The economy might be in the unlock phase, but as far as residential rentals are concerned, the effect of the COVID-19 lockdown and work-from-home still hasn't worn off. Going by latest data from Chennai and Bengaluru, the two southern Indian cities are seeing rents reeling between 20 and 25 percent of pre-COVID levels. Experts suggest that recovery is not expected in rentals until January 2021.
"Bengaluru is seeing a 25 percent drop in home rents as compared to pre-COVID-19 levels," said Amarendra Sahu, co-founder and CEO of Nestaway.
"People are still working from home and the floating population in a city like Bengaluru has preferred to move back to their hometowns. As a result, available supply is four times higher than the number of people on the lookout for homes," Sahu added.
It isn't just Bengaluru that is bearing the brunt of the impact of WFH on rentals. Any city with a sizeable workforce in IT, where companies have extended flexible working to employees, has seen home rents decline. "The effect is visibly higher in luxury properties and apartments in Bengaluru, where we are witnessing close to a 40 percent correction in rent," Sahu explained.
Chennai: home rents down 20 percent
Chennai has registered a similar correction in home rental rates. According to No Broker, prevailing rental rates are 20 percent lower than pre-COVID levels. The rental aggregator has reported a 47 percent spike in listings on the website, a sign of more homeowners and landlords desperate to find new tenants, and thus willing to compromise on rent.
"There are nearly 25 apartments that are vacant at Ceebros Boulevard [Old Mahabalipuram Road, Chennai], where several homeowners have resorted to cutting down on rental expectations," said Sohail Sarooshi, a well-known Chennai-based realtor.
"Earlier, an apartment at Boulevard would go on rent for upwards of Rs 40,000 per month. Today, home-owners have made peace with collecting just Rs 30,000 for the same apartment," he added.
Realtors and brokers keep repeating one mantra to home-owners: Do not let go of an existing tenant even if it means cutting down on rent. "Rental income can be recovered later, but tenants are hard to come by today," said Sarooshi and added, "It’s important to hold on to your tenants today, and that's what I keep telling my clients."
No home loan = no compromise on rent?
A large number of home-owners are desperate for rental income — and are thus open to cutting down on rent — thanks to the overhang of EMIs on housing loans. However, well leveraged home-owners aren't perturbed. An owner of a super-luxury villa on Chennai's up-market East Coast Road, who did not want to be named, has lost out on his monthly rental income of Rs 1.85 lakh since July. However, he says there is no question of cutting down on rent.
"Our tenants were American expats who returned to the US once the pandemic set in," the home-owner said, "I'd rather wait out this period and find the right tenant than compromise on how much rent I’m seeking. While we haven’t been able to close a deal for months, we have been getting several enquiries ever since our villa went vacant." The villa in question does not have a bank loan riding on it.
"A correction in rental rates is common and will continue to prevail in Bengaluru and Mumbai, which have traditionally inflated rentals especially in the last three or four years," said Sahu. "There is no question of anything changing up until January at least, by which time one hopes that employees will return to work and will be in need of accommodation," he added.