In which city room rent increased the most in 5 years?
Is living on rent in big cities of the country now becoming more expensive than buying a house? The latest figures coming out from metro cities like Delhi-NCR, Mumbai and Bengaluru are pointing in this direction. According to market data from Enrock and Knight Frank, house rents in many major areas have increased by 100 to 150 percent in the last five years. In Whitefield, Bengaluru, a flat of Rs 22 thousand has now reached Rs 55 thousand, while in some areas of Gurugram, the rent of Rs 40 thousand has reached close to Rs 90 thousand. In some areas of Mumbai, the monthly rent of a 2 BHK flat has reached Rs 1.5 lakh. The effect of this rapidly increasing rent is that 40 to 50 percent of the salary of the working middle class in metro cities is going only as rent to the landlord. This is the reason why now lakhs of people are trying to understand the new mathematics between rent and home loan EMI.
Headlines
- In the last five years, house rents in major residential areas have increased by 30 to 60 percent.
- In metro cities, 40 to 50 percent of the income of the middle class is being spent on rent.
- Rental yield in Bengaluru and Hyderabad has reached 4.2 to 4.5 percent.
- In many areas, the difference between rent and home loan EMI is only Rs 15 to 20 thousand.
- Landlords have now started increasing the rent by 10 to 15 percent every year.
- The youth are planning to buy houses at a younger age than before.
Rent spoils the budget of the middle class
House rents are continuously increasing in areas like Gurugram of Delhi-NCR, major residential areas of Mumbai and Whitefield of Bengaluru. According to Enrock Research data, rents in these areas have increased by 30 to 60 percent in the last five years. Whereas earlier employed families used to spend 20 to 25 percent of their income on rent, now this figure has increased to 40 to 50 percent. This is having a direct impact on families’ savings, children’s education, health insurance and future financial plans. Rising rents have completely changed the balance of the household budget of the middle class.
How has the fare math changed in metro cities in 5 years?
According to data from real estate research firms Enrock and Knight Frank, there has been an unprecedented jump in rents in the country’s major metro cities in the last five years. The biggest change has been seen in the IT corridor of Bengaluru. The monthly rent of 2 BHK flats in areas like Whitefield and Outer Ring Road has increased from Rs 18,000 to Rs 22,000 in 2019-20 to Rs 45,000 to Rs 55,000 in 2025-26. In some gated societies, rents have increased by 120 to 140 percent, which is considered to be a record level in the last several years.
Rent pressure has increased rapidly in Delhi-NCR also. In the premium areas of Gurugram like Golf Course Road and Sohna Road, a 3 BHK flat which was available for Rs 35,000 to Rs 40,000 per month in the year 2019 has now reached Rs 75,000 to Rs 90,000. That means the rent here has increased by 110 to 125 percent. If Magicbricks is to be believed, the rent here for a 3BHK flat on Golf Course Road in Gurugram usually ranges between ₹ 60,000 to ₹ 2.5 lakh per month or more. That means it shows an increase of up to 5 times. Whereas in the premium societies of Sector-150 and Expressway area of Noida, the rent has increased from Rs 15,000 to Rs 32,000 per month.
Mumbai remains the most expensive rental market in the country. While the rent of 2 BHK flat in residential towers located around Lower Parel and Bandra-Kurla Complex was between Rs 50,000 to Rs 60,000 five years ago, it has now reached Rs 1.20 lakh to Rs 1.50 lakh per month. Even in middle class areas like Thane and Navi Mumbai, rents have increased by 70 to 90 percent. It is clear from this that the cost of living in metro cities has increased much faster than before.
Rental yield increased, landlords got silver
For a long time, the rental yield on residential property in India remained between 2 to 3 percent. But according to the report of Knight Frank India, there has been a big change in this in the last few years. Especially in IT cities like Bengaluru and Hyderabad, the rental yield has increased to 4.2 to 4.5 percent. Rental yield means how much return the owner is getting from the rent in a year compared to the total price of a house. For example, if a house worth Rs 1 crore fetches a rent of Rs 5 lakh per year, its rental yield will be 5%. That means, the higher the rental yield, the greater the benefits for property investors. After the pandemic, the demand for rent increased rapidly due to the reopening of companies’ offices and the return of employees. On the other hand, the availability of houses remained limited. For this reason, landlords have now started increasing the rent by 10 to 15 percent every year while renewing the rent agreement. Due to this, investors are getting more benefits while the financial pressure on tenants is increasing.
The difference between rent and EMI is decreasing
According to RBI home loan data and real estate trends analysis, the biggest change in the real estate market is that rent and home loan EMI are now almost at par in many areas. For example, the monthly rent for a three-bedroom flat in Bangalore’s Outer Ring Road or Gurugram’s Golf Course Road Extension has reached Rs 65,000 to Rs 80,000. Whereas if a person takes a home loan of Rs 1 crore to Rs 1.2 crore, then at the current interest rates his monthly EMI is around Rs 85,000 to Rs 95,000. This means that in many cases the difference between the two is only Rs 15 to 20 thousand. This is the reason why now a large number of people are considering the option of building their own property instead of paying rent.
The trend of buying houses early is increasing among the youth.
This changing equation of rent and EMI has created a new trend in the Indian real estate market. Experts are calling it early home buying. Enrock and Knight Frank market trend reports say that whereas earlier the youth used to plan to buy a house after the age of 30, now they are looking for home loan and property options only at the age of 25 to 28 years. However, there are many challenges in this path. Flat prices are continuously increasing in metro cities and raising a large amount for down payment is not easy. Apart from this, strict credit conditions of banks and limited availability of ready houses also prevent people from taking decisions. This is the reason why a large number of people are not able to buy a house even if they want to and are forced to live on rent.
The changing mathematics of real estate
The rental market of metro cities has completely changed in the last five years. While earlier rent was considered only the cost of living, it has now become the biggest factor influencing the decision to buy a home. Rising rental yields, higher rents and decreasing gap between EMIs have created a new balance in the real estate sector. Middle class families are now not only looking at the current expenses but are also thinking whether the money given every month will become their wealth in future or not. This is why the debate of rent vs EMI is likely to intensify in the coming years.
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