India's Rental Housing Market Adjusts to Widening Gap Between Property Values and Rentals

Mumbai: India's rental housing market entered a phase of recalibration in the December quarter, marked by a widening gap between capital value growth and rental appreciation, according to the latest Magicbricks Rental Index.

While property prices continued to climb at a fast clip, rising 2.2% last quarter, pan-India rental demand fell by 2.4% sequentially even as rentals rose by 2.2%. This reflects a market adjusting to yield compression rather than a broad-based slowdown, with pricing resilience sustained in preferred micro-markets.

Chennai emerged as the top market in terms of gross rental yields at 4.16%, followed by Ahmedabad at 3.98%, and Hyderabad at 3.93%. Bengaluru and Kolkata reported similar yield levels at 3.88% each. The relatively narrow spread in yields across major cities underscores a maturing rental market, where returns are increasingly shaped by capital appreciation rather than rental upside alone, according to the report.

Tenant preference remained firmly tilted towards mid-sized homes, with units ranging between 500 and 1,500 sq ft accounting for nearly 78% of rental demand during the quarter. Semi-furnished homes continued to dominate both demand and supply, accounting for 54% of tenant demand and 55% of available listings, effectively emerging as the standard rental format across major cities.

While demand remains concentrated in lower and mid-rent categories, a major share of listings continues to be positioned in higher ticket sizes, limiting choice for value-seeking tenants and intensifying competition for appropriately priced homes.

Overall, the report highlighted that India's rental housing market is entering a more balanced and discerning phase, shaped by micro-market performance, configuration suitability, and the evolving relationship between capital values and rental income.