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Rental Appreciation Trumps Capital Price Growth in Top Luxury Markets Since 2014 says a report by ANAROCK Property Consultants. Avg. rentals (for a min. 2,000 sq. ft. home) in top 7 cities' key luxury markets rose 17-26% in 7 years (2014 to 2020); avg. capital prices rose max. 15% in the same period, it says.
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Amidst various industry reforms in the last seven years, multiple new trends emerged in the Indian residential real estate market. Strikingly, housing rentals in key luxury markets saw better y-o-y growth between 2014-2020 than average capital prices in the same localities.
Anuj Puri, Chairman - ANAROCK Property Consultants says, "The average rentals for a house of minimum 2,000 sq. ft. size in the top 7 cities' key luxury hotspots rose anywhere between 17% to 26% in 2020, as compared to 2014. In the same period, average capital prices in these micro-markets saw a maximum rise of 15% - and some even saw a marginal dip."
To illustrate - ANAROCK data indicates that the average monthly rentals in Gurugram's Golf Course Road increased by 17% in 2020 over 2014, while average property prices in the same period declined marginally – from INR 13,167 per sq. ft. in 2014 to INR 13,150 per sq. ft. in 2020.
Among the top 7 cities, Hyderabad’s HITECH City saw the highest rental appreciation of 26% between 2014 and 2020; in the same period, average property prices saw a 12% jump. "ANAROCK data also reveals that from 2014 to 2020, rental prices in the top luxury markets saw consistent y-o-y growth – averaging between 3-6% annually," says Puri. "In contrast, capital appreciation in this period either remained range-bound or varied each year. Some years saw a decent yearly rise, even as high as 7%, while prices dropped by approx. -5% in other years - particularly in 2017, when many micro-markets saw capital prices plunge against the preceding year.”
In 2017, various structural reforms like RERA and GST were implemented. After this period, most localities only saw a marginal capital price rise averaging between 1-3% - while rental markets continued their growth run. Due to the pandemic, 2020 was an outlier year for Indian rental markets, with most luxury localities recording either no change in average monthly rentals (compared to the preceding year) or seeing some decline. Without a doubt, COVID-19 impacted luxury rental markets amidst the growing WFH culture. Average property prices showed little or no change in 2020 over 2019.
Top Luxury Hotspots – Rental vs Capital Price Changes: The luxury residential rental market saw a setback due to COVID-19, but now appears to have recovered with demand for rental luxury properties back almost to pre-COVID levels. Monthly rentals in some of the localities have begun heading north. With vaccinations now rolling out and positivity returning, these rental markets will pick up new momentum.
Some of the prominent luxury markets in the top 7 cities that performed well between 2014 and 2020 may see further short to mid-term boosts:
Avg. Monthly Rentals: Top Luxury Markets (For 2,000 sq. ft. area) | ||||
City | Micro Market | 2014 (INR) | 2020 (INR) | % Appreciation (2020 vs 2014) |
Bangalore | JP Nagar | 37,000 | 46,000 | 24% |
Bangalore | Rajaji Nagar | 46,000 | 56,000 | 22% |
Anna Nagar | 48,000 | 56,000 | 17% | |
Kotturpuram | 62,000 | 74,000 | 19% | |
Jubilee Hills | 47,000 | 54,000 | 15% | |
HiTech City | 42,000 | 53,000 | 26% | |
Kolkata | Alipore | 50,000 | 60,000 | 20% |
Kolkata | Ballygunge | 74,000 | 88,000 | 19% |
MMR | Tardeo | 2,20,000 | 2,70,000 | 23% |
MMR | Worli | 1,65,000 | 2,00,000 | 21% |
NCR | Golf Course Ext. Rd | 42,500 | 50,000 | 18% |
NCR | Golf Course Rd | 60,000 | 70,000 | 17% |
Koregaon Park | 50,000 | 59,500 | 19% | |
Prabhat Road | 52,000 | 64,000 | 23% | |
Source: ANAROCK Research
Avg. Capital Prices: Top Luxury Micro Markets | ||||
City | Micro Markets | 2014 (INR/sft.) | 2020 (INR/sft.) | % Appreciation (2020 vs 2014) |
Bangalore | JP Nagar | 5,259 | 5,698 | 8% |
Bangalore | RajajiNagar | 11,534 | 13,300 | 15% |
Anna Nagar | 10,288 | 11,300 | 10% | |
Kotturpuram | 12,650 | 13,500 | 7% | |
Jubilee Hills | 6,300 | 6,950 | 10% | |
HiTech City | 5,088 | 5,675 | 12% | |
Kolkata | Alipore | 11,500 | 13,000 | 13% |
Kolkata | Ballygunge | 10,005 | 11,350 | 13% |
MMR | Tardeo | 38,717 | 41,862 | 8% |
MMR | Worli | 36,388 | 38,560 | 6% |
NCR | Golf Course Ext. Rd | 7,778 | 8,300 | 7% |
NCR | Golf Course Rd | 13,167 | 13,150 | 0% |
Koregaon Park | 9,794 | 11,128 | 14% | |
Prabhat Road | 11,850 | 12,500 | 5% | |
Source: ANAROCK Research