Rentals decline in key metros as pandemic drives people to smaller towns, outskirts
Luxury segment hit the most with 30-40% correction, mid-segment by 5-10%
Rental housing in key metros has taken a hit with reverse migration due to the pandemic and on account of prolonged work-from-home (WFH) assignments, besides salaried job losses.
On the other hand, it has picked up in sleepy towns and peripheral areas both in terms of demand and occupancy rates, according to analysts.
“Over 10,000 people have vacated their rental homes in the last 3 months and have gone back to smaller cities and home towns,” said Amarendra Sahu, CEO, Nestaway Technologies, a home rental company with more than 60,000 homes across 16 cities. “Since July 2020, we have seen three times’ upsurge in owner requests from smaller towns and cities, asking us to manage their homes which we used to turn down. Now, we are coming out with product offerings to solely to cater to this segment,” he added. He said COVID-19 had caused massive disruptions in the home rental industry, especially in cities, as there had been a massive reverse migration of youth to their home towns. An estimated 50% tenants had left Bengaluru, as per reports.
“Prior to COVID-19, tenant base was crowded in central business districts and a few busy areas in Tier-1 cities. We see a tectonic shift in consumer behavior now,” Mr. Sahu said.
“With more than 85% of tenants with us belonging to knowledge jobs, they now prefer far-off locations and nearby smaller cities as the rents are cheaper and they do not have to commute to work daily,” he said.
Pankaj Kapur, managing director & CEO, Liases Foras said the luxury housing segment bore the maximum brunt of 30-40% in rental correction, while the mid-housing segment has seen a rental correction of 5-10 %.
“When the economy goes down, house rents also go down. But this adverse impact is short-lived. Over 70% of the people will come back and then rents will move up,” Mr. Kapur said.
Commenting on the trend, Ritesh Mehta, senior director and head — West India, Residential Services, JLL, said, “ While we are witnessing some correction in rental values due to COVID-19, the real financial impact is yet to be to be seen in the next couple of quarters.”
“While there has been relaxation in terms of daily utility bills and maintenance, loans have moratoriums. The real crash crunch will seen [from October to April] when individuals would be burdened with liabilities to fulfil expenses vis-a-vis an uncertain drop in income,” he added.
He said the steep drop in rentals in the range of 25% in BKC and up to 20% in Worli, prime areas of Mumbai, has created great opportunity for aspirational home-seekers to upgrade their locations due to lower rentals.
“Though this correction is short term till we are all bailed out from the COVID-19 scenario, it would be interesting to watch the affordable housing space, which is witnessing spurred demand in rentals over the past years,” Mr. Mehta added.
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