Residential rentals in Chennai and suburbs have shot through the roof in the last few years. We find out the reasons behind this trend.
When K Saravanan moved into the city from Hyderabad five years ago, he found himself a 2 BHK apartment on OMR for a rent of Rs8000 a month. Besides being close to his place of work, his apartment also offered amenities like gym, jogging track, and so on. Today, he pays a rent of Rs 15,000 for the same apartment. “It’s still much less than what I would be shelling out if I were to live in the heart of the city, say Alwarpet or Nungambakkam. My apartment complex now has a club house, a small in-house cinema hall, a supermarket, ample green cover, etc, and it’s not too far away from the centre of the city either,” he says.
Many like Saravanan prefer living in rented properties close to their work places, but not many can afford the increasing rents in some of these locations. N Hariharan, Office Director, Chennai, Cushman & Wakefield, says, “There has been an increased migration of people to the southern part of the city; the demand has been growing but the supply is limited, especially in areas like Alwarpet, Besant Nagar, to name a few. There is a good supply on GST and beyond Perungudi on OMR. These areas have seen the maximum increase in rentals.” He points out that while rentals in Velachery used to be about Rs8,000 (for a 2 BHK) a few years ago, today it is about Rs25,000. Average rentals in Besant Nagar and Thiruvanmiyur, he adds, are above the Rs25,000 limit.
Apart from the fact that rents are high, the other concern with regard to residential rentals is that they are not uniform. Two apartments in the same complex, for instance, that are of the same size, age and on the same floor demand different rentals. “It depends entirely on the owner. The rental market is largely unregulated and unorganised,” adds Hariharan. This particularly affects tenants, especially when they are looking for apartments on rent within the city. Take the case of Arun (name changed) who lives in a rented property in Adyar. He has been staying in the 2BHK apartment for the last ten years and the rent has increased manifold over the years. “When I moved in to the apartment, in early 2002, I was paying a rent of Rs9,000 and now I pay about Rs30,000. Of courses, the rentals are bound to rise, but this astronomical increase is not justifiable, especially when the apartment itself is about 20 years old and there has been no significant improvement in terms of infrastructure (within the complex) and no amenities provided. There needs to be a strict guideline to ensure that rentals in a particular area at least are uniform,” he says.
Arun’s views are shared by many who live in rented properties across the city. The landlords, however, defend their stand and attribute the increase in rentals to increasing value of land. Ramya Ravindran (name changed) who has let out two apartments – one in Thiruvanmiyur and the other in Mylapore – believes that she has no choice but to increase rentals. “As per the Rental Agreement we hand out to our tenants, we are allowed to increase the rent by 10% per year. Although we do not do it every year, for fear of losing good tenants, we have to increase our rents whenever we modify the apartment. With the market value of land in these areas having increased significantly, we are bound to increase rentals too,” she reasons.
Another factor that has given rise to the phenomenon of increase in rental rates is that of rising income levels of individuals. Abhishek Gopal, a working professional who hails from Chennai, has a property in Velachery he has leased on rent for the last couple of years. “The development of the suburbs and the rising income levels of the middle class have led to an increase in the rental rates of most localities in the city. “People are willing to spend more as long as the locality is safe and has a range of amenities. I hike the rent by 10% every two years but it varies based on many factors such as land prices, electricity rates, etc,” he says.
Rajesh Babu, Founder of RECS Group, a city-based real estate consultancy, says the availability of services and infrastructure in the city attributes to the constant rise in rental rates in the city. “Suburban areas such as OMR, GST Road, and Oragadam have witnessed a rise in rental rates over the years owing to the booming IT and manufacturing industries in the area,” he says. He also mentions that individuals who have lived in the city for more than two years look for renting out their properties. “A large chunk of properties on rent are owned by individuals who are looking for investment avenues and have an understanding of the real estate market,” he adds.
With soaring property prices, it is natural that rentals have to be hiked. It will, however help if the increase were not so haphazard, say residents who feel that a guideline to regulate rentals in the city and suburbs will ensure that there is order amidst the chaos.