Rental Apartments Demand Still Runs High

When the Indian government decided to call back Rs.1000 and Rs.500 notes, one of the sectors that were severely affected was the real estate market. Prices of properties came down drastically all over the country. Sale of properties came to a halt overnight. Buyers postponed their purchase decisions hoping that prices may fall some more if they waited. The government has also proposed new real estate laws and acts which will be implemented soon. These laws, when enacted, will standardize prices and rates and bring more transparency to real estate transactions. Until these new changes are in place, almost all property buying processes are on hold. In the meantime, renting of the property remains the most profitable option for both property owners and customers alike, say experts at property.sulekha.com. 

Buying v/s renting

The current economic scenario is favorable for property owners who want to rent out their extra house or apartment. Since buyers are not considering purchase until there is more stability in the real estate market, the demand for rental properties has gone up. Consequently, there is a substantial increase in the rental rates in most of the major cities in India. However, the higher rental rates have not affected the demand for rented property. Apartments and houses for rent are still highly sought after. 

Property prices v/s rental rates

One of the reasons for the stability of demand in the rental markets is attributed to the affordability factor. Property prices, when compared to rental value, are higher in most part of the country. When paying EMI is more expensive than monthly rentals, most people prefer to rent residential property. This is especially true in the case of lower income individuals in big cities like Mumbai or Delhi. Even if they save 25% of the annual income, it will take years for an average income individual to save to pay the 20% down payment of the house or apartment they want to buy. Then, 50% of the monthly take home salary will have to be paid as EMI for home loans. Considering all these factors, it is affordable to rent out a property than spending all the savings of life on buying a costly property. This is the reason why there is more demand for rental flats in Mumbai, Delhi, and other such big cities. This trend of renting apartments or houses will continue until the real estate sector regains its lost glory after the economy becomes stable post demonetisation.