MUMBAI/DELHI/BANGALORE: Demand for rented homes has halved and rents are down by 25% in several popular residential localities in Mumbai, Delhi and Bangalore, as India Inc tightens housing budgets in its battle against economic slowdown.
In Mumbai, rentals in marquee buildings like the sea-facing Haveli on Malabar Hill, NCPA Apartments at Nariman Point and Maker Towers at Cuffe Parade, where rentals range between Rs 5.5 lakh and Rs 12 lakh a month, are down by up to 30%. In Delhi’s Vasant Vihar, West End, Chanakyapuri, Shanti Niketan and farmhouses in Chattarpur and West End Greens, rentals have dropped 25% in the last one year.
Rentals in apartment buildings in posh neighbourhoods of Bangalore like Epsilon in Yemlur and Prestige Exotica on Cunningham Road are also down by 35% this year, say brokers. Rents in Epsilon range between Rs 7 lakh and Rs 10 lakh. “Corporate earnings have been subdued and no new expansions have been announced in the recent past.
This was the slowest growth in two years, reflecting the country’s lacklusture growth performance. With GDP growth slowing down to a decade low of around 5% in 2012-13 from a peak of 9.6% in 2006-07, companies are paring costs on all counts, including hiring at all levels. A recent survey by the Planning Commission showed that India lost 5 million jobs between 2005 and 2010.
“People always want the best when it comes to company accommodation and so costs go for a toss. Clients are preferring a Mumbai person for Mumbai and Delhi person for Delhi,” says Keith Rowe, managing director of HR Solutions, a Delhi-based executive search firm.
Rentals constitute nearly 15-20% of cost to company (CTC). But not just companies, those being hired too are looking for cheaper accommodations, even when they are entitled to company-rented homes, as rising inflation cuts deep into their pockets.
Rentals crash in metros: Demand for rental homes down 50% as India Inc turns thrifty
The sagging sentiment has added to the woes of the property market where home buying has almost come to a naught.
Especially in Mumbai, where property brokers are struggling to rent out apartments even in areas like Cuffe Parade, Colaba and Marine Drive, which, traditionally, are the most sought after by senior company executives. “Some landlords still ask for the moon but people are not willing to pay,” says Ramesh Nair, managing director-west, at property consultancy, Jones Lang LaSalle India.
With a number of businesses relocating from the old central business districts of Nariman Point and Cuffe Parade to Lower Parel and Bandra Kurla Complex, the charm of living in some of south Mumbai’s posh localities is also fading.
“Some transactions in Mumbai may be taking place at 5-10% lower than last year’s rentals,” adds Shveta Jain, executive director for residential business at Cushman & Wakefield India.
In Bangalore, rentals for single homes are down by 40%, while rents in gated communities have fallen by 20%. A broker in Bangalore says queries for rental accommodation have almost halved in just the last three months.
Relocation budget of companies have dropped by at least 20%, says Alexander Moore, chief executive officer at property brokerage firm LJ Hooker India. He’s also seeing companies shorten the tenure of leases and asking landlords to lower security deposits and increase flexibility. India-related enquiries for Santa Fe, one of the world’s largest relocation firms, have dropped 10%. Business in Delhi and Gurgaon has come down by 50% in the last 3-4 months, says Arvind Mehtani, owner of Settlers India, which helps corporates and expats find homes in posh localities in NCR.
Companies are hiring less and also cutting down on perks, such as rentals,” says Samarjit Singh, managing director of real estate services firm IndiaHomes.
Singh says inventories in south Delhi alone have increased by three times in the last three years. “There aren’t enough premium clients, expats, and top execs to fill these homes like before.” In the March 2013 quarter, India Inc’s revenues grew just 4.8% over the same period last year.