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Tuesday, February 28, 2012

Residential rentals continue to rise

There is bad news for those who live on rent assuming they save some money and tide over high interest rates cycles by not availing a home loan. A number of localities across cities have witnessed significant rental rate appreciation in 2011 due to rise in demand for rental accommodation, according to latest data available with property portal 99acres.com. And that is not all as the trend seems to be sustainable. “Residential rentals may keep on moving upwards. Initial trends coming in indicate that rentals may rise this year too,” says Vineet Singh, business head, 99acres.com.

However, commercial rentals have fallen in the same time frame. Rentals across premium office spaces have declined in some prominent markets, according to a report by property consultant Cushman and Wakefield.
Why moving up

According to industry estimates, developers are going slow on execution of real estate projects. As a result, there is a drop in supply of residential apartments in most prime markets. Therefore, new emerging residential areas are still not able to meet the huge housing demand. “The rental rates have moved up significantly during 2011 because of two key reasons. First, the expected supply of residential properties announced in early 2009 has not been able to reach the market yet due to delay in construction. According to estimates, around 500,000 units in key markets that were to come in the market by end of 2011 are delayed by another year. Second, there has been an increase in lateral hiring by corporates. With job scenario getting better for most in the country, people have more to spend,” says Singh.

Also as new emerging areas lack the necessary infrastructure, they cannot be used for living.

What it means for you

While renting may be cheaper than buying, owning a property at any stage makes sense. “You should not time your investment with the market while buying a property. If you can afford to buy and bear your monthly expenses, rent along with the equated monthly instalments, you should enter the market any time,” says Ganesh Vasudevan, vice-president and business head, IndiaProperty.com, a Chennai-based property portal.

“While residential rental yield in India is around 2-3%, gains from capital value appreciation is much more than the yield on that property. This gain usually beats the rate of inflation. So it makes sense to buy,” added Vasudevan.

Also, with indications of interest rates softening and no correction in property prices, it is time you think of investing in a property.

Source: http://www.livemint.com/2012/02/26203312/Residential-rentals-continue-t.html

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