Going through the roof: What’s causing the unprecedented hike in Bengaluru's 1BHK rentals

Industry observers said a large portion of the city’s one-bedroom properties are strategically located near commercial establishments, which is driving up rentals.

A steep contraction in inventories of two- and three-bedroom homes in Bengaluru is leading to an unprecedented demand for one-bedroom residential properties, prompting landlords to increase rentals by almost 25 percent in less than a year in some cases.

According to experts, current rental yields for one-bedroom properties have risen to about 4 percent in many locations and to as much as 6 percent in some prime areas. Rental yield is the income generated by a rental property relative to its value.

"Typically in Bengaluru, the rental yield for rental assets fluctuates between 2-3 percent, but now in places it has crossed 4 percent on an average. In some places, it can be 6 percent also," said Amit Agarwal, co-founder of NoBroker.

Property listings that Moneycontrol reviewed showed that peak rentals were upwards of Rs 30,000 per month in areas such as Sarjapur Road, HSR Layout, and Indiranagar. Experts said these were among the steepest price escalations in the recent past.

Demand outstrips supply

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Industry observers said a large portion of the city’s one-bedroom properties are strategically located near commercial establishments, which is driving up rentals.

With the reopening of offices, many returning employees are opting for one-bedroom rentals due to their cost-effectiveness and easy maintenance, resulting in a notable uptick in demand, said Karishmah Singh of Bengaluru-based developer Sattva Group.

Given that the available stock in this one-bedroom configuration is not as high as the two- and three-bedroom properties, there is a demand-supply gap, which is leading to a spike in rental rates, Ashish Sharma, city head - Bengaluru, ANAROCK Group, told Moneycontrol.

According to data from MagicBricks, demand for 1BHK inventories almost doubled to 13 percent in Q3 of 2023 from 6 percent in Q2 of 2022. Accordingly, supply increased from 4 percent to 16 percent.

Strategically located

“More than 50 percent of the new 1BHK launches last year took place in northern and southern Bengaluru (25 percent share and 24 percent share, respectively). However, a majority of demand for 1BHK comes from eastern (close to the IT hub of Whitefield) and central Bengaluru,” said Ankita Sood, head of research at Housing.com.

“The demand for 1BHK in Bengaluru has shot up so much that 32-40 percent of queries on our website searched for 1BHK in the city last year,” Sood said. "This is an outstanding number annually where we can see prospective rent-seekers downsizing, especially after a pandemic that continues to push us for larger homes."

Experts maintain that it will take some years until new supply comes in to bring stability to 1BHK rentals. However, while overall rentals in Bengaluru have moved up by 30-50 percent over the past two years, experts said rentals for 1BHKs will soar moderately in the coming quarters
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"I do not see a further escalation of this magnitude and in the coming years, it will be stabilised," Agarwal of NoBroker said.