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Pramod Varshney shifted to a rented 2-BHK flat in Noida’s Sector 137, a couple of years back, at a rental of Rs 13,500 per month. The lease agreement specified a 10% hike in rentals, every year. By that commitment, Varshney’s should now pay a rent of over Rs 16,000. However, the amount that he pays today, is Rs 12,500 per month.
“Initially, I felt that my rent was reasonable, as I used to shell out Rs 22,000 for a 2-BHK flat in Delhi. Later, I came to know that the neighbours were paying even lesser. Moreover, with the kind of unoccupied flats in the vicinity and the owners looking for tenants, Noida has turned out to be a renters’ paradise,” says Varshney.
There are many tenants like Varshney, in Noida, who are either renegotiating with their landlords for a lower rental amount, or shifting to another flat in the neighbourhood at a lesser rent.
Oversupply in a short span of time, has created a unique opportunity for tenants in Noida’s property market. However, this is not good news for the investors, who are stuck with their projects owing to a stagnant resale market and the lack of returns on investment in terms of rental yields.
Rental yields in Noida, and rest of the country
According to data available with Track2Realty, in the last five years, when home sales decreased sharply, the rental yields increased across the country.
- In Bengaluru, it shot up from 2.7% to 3.5%.
- Similarly, in Mumbai, it increased from 2.5% to nearly 3%.
- In Delhi, it went up to 2% from a modest 1.5%.
- However, in Noida, it has decreased from 1.8% to 1.5%, despite the fresh supply of units, with ultra-modern amenities.
An earlier report by Colliers India, also pointed out that rental rates in most areas of Noida, have either remained stagnant or reduced. In some areas like Sector 92 and 93, it fell by 6%. The report also showed a 16% drop in rentals in Noida’s Sector 44, the maximum in the entire city.
“In the first half of the year, possession of 6,000 apartments were given, in Sectors 45, 74, 75 and 76. While many owners have shifted into these units, many have also given them up on rent. With more rental properties available in new apartments, people from existing rental properties have shifted to these cheaper apartments with better amenities,” said the Colliers report.
Should you rent or buy a house in Noida?
The oversupply and the drop in rental rates, have also prompted prospective home buyers to reconsider their options.
“Why should I even think of buying a house in Noida today, when I can live in an apartment worth Rs 1 crore, by paying just Rs 16,000 as monthly rent?” questions Prashant Dahiya, who was initially looking to buy a home in Noida but is now living in a rented accommodation. “The probability of capital appreciation is nowhere near even the safest bank fixed deposit returns. Moreover, the rental yields are around 1.5% and constantly decreasing and the availability of rental housing is way beyond demand,” says Dahiya, justifying his decision.
Nikhil Hawelia, managing director of the Hawelia Group, however, feels that the potential of Noida’s real estate market, cannot be evaluated on the basis of its rental yields alone. As Noida happens to be an affordable market, the rental returns are bound to be on the lower side, he maintains.
“The rental yields in most of the markets have softened. In Noida, as the ticket size of the property has always been on the lower side, it gives the impression of a crash, which is not the case,” says Hawelia.
The rental market in Noida
- Noida has the lowest rental returns among the top cities, at 1%-1.5%.
- Oversupply has dented capital appreciation, as well as rental yields.
- Rental returns are constantly decreasing, despite the supply of new units having better amenities.
- Emerging locations are worst hit, as the existing tenants are renegotiating for lower rents.
(The writer is CEO, Track2Realty)