Bengaluru, India's Silicon Valley, continues to lead the country with the highest rental yield as demand for rental housing in major cities skyrocketed, raising average rental values and yields—property investors' annual return on investment.
The rental yield of Bengaluru stood at 4.45% in the first quarter of 2024, followed by Mumbai, according to data from the Anarock Group. However, in Mumbai, rents were higher than those in the IT hub. That compares with 3.6% before the Covid-19 outbreak in 2019, marking a 24% growth during the period.
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Mumbai followed with a rental yield of 4.15% in Q1 2024, up from 3.5% in 2019—a 19% increase. Gurugram ranked third with a rental yield of 4.1% in the last quarter, compared to 3.5% in 2019.
Robust demand following the pandemic fueled this yield surge, resulting in a steady increase in rental values in key areas of the city following the call for IT companies to return to work.
Rental yield is indeed a crucial metric in real estate investment. It quantifies the return on investment generated by a rental property by comparing the income earned from renting out the property to the overall costs associated with owning and maintaining it. This calculation provides investors with valuable insights into the profitability and performance of their investment property.
Rental Value Growth In Q1 2024
In the prominent localities of the top seven cities, residential rents have witnessed a surge of 4–9% in the first quarter of 2024. This increase surpasses the typical annual rise of 5–10%, marking a significant deviation. While this trend spells good news for landlords, it also signals a concerning aspect of cost-of-living inflation for tenants, the report added.
India's Silicon Valley, Bengaluru, leads this trend; the average rental values in Sarjapur Road and Whitefield rose by 8% each in Q1 2024 against the previous quarter. A comparison of rental values between 2022-end and Q1 2024 shows that the top localities in Bengaluru saw a staggering hike of 40% and above.
Other major cities have also experienced rental value inflation, albeit not to the same extent as Bengaluru. In NCR, Noida's Sector 150 saw average rents rise by 9%, and Delhi's Dwarka rose by 6%. In Mumbai, Chembur and Mulund saw 4% growth each in rental rates.
In Chembur, the average rental rate in Q1 2024 was approximately Rs 62,500/month, compared to Rs 60,000/month in Q4 2023. Kolkata's Rajarhat saw the lowest increase (3%) in the period, from approx. Rs 18,500/month in Q4 2023 to approx. Rs 19,000/month in Q1 2024.
In both Chennai and Mumbai, rents rose by a more sedate 4% while in Hyderabad, prominent localities like HITECH City and Gachibowli saw rents rise by 5% each in the quarter.
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