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The cost of living crisis in major Indian cities, notably Bengaluru and Mumbai, stems from a stark misalignment between stagnant salary increases and soaring rental prices. Limited housing supply, especially near tech hubs, worsens the situation as demand surges with the return to work from office. Rising rental costs outpacing income growth have pushed residents to allocate more of their earnings towards rent, impacting disposable income and prompting consideration of homeownership. This trend reflects a broader challenge of housing affordability, straining urban living conditions and potentially dampening home-buying sentiment.
A widening gap between salary hikes and residential rental costs in major Indian cities is fueling a cost of living crisis for many residents. According to data from Aon Group, a UK-based HR consulting firm, the average salary increase in India decreased to 9.7% in 2023 from 10.6% in 2022. Meanwhile, rental prices in metropolitan areas such as Bengaluru have surged by nearly 30% since 2022, outpacing salary growth. Advertisement
Saurabh Garg, Co-founder & Chief Business Officer of NoBroker, highlights that while overall rent inflation in Bengaluru stands at 24%, it exceeds 35% near tech parks and offices. This surge is attributed to high demand and limited supply as companies resume work from office, attracting more migrants. Experts note that most new housing in Bengaluru has already been occupied, leading to a supply shortage. As more employees return to the office, rental demand has spiked in recent months.
Rental prices in specific areas of Bengaluru now rival those in Mumbai's prime locations like Worli, Bandra, Juhu, and Versova, averaging between INR 90,000 to 2 lakh per month. In Mumbai, Malabar Hill commands the highest rent at INR 3.5 lakh. A Mumbai tenant reported a sudden INR 18,000 increase in their 2BHK rent, now at INR 90,000 monthly. Several tenants noted the near impossibility of finding a decent 1 BHK for less than INR 30,000 monthly in Mumbai. Similar rental demand pressures persist in other metro cities like Delhi-NCR, where areas such as BK Dutt Colony, Sewa Nagar, and Jor Bagh offer limited one-bedroom options, renting for INR 25,000-30,000 per month for furnished flats, according to local brokers.
Magicbricks, an online property consultant, reported a 17.4% increase in rents in Indian metro cities from October to December 2023. Gurugram led the surge with a 31.3% growth, followed by Bengaluru with 23.1%, and Delhi with a 10.5% increase in annual rental growth.
A 2023 survey by YouGov found that about 40% of urban Indians experienced a decrease in disposable income due to high inflation, though the decline was lower compared to other global markets. Nearly 41% of Indians are concerned about the impact of inflation on their spending over the next year, with a significant portion of their income allocated to essentials like food and rent. In Bengaluru, a recent survey by NoBroker revealed that 70% of millennials and Gen Z find rentals unaffordable. The narrowing gap between monthly rents and home loan EMIs is prompting many tenants to consider buying instead of renting. Rental costs are becoming a significant expense in cities like Bengaluru and Mumbai, rendering city living increasingly unaffordable.
A March-April 2024 survey by Magicbricks ranked Bengaluru the lowest in housing sentiment among the top seven cities. The study, including over 4500 homebuyers, positioned Kolkata at 160, Gurugram at 157, and Noida at 154. Homebuyers in the medical and pharma (163) and government sectors (158) exhibited strong housing sentiment, likely due to job stability. Vivek Rathi, Head of Research at Knight Frank India, anticipates a potential decrease in home-buying sentiment if real estate prices continue to rise in 2024 despite stagnant income growth.
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