It’s primarily on account of a large number of investors exiting ‘saturated' markets and selling units to end users, leading to a paucity of housing units on rent.

With the impact of the Covid-19 pandemic waning and employees returning to offices, the rental housing demand in Delhi-NCR has shot through the roof, leading to an almost 20-25 percent jump in rents in established markets of Gurgaon and Noida.

Apart from rising demand, availability has also fallen considerably as investors, who have made profits, have exited ‘saturated’ real estate markets to reinvest gains in other upcoming locations. A delay in delivery of under-construction units, and ready-to-move-in units bought to live in and not as investments are also fuelling the rental demand.

After offices reopened, the rental demand in Noida has shot up by around 25 to 30 percent. A 2BHK unit available for Rs 10,000 per month during the pandemic has now gone up to Rs 15,000 while a 3BHK earlier available for 12,000 is now quoting Rs 16,000 to Rs 17,000.

To cite a few more examples, studio apartments in Sector 137 in Noida that were earlier available on rent for Rs 12,000 are now going for Rs 17,000. Rents of 2BHK units have increased from Rs 15,000 to Rs 18,000.

There are hardly any affordable options available even in Greater Noida West (Noida Extension) as no new residential stock has come up in the last two to three years. The recently handed-over Amrapali projects are perhaps the only ones where rents are in the range of Rs 7,000 to Rs 10,000 per month.

“In the last two years, new supply was halted on account of Covid-19 while several other projects are stuck due to various reasons in Noida. The new launches in the last few months have primarily been in the luxury segment resulting in depletion of the ready supply of affordable housing units,” Pradeep, a real estate broker in Noida told Moneycontrol.

There have also been instances of investors exiting saturated markets such as Indirapuram or in and around Sector 93 in Noida where they have made enough gains to reinvest in upcoming markets. Many have also reinvested proceeds of sales in offices, plots or even luxury apartments, he explains.

The investor cycle works something like this.

An investor in Indirapuram may have bought a housing unit in 2010 for Rs 3,500 per sq ft, put it on rent for at least five to six years and exited when the price reached a saturation point of around Rs 10,000 per sq ft.

With the gains, the investor buys property in Noida Extension, Section 150 and stays invested there until the new investments hit a saturation point too. When investors exit, they sell their units to end-users, who may buy these properties because of proximity to their workplace or due to their families residing in the same locality. This has reduced the number of rental properties available in the market, pushing up rents due to the demand-supply mismatch.

Not only have rental options reduced considerably in established markets but even sales have also been tepid after interest rate hikes. Most people are now in the wait-and-watch mode as their home affordabilty and loan-taking capacity have gone down, he says.

Nitin Jain, a local broker operating in Noida and Ghaziabad, points out that rents for a 3BHK in Orange County in Indirapuram, which were at Rs 27,000 per month earlier, have now shot up to Rs 33,000 as investors have exited and started investing in new projects. “The new buyers are primarily end-users. This has reduced rental inventory in the market and pushed up rentals,” he adds.

Gurgaon market is not different

Rentals in housing societies in Dwarka Expressway have increased by Rs 5,000 to Rs 10,000, especially where the location is good and offices are close by. This is also because senior officials of the National Highway Authority of India have been quoted saying that the Dwarka Expressway will open to commuters in stages and the 19-km section in Haryana will be fully operational by early next year. Some sections of the expressway are already in use.

A 3BHK that was earlier available for Rs 13,000 a month is now going for more than Rs 20,000. In Puri Diplomatic Greens, a 3BHK or a 3.5BHK is now available for Rs 35,000. Villas in Sobha International City are now going for Rs 80,000 to 90,000 per month. In Experion Windchants, a 3BHK is now available for Rs 40,000 to 45,000 and a 4BHK for Rs 55,000, says Prakhar Sahay, a real estate expert from the area.

He also points out that after the chintels paradiso incident in February this year structural audits were ordered at 16 high-rise societies following directions of the district administration. Several tenants in these societies have now moved to apartments where a structural audit has not been ordered. This has led to a reduction in the rental stock and a manifold rise in rents at ‘better’ projects.

Many people have also moved from Dwarka and Rohini to Dwarka Expressway as it is closer to their workplace, leading to a 15-20 percent jump in rents in these areas.

As for investors, a large number of them have been stuck with their investments in Dwarka Expressway on account of the infrastructure connectivity not getting ready on time. “Those who have waited for almost 10 years may decide to stay invested for another two years so as to exit with decent appreciation when the expressway is ready. Others have started exiting their original investment and buying properties in the same area that have more potential in the short term,” explains Sahay.

For example, if an investor exits from project A for Rs 90 lakh, he would invest in another project in the same area in the hope of exiting with at least Rs 1.2 crore in the next two years, he says, adding some have exited and invested in plots in Sohna or Jajhar in the hope of recouping their losses.

The luxury rental market in Gurgaon hits the roof

Statistics shared by PropEquity, a real estate data and analytics firm, show that in DLF The Aralias in Sector-42, the current resale stands at Rs 18 crore and lease rentals are at Rs 4 lakh per month. In 2020-2021, the resale was at Rs 12-13 crore and rents were at Rs 2.6 lakh to Rs 3 lakh per month. In Magnolias, the recent resale price is pegged at Rs 24 crore for a lower floor and rents are going at Rs 5.25 lakh to Rs 5.5 lakh per month. In 2020-2021, the resale was at Rs 15.5 crore -Rs 16.5 crore and rentals at Rs 3.5 lakh to Rs 3.7 lakh per month. In The Crest, the resale is around Rs 12.20 crore and the rentals are at Rs 2.5 lakh to Rs 2.95 lakh per month. In 2020-2021, the resale was at Rs 6.5 crore to Rs 8.5 crore rents were around Rs 1.5 lakh to Rs 2.4 lakh.

“Gurgaon has limited quality supply and the demand for luxury and good apartment complexes is higher. Since most multinationals are here there is genuine demand from corporate customers and also a lot of migration is happening from Delhi to Gurgaon on account of proximity to the workplace,” explains Samir Jasuja, founder and CEO at PropEquity.

Rentals in the Gurgaon premium luxury market have increased manifold after being depressed for a long time. “They are now catching up,” said Mudassir Zaidi of Knight Frank, Executive Director - North, Knight Frank India.

“Both the capital values and rentals of super premium apartments have gone up steeply in these areas. Most of these units are rented out by the owners to corporate honchos and expatriates, who are now back after the pandemic,” he said.