Highlights:
- Luxury homes’ rental saw an increase in 2020
- The purchase price of the luxury homes did not see any change
- Tenants are willing to splurge on rent to afford a nicer home
In India, luxury homes are witnessing their rentals rise even when the capital gains stay limited, as per the research from a real estate consultant firm. What this means is that while tenants are willing to splurge on rent to afford a nicer home, they are not willing to shell out the high prices which are involved to buy the luxury homes outright.
Chairman of Anarock Property Consultants Limited, Anuj Puri, said, “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, data from the real estate consultancy firm indicates that the average monthly rentals in Gurugram’s Golf Course Road increased by as much as 17% in 2020 over 2014, whereas the average property prices in the same period declined marginally – from ₹ 13,167 per sq. ft. in 2014 to ₹ 13,150 per sq. ft. in the year 2020.
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Among the top 7 cities in the country, Hyderabad’s Hitech City saw the highest rental appreciation with 26% between 2014 and 2020; in the same period, the average property prices saw a 12% jump.
Puri said, “Anarock data also reveals that from 2014 to 2020, rental prices in the top luxury markets saw consistent year-on-year growth – averaging between 3-6% annually”.
He added, “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 approximately 5% in other years – particularly in 2017, when many micro-markets saw capital prices plunge against the preceding year”.
Part of the reason for the limited increase in the prices of homes was owed to the structural changes in the real estate market which were introduced in the year 2017 including the Real Estate (Regulation and Development) Act and also the Goods and Services Tax (GST).
After this period, most localities only saw a marginal capital price rise averaging between 1% and 3%, while the rental markets continued their growth run.
A few of the luxury markets situated in the top 7 cities of the country which performed well between 2014 and 2020 are J P Nagar in Bengaluru, which saw average monthly rentals appreciate by as much as 24%; while rents in Tardeo, an upscale area in Mumbai rose 23 % in this period, while capital prices increased by 8%.
