The rental market on the road to recovery

Indian residential real estate has seen steady growth over the past two quarters due to falling inventory and rising rents, with hybrid and remote working becoming commonplace. That, coupled with heightened interest from retail customers looking to acquire income-generating assets post-pandemic, uncertainty and low interest rates on home loans for a decade have driven sales up.

Industry data suggests that rental housing demand increased by around 7% YoY in the first quarter of calendar year 2022 due to higher demand in cities such as Gurugram, Delhi, Noida, Bengaluru and Ahmedabad.

According to global real estate consultant JLL, sales in the first quarter of 2022 hit a new high for the second consecutive quarter (since the second quarter of 2013), with the residential apartment market in India registering sales of almost 52,000 units during the quarter, an increase of 11% on a sequential basis. Sales for the quarter also exceeded the average quarterly sales of the pre-Covid 2018-19 period by 148%.

The residential market is driven by the salaried population and a large percentage of tenants in cities like Bengaluru, Hyderabad, Pune and Mumbai belong to sectors such as banking, financial services and insurance, software and pharmaceuticals. Today, a growing number of employees are considering investing in residential properties, with rents skyrocketing and the market experiencing some stability for the time being. Searches for rental housing across the country increased nationwide from the previous year. This recovery in demand was led by cities such as Bengaluru, Mumbai and Delhi NCR which accounted for almost 63% of sales in the first quarter of CY2022, while Pune accounted for 16% of overall sales. This recovery also reveals interesting consumption trends in the residential sector, including the growing demand for larger apartments (2BHK, 3BHK) in multi-storey buildings, as customers spend more and more time at home, which requires home offices.

There has also been increased demand for rental accommodation close to employment centers and educational institutions, with customers looking to reduce commuting time to work or even otherwise. This trend is expected to continue in the coming quarters as offices move towards higher occupancy and operating rates, which will also lead to an improvement in the rental housing market.

The scenario, however, was quite different over the past couple of years when the Covid-19 pandemic rattled the rental housing market demand with rentals of residential properties in major cities such as Bengaluru, Chennai, Delhi-NCR and Mumbai down 10-20% immediately after the start of the pandemic. But a milder-than-expected third wave of Covid-19 infections, followed by a mass vaccination campaign, helped the sector return to normal.

Rising from the ashes, Indian residential real estate has now become one of the most resilient markets across the globe, having weathered the 2008 global financial crisis, demonetization and the Covid-19 pandemic. 19 and emerging stronger each time. From innovation on construction techniques to better management of construction costs leading to improved finances for real estate developers, the market is now only led by serious and experienced players, which translates into more stability for better quality offers for customers.

These factors will also play a crucial role in attracting investors to the residential sector after the asset class’s share of total foreign investment fell to 11% in 2017-21 from 37% in the previous period. of five years.

Now is an opportune time for new investors to capitalize and help build a world-class residential real estate market in India.

(The author is the founder and managing director of Property First)

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