi, the rental value of 3 to 5 bedroom apartment set in 2009 came at between Rs 44,000 and 48,000 per sq yard. In 2010, it has jumped to a whopping Rs 58,000 to 65,000 per sq yard.
In Chanakyapuri, host to Delhi’s diplomatic crème da la crème, the Rs 40,000 to 42,000 per sq yard has moved a notch higher to Rs 48,000 to 55,000 per sq yard. Likewise, Shantiniketan and Westend, plush south Delhi conclaves, have seen their hiring capacities jump from Rs 28,000-30,000 to 32,000-38,000 per sq yard.
According to CB Richard Ellis, ditto for Vasant Vihar, which saw rentals for independent units touching Rs 27,000 to Rs 38,000 per sq yard this May from Rs 27,000 to Rs 28,000 in May 2009. Or posh south Delhi conclaves of Panchsheel and Anand Lok where current rates remain steady at Rs 27,000 to 32,000 per sq yard from Rs 23,000 to Rs 25,000.
Saurabh Chawla, executive director DLF, explains, “Commercial segment continues to lag the momentum exhibited by the residential segment. We are witnessing increasing traction on leasing. However, challenges remain on the inflation front, which could have an adverse impact on the overall demand and supply.’’
This trend is by no means confined to Delhi and NCR. According to 99acres.com, the situation is the same in India’s major metros. In Bangalore, important areas like CV Raman Nagar and Airport Road, rentals have increased by 11.61 and 11.68 per cent respectively between Q2-2009 and Q2-2010. As in Whitfield where it has moved up to 13.73 per cent or Kormangla where it has shifted gears by up to 28.44 per cent.
Manjusri, DGM, sales and marketing of Bangalore-based HM Constructions, points out, “North Bangalore is a booming location which is seeing an increase of 20-25 per cent in rentals, while south Bangalore is seeing an increase of 10-12 per cent. There is not much change in CBD and East Bangalore. In my view, the market has not come out with the recessionary fear completely. After one quarter, we expect there would be a significant positive change in sales and rentals.’’
In Mumbai, in suburbs like Bhandup west, rentals have gone up by 24.80 per cent, in Andheri (east) by a whopping 36.55 per cent; in Kandivali (west) by 34.07 per cent and Parel by an unbelievable 85 per cent. Localities like Khar has been a substantial 47.35 per cent appreciation while Mahalaxmi has done well for itself by clocking close to a 30 per cent increase.
Likewise in Pune, areas like Kalyani Nagar have appreciated by nearly 70 per cent while in popular areas like Koregaon it has gone up by over 22 per cent while Baner has gone up by 12.3 per cent.
Ashwani Prakash, executive director, Paramount Group, says, “Indian economy was also affected in the global recession which was seen worldwide during the last few years. It can however be said that the Indian economy has shown the fast signs of recovery. The recession, which had largely affected the employment scenario, had ultimately affected the real estate sector and the absorption in the real estate went down remarkably. This had also disturbed the comfort zone of the people who were willing to go for their own property; hence to cover up their residential requirements most of the people have opted for the rental properties. This trend supported by the increase in maintenance cost of the estates, has led to the escalation of the rentals which is visible not only at national level but also at global level.”
Getamber Anand, managing director, ATS Group and vice-president Credai, north, concurs and says, “The prices in north India would continue to escalate between 10 per cent to 22 per cent. In cities like Chennai, Pune, Hyderabad, Bangalore, rentals are expected to rise anywhere between 5 to 25 per cent. The rise however would be limited to specific locations within cities or to some specific projects.”
Experts believe that net 68 million Indians (assuming average size of households is three) will require independent housing and thereby will add to the housing demand of the nation due to age-demographic effect. “We feel there is a huge demand and supply gap which will also push up the rentals in the key specific locations in the major metros and cities, but the rentals outside these regions will be sluggish,’’ adds Anand.
In the coming couple of years, leasing residentials are on a good wicket, notwithstanding the archaic rent control act, which most see as weighing heavily against the landlord. There is a risk element involved in giving out rents and most land lords are aware of the pitfalls of renting out to recaltriant tenants who may take it in their head not to move out of rented accommodation, all what’s worse, refuse to pay rents But clearly, if the government’s proposed amendment in the Rent Control Act is to become a reality, then residential leasing could become a thing of the future.
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