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According to Magicbricks' Rental Update covering October through December 2023, Gurugram is leading the rental market with a significant year-over-year (YoY) growth of 31.3%. The rise is an aspect of a strong YoY increase of 17.4% seen in 13 important Indian cities. Bengaluru, with a noteworthy YoY gain of 23.1%, and Greater Noida, with a 30.4% YoY surge, are joining Gurugram at the top.
The report notes a 1.6% quarter-over-quarter (QoQ) increase in rents, following a 4.6% QoQ rise from July to September 2023. Despite this, rental demand experienced only a modest 1.6% YoY growth, with Greater Noida, Ahmedabad, and Chennai witnessing the highest increases at 6.9%, 6.6%, and 4.1% respectively. However, rental supply saw a significant 16.9% YoY reduction, particularly noticeable in Noida, Hyderabad, and Greater Noida, where rental supply increased by 19.6%, 3.2%, and 2.7% respectively.
The rise in rental demand in 2023 can be attributed to the expansion of the economy, effective job markets, increasing disposable incomes, and migration to Tier 1 cities. Simultaneously, rental supply decreased, possibly due to interest rates exceeding rental yields, restricting investors and property owners from engaging in the rental housing market. Despite a cyclical decline in rental demand between October and December 2023, a rebound is anticipated in the short to medium term, reflecting the dynamic nature of the rental market.
Millennials aged 18-34 constituted the majority of rental demand at 67%, with 2 BHK units dominating the market, commanding 41% of rental demand across these cities.
In summary, the rental market in India, particularly in major cities like Gurugram, Greater Noida, and Bengaluru, witnessed significant growth in rents, albeit with a modest increase in rental demand and a notable reduction in rental supply. This trend is attributed to various factors driving economic expansion and migration to urban centers. Despite challenges such as interest rates impacting rental yields, the rental market remains dynamic, with expectations of a rebound in the near future.
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