Rents dip as tenants seek cheaper homes on city outskirts

House rents take a dive

Bengaluru's urban sprawl
Reverse migration, job-losses, pay-cuts and work-from-home options have, together, impacted tenants' housing priorities. Pic: N Bhanutej

A recent news report talked about the custodian of an apartment complex in Kundalahalli making a “one month rent free’ offer” to attract prospective tenants.


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In a city where home-owners demand deposits at least three times higher than in other Metros, the Kundalahalli offer — even if sceptics see it as a marketing gimmick — is a big climb-down for house owners.

The advertisement is, in fact, reflective of Bengaluru’s current market slump in home rentals. Realtors and home owners are unable to find tenants, owing to a reverse migration of the working population to their home towns, cities and villages. The pandemic’s effect on the city’s house rental business is telling.

Work-from-home disrupts housing market

99acres.com, a portal where real estate developers, brokers and owners list properties, lists a downward trend in rental yields across core areas in Bengaluru. This, it attributes to the work-from-home model and remote learning adopted by work places and educational institutions respectively. The massive job and pay cuts triggered by the pandemic too have accelerated this demand drop, the portal says.

Rental yield is the rate of return (through rent) on the investment (in real estate) minus maintenance charges and taxes.

The tenant community renegotiated agreements to reduce rental rates and sought deferment of rent by a few months. The co-living sector also faced a major hit as tenants started looking for separate accommodation to maintain social distancing norms. It resulted in higher rental enquiries in the Apr-Jun 2020 quarter. The possibility of rental growth seems low due to increased unemployment and potential
pay cuts. It will have an adverse impact on the rental yield of the popular residential hubs in Bangalore

99acres.com

The real estate portal’s Bengaluru Residential Market Update (April – June 2020) report shows negative growth (marked in red) as regular clusters in Bengaluru face a 20% decrease in demand for rented accomodation.

Hebbal in North Bengaluru suffered the most decrease in the last quarter — followed by Whitefield. Marathahalli. Rajajinagar, Yelahanka, Thanisandra, Kadugodi and Bellandur saw a marginal increase.

“The city is witnessing heightened demand for residential accommodations in the outskirts, away from the usual residential hubs,” the report says. As a result, the rental yield in hitherto popular residential areas is expected to decline by 15-18%, on a year-on-year basis, the report says.

No takers for discounts

Muniraj A from MagicBricks.com who is in charge of rentals in Sarjapur and Bellandur, said owners were reluctant to reduce rent or deposit initially, during the first phase of Unlock. But as houses continued to remain vacant for a few months, they opted to slash a couple thousands on monthly rent. Even that has not had the intended outcome, he believes.

About his own prospects, he says that there have been no clients since April as most of them have left the city to go back home. “Now they say the Work-from-home will stretch on till December or January. So we are not expectant of business until then” he admits.

One of his clients who had signed a rental agreement for 11 months, vacated within seven months to go back to their home town. “They asked me to find their replacement so they would not lose out on the deposit” he said.  

Dinesh Poojary, another real estate broker, was compelled to shut down his business and move back to his native village for similar reasons. 

Home-owner woes 

Komala BR, who hasn’t been able to find tenants for her newly constructed 2BHK in Yelahanka for almost three months now. Another home owner, who has been renting her house in JP Nagara 1st phase for 25 years now, said the pandemic just accentuated her tenant’s “misbehaviour”.

“He hasn’t been paying rent since January, and stopped answering our calls in April. As a last resort, we have asked him to vacate without paying rent” she said. Her family resides in the US, making it harder for them to keep track.

Another house owner Krishangi Sharma who lives in Shantinagar, said that her tenants haven’t paid rent since March. But she doesn’t plan to evict them. “The upstairs tenant has a paan shop, so I know he hasn’t had steady income the last few months. It seems cruel to evict them now, considering they have always paid on time before” she says.

Krishangi, however, admitted that although her family is not entirely dependent on rental income, non-repayment is impacting them. “We also shoulder their electricity and water bill costs, and now all of it is an added burden,” Krishangi, who plans to deduct the rent from their deposits, says.

Tenant troubles 

21-year-old Teena (name changed) a resident of BTM Layout was compelled to move houses in the middle of the pandemic, after her rent and maintenance bill were doubled.

She was living with her sister in an apartment that they found through Nestaway, an online portal for home rentals. They moved to Murugeshpalya when the rental amount doubled in the middle of the lockdown.

“It was quite hard to find a place as none of the home owners were allowing us to check the places out” says Teena, stating they were unable to visit far-off places due to the lockdown and had to settle for nearby options quickly. Before renting their houses, landlords sought proof of residence to ensure that the tenants were not from Maharashtra, Chennai or Kerala. 

Co-living spaces including paying guest accommodation have also seen a dip in demand as students have moved out following the closure of colleges, says Nidhi Kumar, CEO of Your Space.

Hariharan Sriram, a student of IFIM Law School, chose to stay in the city when the lockdown was imposed rather than to go back to his hometown in Chennai. Those who moved back to their hometowns refused to pay the full rent, and had to eventually move out, he said. 

Owners seeking full payment of rent seems to be a common story across the city, despite the government’s notifications to property owners to defer rent for the lockdown months. Several professionals who went back to their home states after the work from home model was enforced, admitted to paying the entire rent for previous months, in order to retain their houses or rooms. 

No end in sight

Sagar Prayag, of Sagar Real Estate said the downward trend of the sector will continue until IT companies bring their employees back by scrapping the work from home model. Work-from-home had also driven people towards suburban areas or outskirts like Electronic City or Kengeri, he pointed out.

Sunil Singh, Director of Realty Corp, stated that people who had own houses in the outskirts and were renting houses in central Bengaluru, have moved back. “People are downsizing, those who used to reside in a 3-BHK house are now scouting for cheaper options. Due to people migrating to their hometowns, the rent has fallen by 10-20%” he says.

According to Sagar, there are currently five lakh houses and 1.5 lakh commercial spaces vacant in Bengaluru. He does not believe that the coming months will be any kinder to his business.

[Errata: An earlier version of this story had a mistake about Nestaway’s financial situation. The error is deeply regretted.]

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About Pragathi R 10 Articles
Pragathi R is a Bengaluru-based freelance writer with a keen interest in mobility, governance and gender.

9 Comments

  1. My house owner had really helped me he didn’t force me for rent. when i said i have a salary cut please give me some time to pay. On the other hand tenants in our building took advantage of this and stopped paying rent even if they had money some people said do not pay we will ask for discount i felt that’s unfair it’s true that most of the houses are vacant but we are still in Bangalore i love this place can’t go back.

    Thanks

  2. This write up is highly biased .What about the houseowners who have struggled to make their houses.Most of them have taken hefty loans and have to pay their EMIs.The interest moratorium and all is giving just a marginal relief to them.If they are not getting a reasonable return on their investments, at least to cover their costs, it will be really difficult for them.Many house owners survive on their rental income.Tenants have their options like going to their native places or shifting to outskirts etc.What about the so called landlords? They shouldn’t be treated as a class to be fought with.There shouldn’t be a deliberate attempt to depict the houseowners as cruel , greedy and insensitive.Why these adjectives are not used against banks which have financed most constructions and are very strict when it comes to EMIs?

  3. Finally! This daytime robbery had to stop someday. Nowhere in India other than Bangalore, anyone deposits 11 months rent. These vultures were preying on innocent tenants who come to city to find livelihood and struggle to survive.

  4. Beautifully crafted! Writer I am sure will break a leg in the field of verse!

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