Q2 2016: Decoding Rental Scenario in Indian Cities

In the wake of current economic indicators poised towards fiscal rectitude, the Indian real estate sector is showing early signs of revival. This also comes in the backdrop of myriad initiatives announced by the government in the first half of the current fiscal. Be it the formation of RERA or relaxation in FDI norms or the recent Model Shop and Establishment Act, the sector is definitely envisaging better days in the near future.

Moreover, the announcement of the seventh pay commission is expected to further flush in more liquidity in the market by broadening the buying capacity of the government employees.

Now, coming to news and numbers, a closer look at the data clearly suggests that the number of new launches have taken a backseat this year. While developers are working towards completing their already launched projects, buyers are still in the wait-and-watch mode. Considering the fact that developers are focusing on completing their existing projects, decreasing number of new launches seems to be a positive sign.

In this backdrop, QuikrHomes deconstructed the rental demand and supply activity in the top 8 cities. Now, it is interesting to note that rental markets in all the tracked cities are heading north with ever increasing demand.

Let’s delve deeper.

• In Q2 2016, Greater Noida Sector-4 ranked first in both highest gross rental yield and the highest quarter on quarter rental yield growth with 23 per cent increase.
• All the top gross rental yield markets in this quarter are new entrants to the list.
• On an average, rental yield is in the range of 2.9-3.7 per cent.
• As per the demand, four out of the top five markets are from Delhi alone unlike last quarter wherein not a single locality from Delhi managed to find a place in this list.

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• With proximity to the financial capital, good connectivity, and robust infrastructure, Mumbai suburbs continue to show their dominance in the rental markets of MMR.
• Both, Mira Road and Malad West are the top markets based on gross rental yield, rental demand, and rental availability in Q2 2016.
• Mira Road clocked highest gross rental yield with 3.1 per cent. It must be noted that Mira Road is the new entrant to the list of the top market for rental yield.

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• Kothrud has emerged as the showstopper in all the top markets based on Rental Yield, Rental Availability, and Rental Demand. Moreover, it has seen maximum Rental Yield Growth in Q2 2016.
• Wakad, Hadapsar, and Kothrud continue to top the list of markets based on rental availability in Q2 2016. While Baner and Katraj are the new entries to the list.

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• It is Interesting to observe the growing rental yields in prominent markets of the city such as Banashankari, Jayanagar and JP Nagar with rising rental values. This can be mainly attributed to the increasing employment opportunities in these areas.
• The presence of IT/ITeS has made Electronic City and Whitefield prominent localities for rentals. However, it is remarkable to see how the old localities of Koramangala and Indiranagar have also retained their sheen with a healthy demand and supply ratio.
• Hosur Road, which maintained its top slot for the last two consecutive quarters, was replaced by Banashankari in Q2 2016 for maximum gross rental yield.

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• Interestingly, in Q2 2016, all the top rental markets based on availability have seen an increase in gross rental yield in comparison that in Q1 2016.
• All top 5 markets based on gross rental yield are new entries to the list. The previous quarter top markets included Adyar, Mylapore, Anna Nagar, GST Road and Padur.
• Chromepet recorded maximum rental yield with 4.4 per cent. Strategically located in southern Chennai along the GST Road, Chromepet sees high demand from IT professionals (mainly working in the IT corridor of OMR) and the students studying in nearby colleges.

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• While the western region of the city dominates growth and development pivoted along the IT industry, we can see an increase in rental activity and demand owing to the elevated Metro corridor connectivity.
• Interestingly, unlike other major metros, Hyderabad is undergoing a supply shift towards larger unit configurations in the newly developed residential markets near Cyberabad.
• There is very good rental demand for residential properties and supply is also at par with this demand in most of the major markets including Gachibowli and Madhapur amongst others.

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• Riding high on the back of infrastructure and connectivity, Satellite secured a top slot in both- top markets based on rental demand and rental availability.
• Interestingly, all top market with maximum rental demand are skewed towards Western part of the city due to the presence of IT companies in the vicinity and swift accessibility via Sarkhej-Gandhinagar Highway.
• Situated in North Ahmedabad, Chandkheda has emerged as the top market based on Gross Rental Yield with 3.8 per cent. Strategically located at the junction of Sardar Patel Ring Road and NH-41, the locality is well connected to all major locations of the city.

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• All the top markets based on rental availability and rental demand are well-established and most sought-after localities of Kolkata. Most of these localities boast of excellent social and physical infrastructure and offer excellent connectivity.
• Picnic Garden has been witnessing an increase in spillover rental demand from nearby premium localities of Ballygunge, Gariahat, and Tollygunge. This has made the area secure the first position in the list of top markets for gross rental yield.