Home rentals zoom on high realty prices

The industry norm of eight to 10 per cent rise in rentals is now passe. Ask Deepak Varma, a 38- year-old resident of Kandivili, in the western suburbs of Mumbai. He was shocked when his landlord demanded a 25 per cent hike in rentals to renew his housing lease.




"The landlord gave me just two options - either pay up the increase or search for another property. After some research I found that rentals have zoomed up in Mumbai. As buying a house at these levels is just not possible, I would have to look for a smaller house where the rents are affordable for me," he said.



The trend has been confirmed by real estate portal 99acres.com. According to a study conducted by the portal, residential rentals have continued to rise in sync with the increase in realty rates. The rentals have increased between 12 to 20 per cent. In places like south Mumbai and south west Mumbai, the appreciation has been the most, the study revealed. Khar, a western suburb of Mumbai has seen 47 per cent appreciation in rentals in the second quarter of this year compared to the previous year. It is closely followed by places like Mahalaxmi and Napean Sea Road, which saw 28 per cent and 13 per cent rise in rentals, respectively, over the same time period. Bandra West witnessed an 11 per cent rise in residential rentals. Similarly, Breach Candy and Lower Parel saw rental values move up by six per cent in the second quarter, the study pointed out.



Yashwant Dalal, president of the Estate Agents Association of India said that high property prices are responsible for the rise in rentals in the city. "Property prices have gone up beyond the 2008 peak and are consistently going up since the last three quarters. So people are waiting for the prices to correct and have postponed their purchasing plans for some time. As preference is more towards leased property, the rentals have gone up in the city," he said.



The study by 99acres. com also shows a similar trend in Delhi and NCR. Saket in South Delhi witnessed a 31 per cent rise in rentals in the second quarter of 2010 as compared to the same period last year. South Extension, Safdarjung and Malviya Nagar followed at 24 per cent, 22 per cent and 21 per cent respectively. Vasant Kunj saw a 17 per cent rise in rentals while Dwarka witnessed an increase of 12 per cent in the second quarter of this year compared to last year. Vasant Kunj and Dwarka have emerged as the most affordable rental destinations in Delhi, the study revealed.



Connaught Place has seen an eight per cent rise in rentals while Pitampura and Rohini saw 35 per cent and 37 per cent rise in prices respectively, over the same time period. Key localities of Noida like Sector 93, Sector 53, Sector 61 and Sector 82 saw rentals escalating in the range of 18 per cent to 25 per cent. Prime areas in Gurgaon like Sohna Road and Sushant Lok saw 16 per cent appreciation in rental values.



Pankaj Kapoor, managing director of real estate research firm Liases Foras, said that he does not believe that residential rentals in the country could rise so steeply. "There are lots of properties lying vacant in many of the new residential projects. So, it is quite unlikely that the rentals at this stage could increase," he said.