North Bengaluru commands higher rental yield than eastern IT corridor, prime areas

Local brokers said the main reason North Bengaluru commands a higher rental yield is because real estate in the area is fairly new and booming.

North Bengaluru has moved ahead of the eastern IT corridor of Whitefield and the prime areas in terms of rental yield, according to data from ANAROCK.

The rental yield in North Bengaluru was 4.48 percent in the third quarter of this calendar year, up from 3.38 percent four years earlier, it said. Rental yield refers to income generated by a rented property relative to its purchase value.

"In Whitefield, the rental yield presently stands at 4.41 percent, while back in 2019, it was 3.7 percent. Interestingly, Thannisandra Main Road in the north commands a higher rental,” Ashish Sharma, city head, Bengaluru, ANAROCK Group, told Moneycontrol. “However, in prime areas such as Indiranagar and Koramangala that have mixed demand from IT and other sectors, the rental yield is lower at 3.4 percent and 3.37 percent, respectively."

Explaining the drop in rental yield in the prime areas, Sharma said capital values in these two areas are fairly higher than in the prominent IT hubs, while the difference in rentals is not as much.

Local brokers said the main reason North Bengaluru commands a higher rental yield is because real estate in the area is fairly new and booming. Additionally, infrastructural failures close to the eastern IT corridor such as waterlogging and severe traffic snarls have impacted real estate prices in some areas, they said.

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"Certain pockets in the east that see constant flood every few months, the project prices in those areas have appreciated slowly or are rather stagnant," said Kiran Kumar, vice president of Hanu Reddy Realty.

Rental growth

However, rents are increasing at a faster pace in the east. ANAROCK found that rentals in Whitefield and Sarjapur Road grew 31 percent and 27 percent, respectively, over the past nine months of 2023 for a standard, 1,000 square foot two-bedroom apartment.

"If we are to look at the rental value growth at Thannisandra Main Road, it stands at 16 percent in the last nine months from Rs 24,500 per month in 2022-end to nearly Rs 28,500 per month in September-2023 end," Sharma added.

Sarjapur Road and Whitefield have an edge over North Bengaluru in terms of rental growth because they are strategically located close to the city’s major IT parks, be it the IT-belt along the Outer Ring Road, Whitefield itself, or even Electronic City further south.

"Many prefer to live in and around these IT areas and hence demand remains high. This high demand essentially translates into higher rental values because in many societies there emerges a demand-supply mismatch," Sharma said.

Rent for a two-bedroom flat near the eastern IT corridor of Whitefield can touch Rs 40,000-50,000 per month in a prime location, while for a three-bedroom apartment, it could be Rs 60,000-70,000 per month.

There has been a 30-40 percent rental appreciation in most projects in the east, while in some gated communities, the rentals have spiked by as much as 50 percent.