Residential Rental VS. Ownership

RESIDENTIAL RENTAL VS. OWNERSHIP – A MUMBAI PERSPECTIVE

Abhishek Kiran Gupta, Head – Research, Jones Lang LaSalle Meghraj

Rental – Mumbai is a city with population of 20 million plus, and a major proportion of this population is constituted by a migrant workforce. Many of these will eventually return to their respective home states and cities. Moreover, a large segment of this migrant population cannot afford the property rates. Mumbai is expanding linearly towards the North. Since all major business activities are towards the South part of the city, where residential prices are generally unaffordable. These segments do not choose to settle down and buy property in the city, and this creates a huge demand-base for rental properties, since rentals in these parts of Mumbai are still affordable from the mid-management level onwards.

Nevertheless, rental affordability is still an issue for end users in the more centralized areas of Mumbai. By the same coin, the income on rental returns for property owners ranges from a mere 2.5%-3.5% annually, capital appreciation notwithstanding.

Outright ownership – Among the huge population base, there is always a component of people who seek to eventually own their own property.

With more and more of the farther suburbs getting developed, there are always opportunities for this segment to enter the residential market at a relatively affordable level. They will benefit from the inevitable price rises as these areas develop in terms of connectivity and social / general infrastructure. Therefore, there is also a perennial demand for owned residential properties among those who can afford the capital outlay necessary to avail of the investment potential of Mumbai’s high appreciation rates. Amenable home loan interest rates serve to keep this demand at a healthy level.

The problems related to ownership property in Mumbai are lack of general affordability, a high incidence of legal issues pertaining to clear titles, construction delays and lack of compliance to original development plans by builders.

On viewing all aspects of the rental Vs. ownership property issue, it emerges that the two demand typologies cannot be fairly compared one against the other, since both represent very dynamic sides of the same coin. Mumbai’s residential market banks heavily on both.

MUMBAI RESIDENTIAL CAPITAL VALUES (INR/sq.ft)

Source – Homebay Residential, Jones Lang LaSalle Meghraj

Bandra (W) 18,000-28,000

Khar 18,000-25,000

Andheri 7,500-16,000

Santacruz 8,500-14,000

Vile Parle 8,000-12,000

Mira Road 2,800-3,800

Malad 5,500-9,000

Goregaon 6,000-11,500

Borivali 6,200-7,500

Kandivali 6,300-9,000