Residential rental demand has soared in most cities ever since offices and schools reopened after the 3rd Covid-19 wave in 2022, especially in the past year and particularly in the country’s IT/ITeS capital Bengaluru – which has seen skyrocketing rental values. ANAROCK’s analysis of monthly rents across prominent areas of the top 7 cities finds that Bengaluru’s Thanisandra Main Road and Marathahalli-ORR saw residential rental values zoom up by 24% each between Q1 2022 and Q1 2023.

Average monthly rentals for a standard 2BHK home of 1,000 sq. ft. at Thanisandra Main Road increased from INR 21,000/month in Q1 2022 to INR 26,000/month in 2023. At Marathahalli-ORR, average monthly rentals increased from INR 22,500/month last year to INR 28,000/month in Q1 2023.

Interestingly, the next two hotspots were also in Bengaluru. Whitefield – another prominent IT/ITeS destination – witnessed the 2nd-best rental value growth of 21% in this period, against all prominent localities in the top 7 cities of India.

In Whitefield, the average rent stood at INR 21,900/month in Q1 2022, and in Q1 2023, had reached INR 26,500/month.

The third spot was occupied by Bengaluru’s Sarjapur Road, which recorded rental value growth of 20% between the first quarter of 2022 and 2023. Here, the average rentals were INR 22,500/month in Q1 2022 and INR 27,000/month in Q1 2023.

Prashant Thakur, Sr. Director & Head – Research, ANAROCK Group, said, “When it comes to rental demand and zooming rents, Bengaluru currently stands out among the top 7 cities, with East and North Bengaluru the biggest blips on the rental radar map owing to the IT/ITeS belt there. Whitefield, Sarjapur Road, Marathahalli-Bellandur Outer Ring Road, Thanisandra Main Road, and even Hebbal are the clear chartbusters.”

“We anticipate residential rental values in the IT capital’s prominent markets to rise further by anywhere between 5-12% in 2023, depending on the location, property, builder type, and other aspects,” says Thakur. “In housing societies with limited supply but high demand, the rents could easily rise beyond 12%.”

Top Rental Markets – City-wise

Besides the prominent localities in Bengaluru, other cities also recorded notable rental values growth:

• Pune’s three standout markets with high rental growth between Q1 2022 and Q1 2023 are Hinjewadi, Baner, and Wagholi, which witnessed rental value growth of 19%, 15%, and 13%, respectively
• In Chennai, the top 3 markets to witness high rental values growth are Pallavaram, Perambur, and Oragadam, with rents in this period growing by 16%, 10%, and 11% respectively
• In NCR, the top 3 markets were Sohna Road in Gurugram (rental values increased by 13%), Sector-150 in Noida (15% growth), and Dwarka in Delhi with rental value growth of 10%
• In MMR, the top 3 markets for rental value growth were Chembur, Ghodbunder Road (Thane), and Mulund, which saw 17%, 14%, and 14% growth, respectively
• Kolkata’s top 3 markets with high rental value growth between Q1 2022 and Q1 2023 were EM Bypass, Joka, and Rajarhat, where rents rose by 13%, 11%, and 10%, respectively
• In Hyderabad, the top 3 markets were HITECH City and Kondapur, which saw rental values increase by 12% each, and Gachibowli with 11% growth

Rental Yields

Residential rental yield (the annual rate of return an investor can earn from capital invested in a property) had long stagnated in India. The national average stood at 3% for the last few years pre-pandemic. However, things began to change with rental demand spiking up post the pandemic in 2022. Among the top 7 cities, Bengaluru has the highest rental yield of 4.1% as of Q1 2023-end, followed by Mumbai with 3.9%. Pre-Covid, the rental yield in Bengaluru was at 3.6% – the highest back then, as well.

About the author- Prashant Thakur, Sr. Director & Head – Research, ANAROCK Group