Oversupply chokes rental growth in Bengaluru

BENGALURU: Residential rentals across the major IT hotspots of Bengaluru — Whitefield, Sarjapur Road, Electronic City and Bannerghatta Road — have remained stagnant and dipped in some places in the past one year due to abundance of apartments in the city, as per data obtained from two sources.
The data suggests the real estate market in Bengaluru — end-user centric and often called the most resilient in the country — is still some time away from regaining its health.
Rentals in the IT areas, apart from Kanakapura Road and JP Nagar, have on average gone down by 2-3% in the second quarter of the year, compared to the same period a year earlier. In several places, it has remained flat. Only a few cases have seen an uptick.
Rentals in IT areas have gone down by 2-3% in Q2 2018
Rents in Konanakunte on Kanakapura Road have shown the maximum increase — up by 9% — data from realty portal Magicbicks showed.
Rents for 2BHK in Electronic City Phase I hovered on average at Rs 18,438 in the second quarter of 2017, and currently stands at Rs 18,481. Another prime location, Kundanahalli, has seen rents dip by 1.4% to Rs 22,220. The steepest decline, about 6%, was in HSR Layout Sector 1.
Historically, rentals have gone up by an average of 5%, which is why rental contracts have a 5% annual increase built into them.
E Jayashree Kurup, head editorial and advisory in Magicbricks, said rental yields are expected to remain stagnant till the city’s housing market reaches a stage where the existing and new rental housing stock (by way of fresh construction) is close to demand for rental housing. Rentals in upcoming areas such as those beyond KR Puram flyover have failed to go up. Data from property consultancy Silverline Realty shows rents on Old Madras Road have remained stagnant, though they are significantly lower than in the IT hotspots nearby. Average rentals there are about Rs 17,000 for a 2-BHK compared to Rs 30,000 in adjoining Whitefield.
Sales, too, have not been great. Units sales rose just 2% to 13,382 units in the first six months of the year, compared to the same period in 2017, data showed.