The rental Real Estate market in India has always been potential given that it is the primary solution to mass housing challenges in a country where very few can afford to buy a home at multiple stages of life before finally settling down.
Back in 2017, the worth of the rental housing segment with a volume of 1 crore units, stood at a worth of 22 billion dollars that amounts to 1.53 lakh crores in Indian currency. As anticipated, 2023 is about to witness an increase in the volume to 1.8 crore units with its valuation simultaneously rising to 41 billion dollars or 2.85 lakh crore rupees.
But the low capital appreciation and rental yield over the last 2 to 3 years have slackened the activity of investors since the maximization of rental yields appears daunting to them. Renting property is undoubtedly the best bet provided you invest money in favourable realty markets.
It is evident from the data of realty experts that the affordable housing segment yields a relatively higher income than the luxury or mid-budget homes since the former has a greater demand.
The variation in rental yields also depends on the capital value in rupees for each square foot. Surveys across cities show an increase of 3 per cent in the average rental yield from housing units priced below 6000 rupees per square foot. Whereas, the flats worth 6000 or more rupees per square foot recorded rental yields within the range of 2.4 to 3 per cent. Thus, you can conclude that affordable properties are suitable for the best return on investment.
Why lose hope of seeing the slowdown of the broader market when some micro-markets across the large and Metro cities are offering reasonable property prices? Although the average rental yield remains at 3 per cent on the pan-Indian level, the micro-markets can startle you with rental yields soaring to 4.5 per cent.
Relatively low-budget Real Estate markets have recorded a general trend of a comparatively high return on investment in the form of rental yield. Kolkata leads the cities with higher rental yields such as Ahmedabad, Hyderabad, Ghaziabad, Bengaluru, accounting for 3.9 per cent rental yield on an average with localities like Garia and Barasat recording 4.3 and 4.4 per cent, respectively.
Untapped Rental Demand
The co-living segment of the realty market in demand by individuals within 18 to 35 years of age either migrant students or working professionals still remains unexhausted. The Real Estate players in this segment have room enough to cater to the requirement of these millennials who form 30 per cent of the country’s present population, thereby uplifting the rental yield to 8 per cent.
Cities with Growing Co-Living Market
Recent authoritative data shows that the maximum demand in the co-living residential segment can be attributed to Bengaluru, Delhi NCR and MMR (Mumbai Metropolitan Region). These cities primarily contribute to the co-living supply with as much as 50 per cent of the entire segment. In comparison to the top 10 tier-I cities’ rental market on a whole, a minute 4 per cent of the total rental supply accounts for the co-living segment stock.
Invest in Co-Living or Residential Rental?
Only 10 to 30 per cent of the total residential supply available, is fully furnished, which significantly changes to 70-90 per cent in the case of co-living supply. The degree to which a flat is furnished is directly proportional to its rental value and are more preferred by the co-living players. The rental yield of furnished properties on an average is 3.3 per cent at the pan-Indian level.
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