IT/ITeS boom boosts rental real estate demand

With the IT/ITeS sector serving as a major job magnet in India’s major cities, we examine the impact of this sector on the rental landscape in India

IT/ITeS and BPO companies, have been instrumental in attracting the young workforce to big cities like Delhi, Bengaluru, Mumbai, Pune, Hyderabad, Jaipur, etc. Consequently, this job sector has significantly impacted the rental landscape of India. Owing to the healthy demand for rental properties, the rental yields are comparatively higher, in micro-markets that are close to IT/ITeS and technology parks.

“For example, areas in and around Whitefield and Electronic City in Bengaluru, Hinjewadi and Kharadi in Pune and Gurugram in Delhi-NCR, have seen good rental yield, as compared to other micro-markets in the same cities,” says Vinayak Katkar, director and co-founder, Amura Marketing Technologies. “For young people, the cost of owning a house is very high and they are left with no option but to rent a property. The EMI on a home, is almost three times the monthly rental in these cities. This reduces the monthly disposable income and restricts one’s lifestyle. Moreover, due to the uncertainty in jobs, in this sector, young people are hesitant to create a long-term debt of home loans and prefer to stay in rented accommodations, instead,” he explains.

Check out flats for rent in Bangalore on Housing.com

Changing rental real estate market

While the demand for rental homes, has been positively influenced by IT employees, there has also been a notable change in the overall real estate system. The rental market in India is slowly becoming more organised and systematic and as a result, more people are willing to give their house on rent.

See also: Growing rental market to create more rental management companies

With the influx of people into the major cities due to the IT revolution, brokers and owners started charging a lot more than the existing market rates. This provided an ideal starting point for rental management companies to enter the market, with the promise of hassle-free and transparent transactions, says Kiran N, co-founder, RentMyStay.

“Nowadays, people can see and even book flats online, before they reach the place. Also, people are travelling frequently and switching jobs, more often than the earlier days, leading to a change in the rental landscape. Cities are usually more crowded and hence, those who opt for rental accommodations, prefer to live near the workplace,” Kiran elaborates.

 

Buying versus renting: What home seekers prefer

While agreeing that the IT sector does influence the market, Kawal Nagpal, managing partner at Hi-tech Constructions, maintains that the education sector or students, are the driving force, behind rental economics in India. “As soon as this corporate workforce starts earning Rs 70,000-80,000 in a month, they are quick to change tracks. They are attracted to properties that generate returns on capital, in markets like Noida, Greater Noida and Gurugram and can easily finance a loan of Rs 40 lakhs,” he explains. Nagpal adds that the Smart Cities mission will also have a big impact on the rental market in India, as people will be more willing to live in accommodations in small cities and towns, once infrastructure and jobs are in place.

In the meantime, these same people continue to prefer saturated markets like Delhi-NCR, living in rental homes that are close to their office. What remains certain, however, is that the rental real estate market in India, is undergoing a slow transformation, vis-à-vis prices, business practices, as well as end-users’ preferences.

 

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