Why Rent In Indian Metro Cities Are Skyrocketing? Reasons & What Lies Ahead

Rising rent in Indian metro cities

Recall the famous proverb- “Food, Clothing, and Shelter are three basics of human survival.” Being an agricultural country, we Indians have a sufficient amount of food. Our fashion industry isn’t lagging either to provide affordable clothing. Here, the elephant in the room is “Shelter” or “Housing.” If you are used to the updates in the real estate sector, then you must be aware of the skyrocketing prices of rent in Indian metro cities.

Rising rent in Indian metro cities


But have you ever wondered what could be the reasons behind it? 

Population growth and limited supply of affordable housing! You may say. Well, that’s true. But do you know the root causes? If not, then don’t worry. In this write-up we will delve into the housing rent analysis, prime reasons for rent hikes. Also, we will picture the scenario in the segment of future housing rents. 

Stay tuned!

Current Scenario: Rent in Indian Metro Cities

Residing in metro cities is the dream of almost every individual in the world, especially in India. Why? You may ask. Because of the availability of jobs, educational institutions, better medical care facilities, good transportation networks, and the list goes on. Can you guess a major hindrance that people face while living in metro cities? It is an affordable and good-quality shelter! Unfortunately, the rent in Indian metro cities have been heading north ever since the post-pandemic days.

According to the data released by Anarock Group, a famous property consultancy, the total residential real estate sales in Indian metro cities increased to INR 3,47,000 crore. Not just that, but the rental prices skyrocketed too! The hike in rental prices hiked in both mid-segment as well as luxurious residential rentals. Look into the following table to get a comparative analysis of rental prices before and after the pandemic-

1. Mid-Segment Category of Residential Rentals

The following table describes the average rent in INR per month for a 1,000 sq. ft. area for a standard 2BHK unit.

Indian CitiesMicro Markets (Area)20192022% Change
Delhi NCRSector-150 (Noida)Rs.15,000Rs.19,00023%
Sohna Road (Gurugram)Rs.25,000Rs.28,50014%
Sarajapur RdRs.21,000Rs.24,00014%
KolkataEM BypassRs.19,000Rs.22,00016%
HyderabadHITECH CityRs.23,000Rs.24,6007%
Mid-Segment Category of Residential Rentals (Area: 1000 sq.ft.)

As you can see, Noida Sector-150 topped the list with the highest increase in the average monthly rentals i.e. 23%. While Pune’s famous residential areas Hinjewadi and Wagholi observed an average monthly rental for 1,000 sq. ft. residences. Among all these 7 metropolitan cities, Hyderabad was an exception in the mid-segment residence category. It had a single-digit growth i.e.6%-7%.

2. Luxury Category of Residential Rentals

The following table describes the average rent in INR per month for a 2,000 sq. ft. area-

Indian CitiesResidential Area20192022% Change
Delhi NCR

Golf Course Ext. RdRs.49,000Rs.58,00018%
Golf Course RdRs.70,000Rs.80,00014%
HyderabadJubilee HillsRs.54,000Rs.63,00017%
HITECH CityRs.52,000Rs.60,00015%
ChennaiAnna NagarRs.55,000Rs.64,00016%
BengaluruJP NagarRs.47,000Rs.54,00015%
Rajaji NagarRs.56,000Rs.65,00016%
PuneKoregaon ParkRs.61,000Rs.69,00013%
Prabhat RoadRs.64,000Rs.70,0009%
Luxury Category of Residential Rentals (Area: 2000 sq.ft.)

From the comparative analysis, you can see that the Golf Course Extension of NCR faced the highest growth i.e.18%. While most of the cities’ rents were facing north the category of luxurious residences was. But Pune’s Prabhat Road and Kolkata’s Alipore area saw the lowest jump as compared to other areas.

(Note: All of the above data is collected from Anarock Research Paper)

Prime Reasons for Rising Rent in Indian Metro Cities

Several factors contribute to the high rents of the residents of metro cities. Some of the significant ones are-

1. Imbalance in Demand and Supply for Living Spaces

If you keenly observe the demand for rental houses in different areas, you will find that the urban areas have more demand. Why so? It is due to the availability of jobs. See, there is a comparatively higher number of jobs in cities as compared to villages. That’s why people migrate to cities in search of a sustainable income. 

