Home rents are really going up, hurting tenants and leaving them with very little room for discretionary spending.

Residential rents have increased in the range 26-67 per cent across key micro markets in the top seven cities in India in the last three years, according to data from property consultant Anarock.

“Cities such as Bengaluru and Gurugram have seen rents spike significantly over the past two years,” said Vivek Rathi, National Director- Research, Knight Frank India.

“While overall sentiments regarding the economy and income growth remain strong, the steep increase in rents is having an increasingly larger impact on current incomes of the renting populace,” said Rathi, adding, “It reduces their budget for discretionary expenses such as entertainment and vacations, but the largest casualty is very likely their savings and investments, particularly in the low and middle-income demographic.”

Bosses of top consumer goods and FMCG companies recently flagged concerns over weak urban consumer demand and “shrinking middle class”. They attributed the slowdown to various factors such as flooding in the September quarter and food inflation, and a declining demand for discretionary spending.

In cities such as Mumbai and the National Capital Region where real estate costs are high, people end up spending nearly half their income on rents.

Soaring rent

The data showed that monthly rents have gone up the most in Bengaluru, especially in places such as Sarjapur Road, up 67 per cent at ₹35,000, and up 56 per cent in Thannisandra Main Road at ₹32,000.

In Chennai, rents have increased 33-40 per cent to ₹20,800-21,600 in places such as Pallavaram and Perambur and in centrally located areas such as Anna Nagar rents have increased to Rs 25,000 for a 2BHK, assuming top amenities.

Mumbai has one of the most expensive real estates in the world and recent rise in premium gated developments with a range of amenities has resulted in rental spikes. Rent in the eastern suburb of Mulund has risen 26 per cent to close to Rs 50,000 while in centrally located Chembur it is up 38 per cent at over Rs 63,000.

In Hyderabad rents have increased by 46-50 per cent across areas such as Hitech City and Gachibowli.

Rent inflation has in fact exceeded capital appreciation in many areas.”“With residential rents rising sharply across Indian cities, buying a home has become a more stable and financially sound choice for many,” said Pradeep Aggarwal, Chairman, Signature Global, a large player in the National Capital Region.

A similar view was echoed by Saurabh Runwal, Director, Runwal Realty. “Buying a home offers key financial advantages that renting cannot match.” This included tax incentives while the security of ownership provides a notable edge over renting, he said.

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