About 70% of millennials, Gen Z in Bengaluru struggle to find affordable rentals: Report

With an influx of professionals returning to work, post-pandemic, the demand for rental housing has skyrocketed in Bengaluru in the first half of calendar year 2023.

Chinmay Gowda, 29, has been living in a 2BHK apartment in the eastern Bengaluru suburb of Doddanekundi, paying a monthly rent of Rs 12,000.

His landlord suddenly hiked the rent by 35 percent and Gowda is currently in search of affordable rentals in eastern Bengaluru. "Rents were affordable in Doddanekundi, being a suburb until last year. But today, it is unaffordable everywhere," he said.

On the other hand, Akriti Sood, 25, who recently took up a new job as a marketer, struggles to find rentals within her budget even in places away from her workplace in Koramangala.

With an influx of professionals returning to work, post-pandemic, the demand for rental housing has skyrocketed in Bengaluru in the first half of calendar year 2023.

Coupled with a mismatch in supply and demand of inventories in H1, the brunt of unaffordable rentals are being faced by more than 70 percent millennials and Gen Z living in the city, a survey by proptech unicorn NoBroker that interviewed 34,000 tenants found. Gen Z  refers to the youth population up to 26 years and millennials belong to the 27-42 years group.

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Not just in Bengaluru. The survey said that in H1 of CY2023, about 66 percent of tenants surveyed stated that their rental budgets had increased. Residents in Chennai, Bengaluru, and Hyderabad are showing increased rental budgets, a likely consequence of rising rents, shifting living preferences, and economic recovery.

Shortage of rental properties close to tech parks, offices

"A shortage of supply of rental properties close to offices and tech parks has led to fierce competition for available housing --- particularly in areas like Bengaluru’s eastern belt. A significant percentage of landlords have capitalised on these market conditions, hiking rents by over 20 percent," it added.

In prime areas like Whitefield, Sarjapur, HSR Layout, and Indiranagar, rentals in gated communities have increased by 25-35 percent compared to last quarter, brokers say.

Kiran Kumar, Vice President of Hanu Reddy Realty, said that he does not have properties available for rental listing in gated societies across prime areas in the city. "Today, most millennials and the Gen Z are looking for apartments in gated societies. In places like Whitefield, a 2BHK today starts from Rs 30,000-40,000. In HSR Layout, the rentals are about Rs 20,000-30,000," he added.

Millennials spilling to suburbs

With rental properties not available in prime locations, most millennials and Gen Z have spilled over to the suburbs of Bellandur in the south, Whitefield in the east and southern Bengaluru like JP Nagar.

"People moving to suburbs have started inflating rents, especially in areas close to the IT corridors in east and north," Saurabh Garg, co-founder and Chief Business Officer of NoBroker.

Surprisingly, the survey pointed out that this has led to an upsurge in rental rates with rental yields crossing 6 percent in prime locations like Whitefield and Indiranagar. Additionally, Garg added that even though rentals are still affordable in suburbs, the rental yields in these places are almost at par with prime locations.

More than 40 percent of landlords surveyed by NoBroker found that the one main reason for the rental increase is due to home loan EMIs shooting up. The average home loan interest rate rose from 4 percent in May 2022 to 6.5 percent, as of date.

"New inventories will be hitting the real estate sector about 2-3 years from today. However, the rental curve has reached a peak today and won't increase drastically till then. With property prices increasing at will, the rental yield is set to ease in Bengaluru over the next few years," Garg added.