Rentals plummet in City as housing complexes mushroom

Rates linked to employment generation in big cities

Residential rentals are not growing in the City as fast as they were expected to and house owners are reducing rentals even if marginally, to attract tenants. 

A common sight in many residential areas this season is “To Let” boards with two- and three-bedroom independent houses and apartments on offer for rents.

Real estate analysts say the rate of growth of rent has not kept pace with capital value. If the capital value is around 15 per cent, rents are growing lower at about eight to 10 per cent.

Says Srinivas Reddy, a real estate researcher: “People who have built houses as investment and source of income are losing out. With the availability of scores of independent houses with a floor and more, rentals have to be reduced to get people to stay.

Some areas have two or more ‘To Let’ boards on the same street. The fairly high stock of apartments in the City has not allowed owners to fix higher rents.”

Availability of jobs

Rents are linked to job rates in Bangalore, much like in most metros. Rents were doing very well during 2006-07 when employment generation in the IT/ITeS sector touched nearly a lakh.

The situation went awry in mid-2008, as the economic downturn walloped the world. After a lull, there was some recovery around 2012-13 when approximately 60,000 jobs were created. Still, the recovery of rentals was not at 2006 levels.

The excess supply of housing, especially apartments, riding on the hope of a large number of jobs, spoiled the party. And apartments with high quality facilities have tempted IT/ITeS professionals to purchase them instead of taking them on rent.

Rajeev R, a software engineer and resident of an apartment cluster at Ramamurthynagar, said he did not want to lose opportunity to own a house when the apartment project came up.

“Instead of paying Rs 10,000 or more as rent, I thought that by paying a little more I might as well own a property. I pay a higher EMI, but I have the satisfaction of owning the apartment.” So, when the demand for ownership goes up, rents have to be cut, else the houses would remain vacant.

Current rates

Rents for two-bedroom houses in popular localities hover around Rs 10,000 to Rs 14,000, while three-bedroom houses are available for Rs 16,000 to Rs 20,000. In case where owners have not been able to get tenants, they reduce rents by a little over Rs 1,000. In apartments far away, it would have to be much lower, by at least Rs 2,000.

There are examples of people waiting for as long as three to six months for tenants to come. There is also the anxiety of renting out the property to the right people. Then in an apartment complex, if there are two or four apartments available for rent, owners can’t quote diverse rents.