News & Resources

Skyhigh rentals squeeze residents

Sunday 6 May 2007 - DNA

In some areas, year-on-year increase has been more than 50 per cent. Vinay Sarawagi reports.

For the last four years PG Kamath has been staying in Khar in a flat leased out by his company. But when the 46-year-old IT professional decided to look out for another flat in the same area on an individual lease, he was in for a shock.

“It has been eight months since I started my search. Prices are just beyond my reach; several buildings don’t even have proper roads and parking,” he says in an exasperated tone.

“Bandra, Khar, Santacruz and Juhu have registered a 40 per cent year-on-year increase in rental rates,” says Sanjay Verma, MD, Cushman & Wakefield. The realty consultancy’s April 2007 report, in fact, shows a year-on-year increase of 53 per cent in rates for Andheri, Malad, Goregaon and Powai.

The rise in rental rates is not only across localities, but also across properties. “Right now I am dealing for a 2,250-sq ft furnished flat in Juhu. Owners are quoting a monthly rental of Rs2 lakh. The price a year back was half of that,” says Ritesh Juthani, AVP, Terraa. “The rental rate difference between town and suburb has almost vanished now.”

The rental rate squeeze is not limited to high value properties. Financial analyst Sonadeep Roy decided to stay in his 2BHK flat in Malad after he found rentals in Bandra beyond his means. The 41-year-old wanted to shift to Pali Hill to be close to his new office in Bandra Kurla Complex. “But they are asking Rs65,000 per month for a 1BHK flat there,” Roy says.

Anuj Puri, MD, Trammell Crow Meghraj, attributes the rise in rental rates to growing residential capital values of the properties. Capital value, in simple terms, is the notional value that is attached to a particular property. The year-on-year increase in capital value of properties in Andheri, Malad, Goregaon and Powai has been a whopping 63 per cent. “Bandra, Khar, Santacruz and Juhu have had relatively modest year-on-year increase of 27 per cent,” says Puri. Realty experts predict at least a 10 per cent correction in the capital value of properties in the next three months,” says Puri.

Another reason for the skyrocketing rental values is the shortage of good quality housing in high aspiration localities. “Localities like Bandra, Khar, Juhu and Santacruz are becoming the desired destination,” says Sunita Nair, head of residential services, Trammell Crow Meghraj.

Aditi Vijayakar, India head, transaction services, Cushman & Wakefield, says the shortage of good houses will continue for the next 24 months. “Projects under development in north, central and south Mumbai will be available only in another 18-24 months,” she says.

Several property dealers feel that rental rates are skyrocketing because of a multiplier effect. “One or two big deals are happening and it creates news that the market is booming. Actually the number of deals has drastically gone down,” says Rayan D ‘Souza of Ravina Real Estate.

Back to News & Resources