Blogs

Bangalore is the Silicon Valley of India and a top-rated residential city. With the booming IT industry and other startups, the employment rate drastically increased in 2022, with an average of 8% resident growth rate in popular localities. Many individuals have fallen in love with the city and see many opportunities here. Most of the migrating millennial workforce search for "house for rent near me" to find the best accommodations in areas like Maithri Layout.

Due to the high demand for homes, many landlords are eyeing properties to purchase in various areas of Bangalore to reap the high rental returns over their capital investment. This article will highlight the best rental localities in Bangalore with a higher rental return than other city areas to allow landlords to make informed decisions.

Best Localities in Bangalore to invest in for higher rental returns:

From North to South and East to West Bangalore, there are many localities with characteristics that make each unique. The following are the most prominent areas that reflect in the search results of "apartments for rent in Whitefield":

Whitefield: As per the statistical data, the Whitefield locality is known to be amongst the Top 3 rental localities in Bangalore and India. The real estate market is booming in this area as property prices have increased in recent years. The locality has a well-established infrastructure, many IT companies like TCS, Mu Sigma, SAP and more, metro and BMTC connectivity, and microbreweries, making it an in-demand locality. The average price per square foot is INR 8,100, with a rental yield of 7.00%. Landlords can reap high rental values by investing in Maithri Layout, Sathya Sai Layout, and other popular localities.

Bellandur: This area swiftly grows in Bangalore, with infrastructural development and other amenities. Many IT firms are nearby, making it a convenient choice for millennials working in the IT sector. The locality is also well-connected by road to other parts of the city. Public transport is also available via BMTC buses. The average cost per square foot is INR 9500. and rental yield is around 7.00%.

Sarjapur: Another popular location in Bangalore that pops up when people type "house for rent near me" or other localities in the city. Like Maithri Layout in Whitefield, localities in Sarjapur are becoming popular investment plots. The area has many infrastructural developments, IT companies and startups, famous microbreweries like Byg Brewski Brewing Company, and hospitals like Columbia Asia. The locality is well-connected to other parts of Bangalore like Silk Board, Electronic City, Marathahalli, and Outer Ring Road. The prices per square foot are at an average of INR 7,850 and the rental yield is around 6.00%.

HSR Layout: The locality is very popular amongst others in Bangalore. Both landlords and potential tenants are looking to invest and rent a home, respectively. The high rental returns in the area are due to infrastructure development, startups and established IT and non-IT companies, popular restaurants, hospitals, and other amenities. The average price per square foot is INR 7,500. and rental yield is around 8.00%.

Electronic City: This location had few residents, while today, the same locality is booming in the real estate market. Many millennials are looking for a home in this area due to employment opportunities in the city. The locality is safe with infrastructure development and many job opportunities in many industries. The average per-square-foot cost is around INR 4850 and the rental yield is around & 7.00%.

Several factors contribute to the rental demand in the Indian real estate market. Firstly, the millennial population, known for their preference for flexibility and mobility, has increased the demand for rental housing.

Additionally, the influx of professionals in urban areas, seeking job opportunities, has further boosted the rental market. Moreover, the high cost of property ownership and the ease of renting have made it an attractive option for many.

While the Indian real estate market is vast and diverse, regional variations play a significant role in rental yields. Metropolitan cities like Mumbai, Delhi, and Bangalore, known for their thriving job markets, witness high rental demand.

These cities offer a higher rental yield due to the demand-supply dynamics. On the other hand, tier 2 and tier 3 cities may have lower rental yields but offer the potential for long-term capital appreciation.

3. Factors Affecting Rental Yield in India

To unlock the profit potential of rental properties in India, it is essential to consider the factors that affect rental yield. By understanding the location dynamics, property type and size, amenities and infrastructure, and economic factors, investors can make informed decisions and maximize their rental income.

Location Dynamics

The location of a rental property plays a crucial role in determining its rental yield. Factors such as proximity to schools, hospitals, shopping centers, and transportation hubs can significantly impact the demand for rental properties.

Additionally, areas with high employment opportunities and a growing population tend to have higher rental yields. It is essential to research and identify locations that offer a favorable rental market to ensure a steady stream of tenants and maximize rental income.

