Why Landlords Are Now Charging Double The Rent In Bengaluru: Here Are The Key Reasons

Rents in India's technology hub of Bangalore have nearly doubled since the start of last year, making it the country's hottest residential market.

The landlords in the technology hub city are now charging the highest proportion of their property's value as rent, which has edged out financial centre Mumbai, Bloomberg reported as revealed by market researchers.

This comes at a time when companies are ending work from home and calling back employees to offices. But, why such an exponential rise in rents? Let's find out.

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Landlords recouping lost revenue during pandemic

Over 1.5 million workers, including those for global firms like Alphabet Inc.'s Google, Amazon.com Inc., Goldman Sachs Group Inc., and Accenture Inc, reside in the capital city of Karnataka state. Most of this population was displaced during the pandemic, with staff moving to remote work or departing the city, leading to a decline in rents in the IT hub.

However, with the economy and private sector stirring back to life in Bengaluru, landlords are looking to recoup lost revenue and find themselves in a seller's market.

"Apartments had to be rented out at very low rates during Covid as many went back to their hometowns. Now that people are getting back to the office, landlords are making up for their losses with higher rents," said Prashant Thakur, head of research at property consultancy firm Anarock.

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Shortage of supply

The shortage of supply has led estate agents and ultra-picky homeowners to demand LinkedIn profiles and resumes from prospective renters, said Arpan Batra, the owner of real estate consultancy Anzen Spaces.

She and Waquar Ahmed of Ahmed Realty ¡ª who has 35 clients looking for a home and no inventory to offer ¡ª both observed a doubling in rent prices over the past year. Multiple interview rounds, including on Zoom, are now commonplace.

Part of the problem is an artificial constraint on supply, Batra said, brought on by construction grinding to a halt during the pandemic. Bangalore only added roughly 13,560 residential units in the first quarter of this year, an increase of just 3% compared with a 55% jump in Mumbai, according to Anarock. Bangalore is now the top Indian city for rent yield with 3.9%.

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Concentration very high in some areas

Nowhere is the problem as acute as the neighbourhoods in central Bangalore, Whitefield and the Outer Ring Road (ORR) area. There are about 350 companies in the 17-kilometre ORR stretch and they together employ one million workers, said Krishna Kumar Gowda, general manager of the Outer Ring Road Companies' Association.

The concentration is high and impacts availability of rental homes within a reasonable distance, he said. Intel Corp., Microsoft Corp., KPMG, Goldman Sachs and Morgan Stanley Inc. have their offices along the length of the road and a new Google campus with a capacity for housing 10,000 workers is coming up fast, said Gowda.

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Ramyakh Jain, who moved to Bangalore for a new job, found a two-bedroom rental home for 50,000 rupees ($600) per month in February. It's one-and-a-half times the rent and only half the size of the apartment he previously had in New Delhi's Gurgaon district. It took him weeks of scouring the market with the help of as many as 25 estate agents. Even so, he considers it an accomplishment.

"I've found a roof over my head," Jain said. "I'm among the lucky ones."

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