After coming to cities, every migrated individual can’t buy a house as soon as possible. Because buying a house requires high documentary work as well as capital. So, if you get stuck in such a situation, what would you do? Rent a house! Yes, obviously because not only it will be pocket-friendly but also you can switch home according to the location of your job. There are lakhs of individuals like you who face the same scenario. This is the point when there is an imbalance in demand and supply for living spaces. Because there are more tenants when compared to the availability of rental houses.

Increased demands and low supply of housing area

This factor has become prevalent after the end of lockdowns. Because employees are returning in masses to rent homes instead of buying one. As the overall cost of properties is increasing, the interest rates and rental prices are increasing too!

2. Upgrading to large-luxurious homes

Did you know, in FY23, Hyderabad, Chennai, MMR, NCR, and Bengaluru had the highest price of luxury rentals? Modern lifestyles and aspirations have changed the housing preferences of urban dwellers. Many individuals prefer to live in well-connected areas with access to amenities, which tend to be more expensive. This shift in preferences also contributes to the rising rental costs. Apart from that, people are upgrading their lifestyles. Due to this, the demand for modern and technology-equipped homes has aided in the increase of housing costs. Eventually, the rents also increase.

Upgrading to technology equipped homes

(MMR: Mumbai Metropolitan Region

NCR: National Capital Region) 

3. Relocating Near Offices, Colleges, and Schools

Recall a scenario when you had to travel a long distance to reach the office/college/school. The long traveling hours are no less than a waste of time. Didn’t you wish that if you lived near an office/school, you could save a considerable amount of time to do better things? You might have looked into residential places near your office. Unfortunately, the rents were much higher than the ones you expected. So, here comes a notable point. Have you ever wondered why rental prices are higher in a corporate area than in a remote area? Obviously, because people prefer to live near offices to save traveling hours.

Are jobs the only reason for the demand for rental homes? Well, not really. Although jobs contribute a major portion of rental homes’ demands. But other factors include living near schools and colleges are responsible too. With new academic sessions, parents prefer to locate their nuclear families close to schools to reduce travel time. The same thing applies to college students too. They also prefer to live near colleges to prevent the waste of time in traveling. That’s why the rental prices of residences present near institutions and offices are increasing on a daily basis.

4. Development and Infrastructure Costs

High development and infrastructure costs (Rising rent in Indian metro cities)

As you know, land acquisition, construction, and infrastructure development in metro cities are quite high compared to non-metropolitan areas. Can you guess how the landlords recover these costs? Through rents! The costs involved in constructing or buying a residence in a metro city, are often passed on to the renters. Thus it leads to an increase in rental prices.

5. Population Growth & Urbanization

As you have read in the first point, people often migrate to cities for jobs because cities have more employment opportunities. Over the past two decades, India has witnessed rapid urbanization, especially in metro cities. There has been a significant influx of people from rural areas seeking better job opportunities and improved living standards. This population growth has created a high demand for housing, leading to increased rental prices.

House Rentals: What Lies Ahead?

Is there any way to achieve or reduce the costs of skyrocketing rents in Indian metro cities? Yes! There are numerous ways available. But most of it lies in the palms of our government. Recently, the Indian government made certain amendments to the National Rental Housing Policy to curb the era of landlords. Do you know, this policy was formulated with the goal of providing affordable housing for all? To maintain the balance between the duties and rights of tenants and landlords, they implemented Tenancy Act. It establishes a framework to control the tenancy in both commercial and residential buildings. These official rental agreements help registration with appropriate authorities. Thus, it keeps both parties (landlords and tenants) at peace.

National Rental Housing Policy

However, as per the experts, the real estate sector will expand and become stronger. Mainly due to a stable foundation and reduced mortgage interest rates. Also, in financial terms, the demand for housing in 2023 will be decided by the rise or fall of the repo rate. This may surpass the government’s effort through the National Rental Housing Policy. As a result, the housing rent in Indian metro cities will continue to rise!

Final Words

Addressing the rental affordability challenge, especially in metro cities requires concerted efforts from multiple stakeholders. Majorly, it includes the government, developers, and urban planners. It is important to strike a balance between economic growth, urban development, and providing affordable housing options. Thus, it will ensure affordable and good quality houses for urban dwellers!

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Published By: Supti Nandi
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11 months ago

Great overview on this.Rather than giving this much on rent, people coming from other citites prefer to buy their own house and pay emi, which is equal to their rent they are paying currently.
What do you think on this?