Also Read: Build to Rent (BTR) Vs Traditional Renting: Addressing India's Housing Challenges

Property Type and Size

The type and size of the property also influence rental yield. Apartments and houses with multiple bedrooms and bathrooms tend to attract higher rental rates.

Additionally, properties with modern amenities such as parking spaces, security systems, and recreational facilities are in high demand. Investing in properties that meet the preferences and needs of potential tenants can lead to higher rental yields.

Amenities and Infrastructure

The availability of amenities and infrastructure near a rental property can significantly impact its rental yield. Access to facilities such as parks, gyms, swimming pools, and community centers can attract tenants and command higher rental rates.

Furthermore, properties located in areas with well-developed infrastructure, including good roads, public transportation, and reliable utilities, tend to have higher rental yields.

Economic Factors

Economic factors, such as inflation, interest rates, and job market conditions, can influence rental yields. During periods of economic growth, rental demand tends to increase, leading to higher rental yields.

Conversely, economic downturns may result in decreased demand and lower rental incomes. It is crucial to stay updated on economic trends and make informed decisions based on the prevailing market conditions.

4. Tips for Maximizing Rental Yield

From renovation and property upgrades to strategic property management and understanding tenant preferences, these tips will guide you toward maximizing your rental yield.

Renovation and Property Upgrades

Investing in renovation and property upgrades can significantly increase the rental value of your property. Consider making improvements such as modernizing the kitchen and bathrooms, upgrading flooring and lighting, and enhancing the overall aesthetics.

These renovations can attract higher-paying tenants and justify higher rental rates. Additionally, energy-efficient upgrades like installing solar panels or energy-saving appliances can reduce utility costs, making your property more appealing to tenants.

Strategic Property Management

Effective property management is crucial for maximizing rental yield. Regular maintenance and prompt repairs ensure that your property remains in good condition, attracting quality tenants and minimizing vacancies.

Implementing a proactive approach to property management, such as conducting regular inspections and addressing tenant concerns promptly, can help maintain tenant satisfaction and encourage longer tenancies. Furthermore, consider hiring a professional property management company to handle day-to-day operations, ensuring efficient management and maximizing rental income.

Understanding Tenant Preferences

To maximize rental yield, it is essential to understand the preferences and needs of potential tenants. Conduct market research to identify the target demographic for your property and tailor your property accordingly.

For example, if your property is located in an area popular among students, consider providing study areas or furnished apartments. Understanding tenant preferences will help you attract and retain tenants, leading to higher rental yields.

5. Technological Advancements in Real Estate

From proptech advancements to the integration of AI and analytics in property management, and the impact of virtual tours on tenant acquisition, these advancements are reshaping the rental market.
Proptech Innovations
Proptech, or property technology, has emerged as a game-changer in the real estate industry. It encompasses a wide range of technological solutions that streamline property management processes, enhance tenant experiences, and optimize rental yields.

From online property listing platforms to digital payment systems, proptech innovations have made it easier for landlords to market their properties, attract quality tenants, and manage rental transactions efficiently.

Also Read: Features of Urban Gated Apartments: Ecofriendly and Sustainability

AI and Analytics in Property Management

The integration of artificial intelligence (AI) and analytics in property management has transformed the way landlords and property managers operate. AI-powered tools can automate routine tasks, such as rent collection and maintenance requests, freeing up time for more strategic activities.

Analytics provide valuable insights into market trends, tenant preferences, and rental pricing, enabling landlords to make data-driven decisions that maximize rental yields. By leveraging AI and analytics, landlords can optimize property performance, reduce vacancies, and enhance tenant satisfaction.

Virtual Tours and Their Impact on Tenant Acquisition

Virtual tours have become a powerful tool for tenant acquisition in the digital age. With virtual reality (VR) technology, potential tenants can explore properties remotely, experiencing a realistic and immersive walkthrough without physically visiting the property. This technology saves time for both landlords and tenants, allowing them to narrow down their choices before scheduling in-person visits.

