Bengaluru tops list of cities with highest rental yield of 4.45% in Q1 2024; Mumbai second with 4.15%
The top 7 cities saw an average jump of 4-9% in rents in Q1 2024. While this bodes well for landlords, it signifies a high cost-of-living inflation for tenants
Bengaluru topped the list of cities with the highest rental yield of 4.45% in Q1 2024 followed by Mumbai at 4.15% and Gurugram at 4.1%. This was primarily on account of corporates asking their employees to return to work, data shared by Anarock showed.
Mumbai’s rental yield was at 4.15% in Q1 2024 as against 3.5% back in 2019 – a 19% growth. Gurugram was close behind with a rental yield of 4.1% in the last quarter against 3.5% in 2019, data showed.
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Rental yield is the annual return on investment (ROI) investors earn from capital invested in a property.
Here's how rentals stacked up in Bengaluru
Bengaluru’s rental yield in pre-Covid 2019 stood at 3.6%, which amounts to a growth of 24% in this period, Anarock data showed.
As per Anarock data, the average rental values in Sarjapur Road and Whitefield rose by 8% each in Q1 2024 against the previous quarter. In Sarjapur Road, the average monthly rent in Q4 2023 stood at approximately ₹31,600 for a standard 2 BHK flat of 1,000 sq ft in Q1 2024, it went up to approximately ₹34,000 per month. Similarly, Whitefield saw average monthly rents go up from ₹30,200 in Q4 2023 to ₹32,500 in Q1 2024 - a 8% jump.
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A comparison of rental values between 2022-end and Q1 2024 shows that top localities in Bengaluru saw a staggering hike of 40% and above.
Other cities that witnessed rental values inflation are…
Other cities have also witnessed rental values inflation, though not to the magnitude seen in Bengaluru. These cities included Gurugram, Noida, Delhi, Pune, Mumbai, Navi Mumbai, Thane, Kolkata, Hyderabad and Chennai.
In NCR, Noida’s Sector 150 saw average rents rise by 9%, and in Delhi's Dwarka by 6%.
In Mumbai, Chembur and Mulund saw 4% growth each in rental rates. In Chembur, the average rental rates in Q1 2024 stood at approximately ₹62,500 per month as against ₹60,000 per month back in Q4 2023.
In the prominent localities of the top 7 cities, there has been an average jump of 4-9% in residential rents in Q1 2024. Considering that the typical annual increase is 5-10%, this is significant and while it certainly bodes well for landlords, it signifies a worrisome element of cost-of-living inflation for tenants, the analysis showed.
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Kolkata’s Rajarhat saw the lowest increase (3%) in the period – from approximately ₹18,500 per month in Q4 2023 to approximately ₹19,000 per month in Q1 2024. In both Chennai and Mumbai, rents rose by a more sedate 4% while in Hyderabad, prominent localities like HITECH City and Gachibowli saw rents rise by 5% each in the quarter.
Rental demand is soaring because…
Residential rental yields in India had chronically stagnated before the Covid-19 pandemic, with the national average at just 3% for many years, said Santhosh Kumar, Vice Chairman – ANAROCK Group.
“With post-pandemic rental demand soaring after offices resumed, rental yields are heading north too. IT-dominated cities including Bengaluru, Gurugram, Pune and Noida, and also MMR, have seen considerable upticks in their rental values, and therefore yields,” he said.
Residential rental values in India’s top cities have resurged tremendously after the pandemic, with 2023 seeing them soar by over 30% y-o-y. In the last quarter of 2023, rental values stabilized in most cities as renting activity usually abates in the last quarter of the year. However, the rental real estate market picked up momentum again in the first quarter of 2024, he said.
"Going by the current momentum, there are no immediate prospects of the rental inflation trend slowing down," he said, adding "In fact, it is expected to pick up in the next few quarters, as rental activity typically remains high in the first two quarters of a fiscal year," he added.
