Demand for residential rental homes up 10-20% in 2022: report

The demand for residential rental houses in the seven major cities of India has increased by 10-20% in 2022 compared to the pre-pandemic period in 2019. According to a report by ANAROCK Group, the demand for rental houses has increased, and in most places it exceeded supply. This has driven up prices, according to a report by The Economic Times (ET) declared.

The increase in demand can be attributed to people returning from their hometowns, as several companies have started calling their employees to the office.

The largest increase in rental housing demand was seen in Mumbai and Bangalore. In both cities, demand increased by 15-20% compared to 2019. In NCR, demand increased by 10-15%, followed by 10-20% in Pune.

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In Kolkata and Hyderabad, demand for rental accommodation increased by 5-10% each and in Chennai it was 8-10% higher than in 2019, the HEY report added.

Magicbricks recently reported that searches for Indian rental properties increased by 84.4% (year-on-year) in the second quarter of this year (Q2CY22) and by 29.4% compared to the first quarter. Real estate listings, on the other hand, were up 28.1% year-on-year.

HEY also quoted an expert saying that the Reserve Bank of India’s (RBI) monetary policy tightening has made renting houses more affordable for the public, compared to buying them.

In the last three monetary policy announcements, the RBI has raised the benchmark interest rate – the repo rate – by 140 basis points. Along the same lines, banks have increased their lending rates. HDFC, the country’s largest private lender, raised rates six times between May 1 and August 9 by a cumulative 140 basis points, the HEY report added.

With this, the demand for buying houses may drop. On the other hand, the demand for rental accommodation is expected to increase.

The Model Tenancy Act, which was approved by the cabinet in 2021, could further stimulate demand for rental housing. The law aims to establish a legal framework in the form of tenancy courts and structured tenancy agreements. This should bring more transparency to the sector and attract more private investment.

However, most Indian states have yet to set MTA-compliant rental rules.