Virtual tours also attract a wider pool of potential tenants, including those who may be located in different cities or countries. By incorporating virtual tours into their marketing strategies, landlords can increase tenant interest, reduce vacancy periods, and ultimately maximize rental yields.

Unlocking the profit potential of rental yield in India requires a comprehensive understanding of the market, strategic decision-making, and a focus on providing value to tenants. By implementing effective strategies, staying informed about market trends, and continuously improving their rental properties, investors can achieve higher rental yields and maximize their returns on investment.

FAQ

Q. What is rental yield, and why is it important for property investors in India?
A. Rental yield is a crucial metric for investors, representing the annual rental income generated by a property as a percentage of its market value. Understanding its significance is essential for making informed investment decisions in the Indian real estate market.

Q. How can investors calculate rental yield for properties in different regions of India?
A. Calculating rental yield involves dividing the annual rental income by the property's market value and multiplying by 100. However, determining the yield for diverse regions in India requires considering factors such as rental trends, property prices, and local market dynamics.

Q. What factors influence rental yield variations across different Indian cities?
A. Various factors impact rental yields, including property demand, economic growth, infrastructure development, and local rental market conditions. Exploring these factors in the context of specific cities in India is crucial for investors seeking to unlock the profit potential of rental properties.

Q. How can investors optimize rental yield and enhance their returns in the Indian real estate market?
A. Optimizing rental yield involves strategic decisions such as choosing the right location, understanding tenant preferences, and staying informed about market trends. Additionally, investors can explore property management strategies and leverage technology to streamline operations and boost overall rental income.

Q. What are the current trends and future prospects for rental yield in India?
A. Staying informed about the latest trends is essential for anticipating future changes in rental yield. Exploring factors like urbanization, government policies, and emerging real estate markets can provide insights into the evolving landscape, helping investors make informed decisions for long-term profitability.

Positioned strategically in Bangalore South, Electronic City enjoys a prime NH7 location. It's only 9 km away from the Silk Board junction, roughly 18 km from Vidhana Soudha, and approximately 70 km from the new Kempegowda International Airport (KIA) in Devanahalli. Covering a sprawling 903 acres and 11 Guntas, the Electronic City Industrial Estate stands as a significant landmark.

Rental Insight: 

Electronic City's tech parks and corporate offices consistently attract IT professionals, resulting in robust demand for rental properties. The thriving IT sector, coupled with the forthcoming Metro connectivity, further enhances the rental appeal.

Economic Outlook: 

The projected contribution of millennials, estimated to be around 1 trillion dollars by 2030, aligns seamlessly with Electronic City's tech hub identity, reinforcing the sustained demand for rental accommodations.

Property Pricing: 

Apartments in Electronic City cater to a range of budgets, with property prices spanning from 40 lakhs to 1 crore INR. The property cost per square foot varies from 4350 to 5800 INR. The enticing average monthly rental yield of 3.64% positions Electronic City as an attractive choice for those seeking returns.

2. Whitefield: Urban Amenities and Rental Opportunities

Demographics (2020): 

Covering an area of approximately 17.05 km², Whitefield is home to a population of 186,768 residents, resulting in a population density of 10,952 individuals per square kilometer. The millennial population, which numbers around 58,000, contributes to the dynamic character of the area.

Property Pricing and Rental Yield: 

Properties valued at 1 crore INR and above in Whitefield offer an average rental yield of 3.58%, in line with 99acres.com's survey.

Insights: 

Whitefield's robust rental market is driven by its strategic location, attracting professionals from multinational companies and educational institutions. The ongoing transformation into a smart city, coupled with improved infrastructure, positions Whitefield as an appealing destination for quality rental accommodations. The consistent growth in rental rates underscores its potential for promising rental yields.

3. Hebbal: The North's Real Estate Gem

Geographical Advantage: 

Hebbal gains an edge with the upcoming metro connection linking KR Puram and Kempegowda International Airport. Property

Pricing and Rental Yield: 

Properties valued at 1 crore INR and above in Hebbal offer an average rental yield of 2.22%, aligning with the findings from 99acres.com.

Insight: Hebbal's strategic location near the airport and central districts continues to attract both tenants and investors. Infrastructure enhancements, such as the Hebbal-KR Puram flyover, have improved connectivity. Market data supports a rising trend in rental demand and rates in Hebbal, establishing it as a notable option for substantial rental returns.

