Bangalore is the fastest growing city in terms of economy, competing with top cities in the world like Tokyo and Beijing, as per Oxford Economics. In 2023, the rates of flats for rent in Whitefield, Bangalore, have increased significantly, worrying engineers and other working millennials seeking residence in the city. The individuals typing "house for rent near me" are finding homes out of their budget. Software engineers seeking 1BHK flats for rent in popular localities like Maithri Layout in Whitefield and others are not finding sustainable homes they can afford.
Many reasons might have led to the rise in rental prices in popular localities like Whitefield, Koramangala, and Sarjapur. The rental struggles of the tenant, reasons for rent hikes, and more will be explained in the upcoming section of the article.
Changing Rental Market Trends (Post Covid-19) - Why There Is a Sudden Spike in Rent in Bangalore:
One of the main problems the tenants are facing is the skyrocketing rental prices, especially in IT Hub residential areas like Maithri Layout in Whitefield, Sarjapur, and Bellandur. The rental value has increased in 2023 compared to last year. There are many possibilities as to why landlords are increasing the rent by almost 30% of the cost. When new-age tenants search for "1BHK for rent near me" or "house for rent near me," they do so with expectations different from Covid-19 times. The trends were much different during the lockdown period, where the working trend shifted from Work-from-office to Work-from-home. Today, it is shifting back to Work from Office. The following are the reasons for rental value hike and issues tenants face in finding a home in Bangalore in 2023:
Demand v/s Supply gap: The increasing requirement for apartments in the IT hub of Bangalore is overshooting the availability of homes in the area. The new residential units added are only a 3% increase compared to 2022. These units are filling quickly, whereas double the demand is coming in. The inflow of migrating working professionals constitutes over 50% of the population in dire need of accommodation. During the lockdown in 2020 and 2021, the construction industry had halted, creating scarce supply. The demand which went home is now suddenly coming back, creating a huge gap in the rental market. It has allowed landlords to hike prices and lease their homes only to individuals who can afford the high rent.
Recovering from Pandemic losses: During the pandemic, most big companies, like Amazon, Wipro, SAP, etc., asked their employees to work from home. These individuals returned to their hometown to work remotely, increasing vacant homes in Bangalore. The landlords had to reduce their rental rates and incur a big loss. Now that the workforce has been asked to return to the office, there is a spike in demand for homes, an opportunity for the landlords to regain the revenue lost.
Sudden Rental Hike trend: The primary factor affecting the tenants is the sudden hike in the rental rates. The landlords in Bangalore are gaining rental yields of around 3.9%. The rent has increased by almost 40% in the last year, making it difficult for engineers and other working professionals to find a residence in the city. Despite adding 13,560 resident units in Bangalore, there is still a mismatch between the demand and the availability. In Whitefield alone, hundreds of people look for '1BHK for rent near me" and are not finding homes in the reasonable price bracket. The average rent of a 1BHK or a 2BHK home has shifted from INR 25,000 to INR 40,000. The price can go up to INR 60,000 in some in-demand localities.
IT Hub Concentrated areas advantage: Over 350 IT companies in and around localities like Whitefield, ITPL, and Koramangala. There is an increase in demand for homes in these localities, making it difficult for tenants enquiring about the 1BHK homes for rent in Whitefield, Bangalore, to find a home. It increases the value of properties within a commutable distance from the workplace. Therefore, rents of properties in demand around these localities have increased significantly.
Additional issues faced by tenants: Apart from the high rent, there are other issues individuals are facing in 2023 to find a home in Bangalore. Some landlords make decisions based on their personal biases when leasing their property to an individual. Most do not prefer to give their property to unmarried individuals, while others want the tenant not to cook meat in the house. Some landlords rent their houses to potential tenants willing to pay a larger price than the quoted price. It makes the other applicants feel like it was an unfair trade, and the opportunity was taken away. Many landlords are asking for the resumes and LinkedIn profiles of potential tenants to screen the list of incoming applications. Some people ask for the tenant's marks cards and refuse to give them a flat if they have scored below 90%. Working professionals and students seeking residence in the city are finding these demands unreasonable. The stress of house-hunting and the landlords' unreasonable demands affects their mental and physical health, making the process more taxing.
How India's Inflation Rate and Rising Rental Prices are Affecting Each Other:
Inflation is the rise in costs of goods and services in a country's economy. The price rise in 2023 will affect all costs, including the rental market and residential real estate.
India's central bank is fighting against sudden inflation. It is affecting the real estate and rental market as the prices in top cities like Bangalore and Mumbai showed a 30% rise in rent, as reported by 20% of the tenant base in these cities.
Over the last five years, Bangalore has seen an inflation rate of 33%. This percentage is only predicted to grow in the coming years.
The ancillary and house rental costs contribute 10.07% of the weightage of the Indian consumer's price inflation leading to a three-year high.
The inflation in urban housing is rising by 4.47% YoY, as seen in December 2022, compared to 3.61% in December 2021 and 3.21% in 2020.
The RBI's comfort zone of inflation rates is between 2%-6%, where the country's retail inflation fell to 5.72%. But the core inflation excludes fuel prices and food supplies. This inflation rate remains closer to 6%, creating a tricky situation for the bank.
The increase in housing rents affects the inflation rate and could become a risk by leading to a further rise.
The average rent rose to around 20%-25% in top cities than pre-pandemic rates. Some popular housing societies have increased the rent by 30%.
The work-hybrid culture in the post-pandemic era demands larger homes with much more space.
The house pricing index put together by the RBI captures home sales and shows a steady rise in the value, which is the highest in more than ten years.
Although the housing market does not directly fall in the basket that affects inflation, its effect is indirectly captured by the construction sector and raw materials. Analysts have predicted that this rise will only exponentially grow.
Future Prediction- Bangalore to be the Fastest-Growing Asian City in 2023:
The increasing demand for flats for rent in Whitefield, Bangalore, and other localities due to many millennials migrating to the city for career opportunities has increased the demand for growth in infrastructure.
The Oxford Economics survey states that Bangalore is set to outperform other indian cities and Asian Pacific peers in 2023 in terms of overall growth with the help of communication and information sectors as its primary drivers.
Prominent localities in Bangalore, like Maithri Layout in Whitefield and layouts in Bellandur and Sarjapur, are seeing a steep rise in rental home demand as people search for "houses for rent near me."
The city is expected to see a 6% growth compared to other metropolitan cities in India.
Rent in Whitefield and Sarjapur is expected to increase by 12% this year.
The two cities have attracted several investors in the IT and manufacturing sectors.
There will be an increase in the influx of working individuals shifting to the city, rising the demand for 1BHK and studio flats on rent in Whitefield, Bangalore, Sarjapur, and other localities in and around ITPL.
The climb in demand will, in turn, increase the cost of living and house rent. The tenants, consisting of software engineers and other working professionals, must budget accordingly to afford the higher rent.