Rents Soar Across 13 Major Cities, with Mumbai Leading the Rise

The rental market in India has experienced a sharp surge in prices, with average rents across 13 key cities rising by 7.4% quarter-on-quarter (QoQ) between July and September 2024. The current increase in rental costs is the highest seen in the past two years, putting pressure on tenants and highlighting the growing divide between demand and supply in the real estate sector.

At the forefront of this spike is Chennai, which recorded the steepest rise at 22.2%, pushing its average rent from Rs 17.94 per square foot (psf) in Q2 2024 to Rs 26.91 psf in Q3. In a similar vein, Delhi and Thane witnessed substantial increases of 11.4% and 10.9%, respectively, with rents reaching Rs 37.55 psf and Rs 33.10 psf. Notably, Mumbai continues to hold the title of the most expensive rental market, with an average rate of Rs 86.50 psf, further entrenching the city’s reputation as a luxury destination for tenants. The surge in rental costs is largely attributed to a sustained increase in rental demand, which has continued to rise, albeit at a slower pace of 2% in the latest quarter, following an earlier surge of 14.8% QoQ in Q2. At the same time, rental property supply has seen a worrying decline of 6.7% QoQ. This supply-demand mismatch is resulting in upward pressure on rents, causing a growing sense of frustration among potential tenants. “Rising rents are impacting a significant portion of the working class, with many tenants now looking at alternative locations or downsizing their choices. Cities like Greater Noida and Kolkata, with relatively lower rents, are becoming attractive options, but these markets are still catching up,” said a senior analyst at Magicbricks.

Interestingly, despite the surge in rents, gross rental yields across these cities have increased slightly, reaching 3.62%. Ahmedabad leads with the highest yield at 3.9%, while Chennai saw the biggest growth at 21.3% QoQ, reflecting a more balanced market in certain areas. However, regions like Gurugram, Pune, and Mumbai are showing a decline in yields as property price growth has outpaced rental growth, making investment returns less attractive for landlords. From a sustainability perspective, this sharp rise in rents is further exacerbating affordability challenges in urban areas. While there is a significant push towards new construction and development, the lack of affordable rental housing and declining availability of ready-to-move-in properties could force many to seek housing further from city centres, leading to longer commute times and greater carbon footprints. As cities like Mumbai and Delhi become more expensive, people are increasingly questioning the sustainability of such rapid price escalations. With a growing demand for self-use properties, the supply of rental homes continues to dwindle, leaving tenants to bear the brunt of these soaring costs. The imbalance between demand and supply could strain the already congested urban infrastructure, resulting in increased pressure on essential services and transportation systems.