4. Koramangala: The Trendy Locale with Strong Rental Prospects

Demographics (2020): 

Encompassing an area of 6.94 km², Koramangala is home to 153,187 residents, resulting in a population density of 22,058 individuals per square kilometer. The male population stands at 81,456, while the female population is 71,731.

Property pricing and Rental Yield: 

Investments of 1 crore and above in Koramangala offer a range of 10,000 to 13,000 INR per square foot, with an average rental yield of 4 to 7%.

Insight: 

Koramangala retains its status as a sought-after residential and commercial hub. Live data confirms sustained demand for rental properties, presenting an opportunity for investors seeking rental returns.

5. Marathahalli: The East's Rental Powerhouse

Demographics (2020): 

According to a survey conducted in 2020, Marathahalli spans approximately 6.82 km² and houses a population of about 118,091 residents. The population density stands at 17,309 individuals per square kilometer, with a male population of 61,869 and a female population of 56,222.

Property Pricing and Rental Yield: 

Marathahalli boasts enticing rental potential, offering around 3.68% return on a 1 crore INR investment.

Insights: 

Marathahalli's reputation as a bustling IT and business hub, coupled with its proximity to major IT parks and corporate zones, ensures a consistent demand for rental accommodations. Recent reports highlight an upward trajectory in rental rates, indicating that Marathahalli holds promise as a locale with significant potential for robust rental yields. This dynamic rental powerhouse harmonizes a thriving demographic landscape with appealing rental income prospects

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 that 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 rental flats 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 affect 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 Bellandur, 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.

Investing in a rental property is a prospect many landlords are looking at today due to the increase in demand for the need of rental homes, especially in a metropolitan and IT hub like Bangalore. Many millennials are shifting to the town for work and seeking flats for rent in Whitefield, Bangalore, or searching for "1BHK on rent near me" online in localities like Koramangala or Jayanagar. Landlords must consider this an opportunity to invest in rental housing real estate to attain high yields.

The real estate market will be on the rise in 2023, especially in residential sales, having increased by 51%. Research shows there will be a 7.5% growth across India in housing prices. Despite that, the housing sales in the top cities in the country are expected to breach 2014's peak sales. The cost of properties is up by 7%-10% in good localities. 2023 is the time to invest in rental homes, especially in Bangalore. Landlords can expect a significant profit increase through yields due to the high demand. But why choose this city? That is the next question that comes across the minds of the landlords. The following section will highlight this city's advantages over other top metropolitan cities in India.

Why choose Bangalore to invest in rental homes?

The housing real estate industry is predicted to grow from INR 12,000 crore in 2019 to INR 65,000 crore in 2024, contributing to 15% of the country's GDP. Many millennials are searching for "1BHK on rent near me", specifically flats for rent in Whitefield, Bangalore. Due to the rise in demand, it is the best time to eye properties for rental homes in this city. The following points will also add value to why the investment must be made in Bangalore over other cities:

Growing Economy: 

Due to the city's large infrastructure development and multiple startups and IT sectors, it is ideal to invest in houses for rent here. Many career-oriented individuals migrating to the city seek residence and ease of access to their workplaces. Today, various areas in the city, like Whitefield, Koramangala, Jayanagar, etc., are well-connected through BMTC buses or the city's metro.

Growing Housing Demands:

The population growth in India has increased the need for more housing. Most millennials are moving here for better employment and quality of life. It has led to a high demand for flats for rent in Whitefield Bangalore and other localities in the city. People living in Whitefield, Sarjapur, Koramangla, etc., frequently search "1BHK on rent near me", which shows a gap in the supply of homes in the city. It is the best time to invest in real estate to build homes for rent to fulfill the needs of the growing population. 

Higher Rental Yields:

The city has become an attractive destination for rental flats investment for real estate investors. As per a survey, the average rental yield in Bangalore is between 5-7%. Even in more densely populated cities like Mumbai, the average yield is only 3.5%. It shows that the landlord has an advantage in investing in Bangalore over other cities.