Rental Values In Top Indian Cities Surge By 72%, Outpacing Capital Growth: ANAROCK Report

Rental values in key micromarkets across India’s top seven cities have surged by up to 72% between the end of 2021 and the first half of 2024, outpacing capital value growth in many regions, according to the latest report from ANAROCK Research.

As an increasing number of Indians migrate to urban centres, the rent-versus-buy debate has intensified, with both options presenting their own set of advantages and challenges.

"Data analysis of key micromarkets in the top 7 cities shows that in cities like Bengaluru, Pune, Kolkata and Chennai, average residential rental values rose more than the capital values between 2021-end and H1 2024. However, areas in NCR, MMR and Hyderabad saw the reverse trend—capital values appreciated more than the rental values," said Prashant Thakur, regional director and head of research at ANAROCK Group.

In Bengaluru, the Sarjapur Road locality rental values increased by 67%, compared to a 54% rise in capital values. The Thannisandra Main Road area experienced a 56% hike in rental rates, while capital appreciation stood at 52%.

In Pune's Hinjewadi, rentals rose 52%, whereas capital values climbed just 31%. In Wagholi, rental value growth was 60% while capital values rose by just 30%.

Kolkata's EM Bypass witnessed rental values appreciated by 46%, but capital values surged by a modest 15%. In Rajarhat, rental value growth was 30% while capital appreciation was 23%.

In Chennai's Pallavaram, rentals surged 40%, with capital values rising only 18%. At Perambur, rental value growth was 33% while capital appreciation was 18%.

However, in certain micromarkets, such as NCR, MMR and Hyderabad, capital value appreciation outpaced rental growth.

In Noida’s Sector-150, rental values increased by 56%, while capital values appreciated to 126%. While Sohna Road saw rental values rise 40% in the period, capital values jumped by 54%.

Hyderabad's HITECH City saw rentals grow by 46%, while capital values rose by 59%, while Gachibowli saw rental values rise 50% and capital values by 70%.

In MMR’s Chembur, rental growth was 38% while capital appreciation stood at 39%. In Mulund, rental values appreciated by 26% while capital prices rose 36%.

The rent versus buy decision remains highly individualised and depends on factors like job stability, financial capacity, and personal preferences, according to the report.

For instance, someone in Bengaluru paying Rs 50,000 in rent for a 2 BHK property worth Rs 1.2 crore may weigh whether to continue renting or opt for a home loan, which could prove profitable in the long run.

Despite rising rental costs, the security of owning a home has grown in appeal, particularly during the Covid-19 pandemic. With home loan interest rates currently averaging between 8.75% and 9.5%, many see mortgage payments as a way to build a non-volatile asset. Additionally, tax benefits for home buyers further tilt the scale towards home ownership.

"While investment rationale is important, personal preferences and local market performance also play crucial roles in making the right decision," Thakur said.