Rental property in India is seeing an extraordinary demand across all segments from individuals, corporate houses and retailers. The demand and supply equilibrium has changed to a large extent and has varying degrees of responsiveness to rentals.

Let’s understand the scenario of rental returns with an example. A person acquires an asset or invests in an office space and then leases out to some MNC corporate executive or an MNC at a healthy rate. Here, the owner is assured of fixed monthly returns while enjoying the physical possession of a tangible asset in hands. This is what most investors are doing these days to cash in on high rental returns.

Commercial Rentals involving leasing out mall space etc gives returns higher than that achieved with office space and much higher than the rental return from residential space. The lease agreement including such deals can generally extend from three to nine years and specify 15 per cent escalation in property rental every three years.

Renting Office space, Shops, Call centers and Showrooms have gained ground in commercial rentals. Showroom rentals have a healthy effect on retailers who do not invest much. Leasing to a good brand ensures steady returns. Departmental stores also are considered a safe and growth-oriented performer in the property rental business in India.

Likewise, people are earning by giving their residential property on rents, an excellent way to make money off the real estate investment. This also comes with an advantage to earn while still holding ownership over the property. However, be cautious enough to avoid bad tenants. Therefore, protect yourself legally with a Residential Lease.

It is a form containing terms and conditions that a landlord ants his/her tenants to follow. Any clauses regarding damages and repairs or subletting should be included in the residential lease.

Another new trend in rental property market in India is Vacation Rentals. They are gaining in popularity among holiday enthusiasts and tourists as they help them to escape hefty costs of prohibitive packaged holidays.

Vacation rentals are a great way to planprecisely the vacation with own terms of theaccommodation which best suits to the specific dates a traveler wants. Buyers and investors have the option of renting their homes as a vacation home to tourists in agreement with the property management division of the developers.

Nowadays, the Indian property market also offers good cost effective solutions for business travelers. The concept of renting a serviced apartment is such a new money saving alternative to expensive hotels. Serviced apartments offer the comforts of private residential living on lower rents.

Those like business and leisure travelers who visit a city on a short period usually opt for such kinds of apartments on rent. Serviced apartments are gaining in popularity in metros like Chennai and Bangalore.

Outlined below is the current trend of housing and commercial rental segment in major Indian cities.

Mumbai

There are hundreds of new buildings and complexes ready for possession all across Mumbai, Thane and Navi Mumbai. People look for rented apartments at different budgets in different areas. The trend now is that each property is able to create its own niche client who finds the area agreeable on a host of outstanding features.

The takers for Hiranandani Gardens, Powai show a partiality for good quality life, clean surroundings and infrastructure like schools, hospitals, banks and new generation stores. There is an ongoing demand from companies present within the complex.

Buyers interested in buying into new swank buildings can well lease apartments in the same buildings, paying less then their EMI’s in selected properties.

The potential lease markets are Andheri West, Andheri East, Powai, Juhu – Bandra belt, Malad both east and west, Goregaon east. They have good connectivity with the Central Business Districts like Andheri East, Santacruz East, and Bandra Kurla Complex. Rents in Mumbai are going through roof and befuddle everyone.

The Central Business District of Mumbai and Nariman Point in the city are considered to be the best expensive commercial locations in the world.

While the system of transaction allowed one to pay higher deposits and lower rents, there were companies settling for lower deposit and higher rent. With the introduction of FBT (Fringe Benefit Tax) companies prefer to take apartments on Individual Lease basis.

Delhi and National Capital Region (NCR)

Most multinationals have entered the north Indian market and set up office in Delhi. The increase in the staff strength led them to shift to Gurgaon where modern office complexes are available at far lower rates.

The result of the imbalance in demand and supply has led to a rise in the capital and rental values of properties in Delhi and NCR.

The capital value has been seen to double in six months’ time. The property rentals in Saket and Jasola have risen above Rs 110 per sq ft though the buildings are still under construction. Rentals in Delhi have nearly doubled in the last couple of years.

Prime commercial areas like Connaught Place presents the case of high rates and low vacancy in rented property. After the advent of the Metro Rail, vacancy levels have declined to less than 5% here. There has been no new supply of Grade A office space in the Central Business District (CBD) in the last few years. More office space is required to be added.

With Gurgaon being the hot favourite of corporates office space is also under construction. The rise has been to the tune of 40%. The leading player specializing in office complexes on Golf Course Road include Realtech, DLF, Vipul, Vatika, and Prakash Infrastructure.

Several net worth individuals and NRIs have invested heavily both in Gurgaon and Noida market seeing opportunity that high demand for leased office space provides.

A number of software companies have promoted campus style developments in Noida Greater Noida is also coming up as a major IT-ITES hub riding on advantages that include good connectivity via the expressway, strong infrastructure, and affordable land prices.

Rentals for legal commercial properties in New Delhi and its suburbs have seen a further increase in the wake of the drive by the Delhi Municipal Corporation to seal illegal constructions.

Chennai

Chennai presents the advantages of lower operational expenses combined with lower cost of accommodation to employees. This has been succeeded in attracting many domestic and multinational companies to Chennai.

The growing technology sector has given a boost to property rentals in Chennai. New supply of luxury apartments in the city is slower than the hectic construction of mid-range residential developments for local middle income and upper middle income residents.

World class standard residential accommodation in Chennai is hard to come by. Incidentally, it has a relatively strong demand for quality serviced residences and has one of the best infrastructure facilities in the country. The newer luxury constructions built by prominent developers in the city are equipped with swimming pools, back up power and health club and other amenities.

Prices of office rentals in Chennai have nearly doubled in some parts of the city. On an average prices have risen between 30% and 80% in the previous years. Because of over building by the developers, commercial rentals in Chennai are expected to drop by around 15% this year.

Kolkata

Kolkata has become the preferred choice for accommodation among the middle-rung executives in call centres and BPO firms due to its proximity to the IT hub. Property rentals in Kolkata have been shot up significantly by 45-50%. Posh bungalows and furnished duplex in Kolkata localities like Queen's Park and Ballygunge are extremely fetching.

At Elgin Road, four-bedroom flats are going for Rs. 55,000 per month. With NRIs buying apartments in these complexes, plenty of apartments are up for rent.

Hyderabad

Hyderabad has seen real-estate prices go sky high and have gone up by 200-300% in less than a year. With recent government order that specifies strict norms for new apartments, construction activity has taken a back seat.

The malpractices by realtors too discourage people from venturing into the property market and circumspect about buying property in Hyderabad. Areas like Banjara Hills are exorbitant and rents are usually fixed on a square feet basis.

Kochi

A project in Kochi will comprise residential apartments, commercial complex-cum-shopping mall and a service apartment. Foreign real estate companies are also inking joint ventures and working out flexible ownership agreements like renewing the management contract. Setting up serviced apartments is an excellent proposition as it offers high profit margins

To retain its position as a global sourcing destination for IT and ITeS, the real estate which offers cost advantage factor should be within limits and rentals need to be stable.

The current scenario of property rentals in Kochi is encouraging. The new models being developed are, in fact, are sure to elicit an overwhelming response in the real estate rental market in India. It is open to possibilities and can accommodate all categories of profiles.