An analysis of different types of rentals & rental trends in India

There are a number of investors who take to the path of purchasing and leasing out residential as well as commercial properties to earn passive income and capital gains. The article talks about the ongoing trends in the rental market.

The most important characteristic of a rental market is that it cannot target a particular class of consumer and still expect to survive in such recessionary times. As a matter of fact, rentals are meant for people of all classes who might vary in age, incomes and lifestyle. Every small and big city, especially big corporate hubs like Bangalore is a hotspot for a thriving business of rentals.

From a realtors point of view the rental market is broadly divided into two sub-divisions:

•   Residential Real Estate: As the name suggests, this property is designed for living purposes only. As per norms decided, any property that is designed as a living space for between 1-4 families is considered as residential real estate. There are various types of residential properties, of which the single family home (SFH) or 1 BHK is the most common. Other than these, there are duplexes, triplexes and 4-plexes that can be accessed as per family requirements.

•   Commercial Real Estate: Realtors find commercial real estate leasing more lucrative as this is where most of the money is.  Residential complexes having more than five units, office space, retail space all are covered under commercial real estate.
  

Benefits & Drawbacks of rentals from a renter’s perspective

Each rental comes with its own benefits due to which it seems attractive to certain tenants. Sharing apartments with other tenants helps in controlling costs and increases social relevance. Having a flat or house for rent in a society will ensure no hassles of security and maintenance. The biggest benefit is that rentals give the person living the privacy of a personal home, without the necessity of mortgaging or a entering into a long term commitment to maintain and inhabit the place. A private home is equity, which can be liquidated as per the needs and market conditions by the home owner. This is where the tenants loose out from homeowners. Rental homes do not provides any scope for building equity. Further, private owners may also borrow funds against their equity, which is not an option for the tenants. Rentals homes are at the mercy of the landlords for any maintenance or repair work.

Rental trends in India

Residential rental trends: Different renters usually have different requirement and constraints, of which the budget and location are the most important. The biggest rental markets of India are the IT hubs like Bangalore, where there is a large population of working migrants who are constantly looking out for better living options as per their financial prowess and the location of their offices. The rental market in this city is more complicated then other metropolitan cities. For instance, to have a furnished apartment for rent in Bangalore at a prime location you need an investment of at least Rs. 1 lakh. Despite such strict constraints, there is no dearth of takers. After all IT is one of the best paying industry of the world. Other Tier I and Tier II cities that have greater avenues for job seekers have provided the investors a constant source of good income through regular rentals. High-end rental apartments, bungalows, villas and condominiums are also gaining on the attention of renters. PG accommodation, which is considered best for working single executives and students are a little hard to find as the vacancy rate is low.

Commercial rental trends: In order to facilitate low risk and overhead costs on maintenance, investors tend to lease out a commercial space rather than buying it. India’s commercial rentals include office space, mall space, BPO spaces among others. Commercial space leasing agreement is generally for long term, a period of about three to nine years, which is enough to earn a good yield over the property.  Commercial space gives far better returns in forms of rentals than residential properties.

Saurabh Tyagi is a professional writer working for property website 99acres.com. This website provides services for all types of property buying, selling or renting in Indian real estate domain. Information on residential and commercial properties, rental homes, apartments for rent in Bangalore, Bangalore properties, are available.