Saturday, June 20, 2009

Hike in house rentals by over 25%

Naresh Behl, a realtor active in IP Extension in East Delhi, works even on his weekly off days. Reason ? Those looking for rented accommodations keep on calling him to remind him about their requirement - this is something , Naresh says, he has not encountered in his decade-long career as a realtor.

“The demand for rented accommodation has really gone up in a big way as many people, who were looking for a house of their own, have shelved their plans due to the current insecurity in their jobs,” explains Naresh. The other reason is that many people are shifting from South Delhi to East and West Delhi for the simple reason that rentals in South Delhi are at least 20-25 % higher compared to other parts of the capital.

The economic slowdown has hit home sales and sent prices plummeting. The flip side - house rents have shot up. Rents went up by around 30% in major cities including Delhi and the National Capital Region (NCR) last year, as more and more consumers, hit by the slowdown, preferred living in rented houses to investing huge sums in properties, industry officials say.

“The slowdown has fuelled rental market. On an average, the residential rental has gone up 25% in the last one year in Delhi and NCR. In many areas, it went up by even 40%,” says Anu Gupta of Century 21 India.

Ashok Chauhan, a North Delhi-based broker adds: “The rental for a two-bedroom set in Delhi was about Rs 8,000 per month a year ago. However, today, it is very difficult to get a decent two-room set on the same rent even in remote localities.”

According to industry officials, the high cost of properties and slackening supply of houses have fuelled rentals in Delhi. “People need a house to live in, and not everyone can buy one. With prices still beyond the reach of a large section of the middle class, staying in a rented accommodation is the only option left,” Anu Gupta says.

CMD of ILD group Alimuddin Rafi Ahmad , on the contrary, is of the opinion that prices of flats are now well within the reach of working class. “There is enough correction in realty prices. However, prospective buyers are not going for kill as they are expected to do because there is an element of job insecurity. Nobody is sure whether his/her job is secure. And, it is these fence sitters who are fuelling rentals in Delhi and NCR.”

On the other hand, SVP group CEO Sunil Jindal says the realty market is fast improving . Now, many serious buyers are apparently coming to their office. “The best thing is that there are many who are buying flats purely for investment purpose. Most want to give out their flats on rent.”

Subodh Mishra, a Web journalist, says he had to shift home from Pitampura to Rohini because of high rents. “I was paying Rs 8,000 for a two-room set in the Pitampura. However , this year my landlord asked for Rs 10,000. This was out of my budget, so I shifted to Rohini , where I got a similar house for Rs 8,500,” Mishra said.

The trend in commercial and official rental markets is just the obverse of the housing rental sector - here prices fell 30% last year, according to reports by global real estate consultant Cushman and Wakefield.

Anil Makhijani, head of Mak Realtors, said supply was more than the actual demand in the office rental sector. “Office rentals are going down because the supply is more than the actual demand. However, in the residential property sector, the demand is much higher. Naturally, the rents will go up,” Makhijani added.

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