Monday, July 22, 2024

Bengaluru Rental Crisis: Tenants Forced to Vacate Amid Soaring Property Prices

In the face of escalating property prices, tenants in Bengaluru are grappling with an unexpected challenge – landlords asking them to vacate their rented apartments for the purpose of selling the properties, even while existing rental agreements are in force.

Endroneel Bhattacharya, a tenant in Bengaluru, finds himself in this predicament as his landlord has given him just one month to find a new residence, despite his rental agreement being valid until March 2024. Finding a suitable apartment within this timeframe, especially with a pet dog, has proven to be a daunting task, as rental rates have surged. Bhattacharya currently pays Rs 25,000 per month for a 2BHK apartment in Begur, near the Electronic City IT corridor. However, new apartments in the suburbs are priced at no less than Rs 30,000, while prime locations like HSR Layout command rents ranging from Rs 40,000 to Rs 50,000.

Another IT professional in the city, who chose to remain anonymous, is facing a similar situation and had to take time off from work to search for alternative accommodation.

Local real estate agents attribute this phenomenon to the booming property market, with landlords keen on capitalizing on the potential for higher returns. Kiran Kumar, Vice President of Hanu Reddy Realty in Bengaluru, shared an example of a landlord wanting to sell a property that is currently occupied by a tenant paying Rs 40,000 for a 3BHK apartment. The current market conditions make the property worth at least Rs 1.5 crore, representing a 20% increase from the previous year. Selling the property would provide a 10-15% higher return compared to renting it out.

Property experts note that real estate prices in various micro-markets across Bengaluru have surged by 10-20% in the past year. In areas like Defence Colony, near Indiranagar, apartment prices have increased from Rs 28,000 per sq ft to Rs 40,000 per sq ft in just a year. In the upscale Sadashivnagar, close to the CBD, a 3,000-square-foot apartment was sold for about Rs 15 crore, which translates to Rs 50,000 per sq ft. In 2018, a similar apartment in the same area was priced at Rs 30,000 per sq ft.

With demand outpacing supply, the rental market has tilted in favor of sellers. Data from Knight Frank shows a decline in new residential launches in the first half of 2023 compared to the previous year. Despite this, demand for apartments remains robust, with Bengaluru leading the nation in apartment sales during the second quarter of 2023. The resurgence of office work and the return of a floating population to the city after the pandemic-induced work-from-home era have further strengthened landlords’ confidence that their properties will sell, even at premium prices. Tenants, on the other hand, are navigating a rental market where prices have surged by 20-40%, particularly in prime areas.

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