How a redevelopment spree has pushed house rents by up to 65% | Mumbai news

“After hard negotiation with the developer, he agreed to hike the rent from ₹20,000 per month to ₹22,000,” said Rohan. Even with the revised amount, he is getting flats that are at around 100 sq ft smaller than the one he occupied earlier. “A 430 sq ft apartment will set me back by another ₹5,000, which I have to shell out from my pocket.”

E Rohan’s case is illustrative of a sharp spike rents in the Mumbai Metropolitan Region, thanks to a rash of redevelopment projects. While builders offer an annual increase of between 5-10% in the rentals, it still falls short for consumers.

It’s business, not charity

“Nobody is doing charity. A developer also pays corpus, extra area for free after the building is redone, offers new amenities, compensatory rental etc,” said Abhishek Kiran Gupta, chief executive officer and co-founder of CRE Matrix and IndexTap.com, a prop-tech platform,

The overall spike in Mumbai’s housing rental market has been approximately 14% between 2020 and 2024.

A casual calculation will reveal that if a developer matches the existing market rental by paying an additional ₹5,000, his annual outgo will be ₹60,000 per person. If it is multiplied by the number of flats being redeveloped, the additional burden on a builder will run into lakhs.

Reason for the rise

Pankaj Kapoor, managing director, Liases Foras, a real estate research and rating company, said the phenomenon stems from two prime factors. “The after-effects of the Covid-19 pandemic and the surge of redevelopment projects,” said Kapoor.

There are over 2,000 buildings in different stages of redevelopment in Mumbai, a majority in the western suburbs. More are waiting to be added to the list soon. Industry players that HT spoke to shared that the redevelopment upswing will sustain for the next five years, and through this time, the upward trend of rentals will continue, as a majority of displaced families or original residents and commercial establishments will look for premises on lease.

“Through the lockdown months, rentals had crashed by as much as 50% to 60%. When it was lifted, salaried population in tier-2 and -3 cities continued to work from home. When companies started calling their employees back to work, the demands started escalating,” said Kapoor, adding that in comparison to the prevailing rents in 2020, the existing market conditions “can be put down to a correction to earlier levels”.

Meanwhile, redevelopment has become lucrative, said Gupta, as after the pandemic the government revised development control rules and relaxed FSI. Hence, in a prime suburb of Santacruz West, around 50 buildings are being reconstructed. Similar situation prevails in Borivali, Mulund, Khar, Bandra, Chembur, Kurla, etc. In Borivali’s IC Colony, over 50% of the three- to four-storeyed buildings are either being redeveloped the owners are in discussions with builders.

“The rise in rentals have been sharp in Bandra West (Pali Naka, Carter Road, Mount Mary, Rizvi Complex, Hill Road) and Khar in the last couple of years – never before have so many buildings gone for redevelopment at a time,” said Arshad Khan, a Bandra-based property consultant.

A studio apartment, in Bandra West that was rented out for ₹25,000 to ₹30,000 a couple of years ago is now being pitched at ₹50,000. Likewise, a 1BHK’s rental in the same suburb has shot up from ₹50,000 to around ₹75,000. “With shortage of accommodations, owners are getting any price they quote,” said Khan.

This has led to a rise in the rental yield (return on investment when a property is leased – or the per centage of an apartment’s or commercial unit’s value). “Traditionally, a residential property’s yield was in the range of 1.5-2% — today it has more than doubled,” said Gupta, adding, real estate in Mumbai today is out of bounds for the salaried class.

This is illustrated by data available on 99acres.com: Vidyavihar, in the eastern suburbs, has the rental yield of 9%, followed by Jogeshwari and Govandi at 7%. Dadar East, Borivali and Kurla command an average of 6%. These returns are deemed in the affordable and mid-segment housing societies.

In the premium segment – Worli, Tardeo, Cumbala Hill, Khar and Bandra East – the rental yield is 5%, less than the mid-segment and affordable residences.

Anarock Group’s 2021-2024 data showed Chembur and Mulund’s average monthly rentals grew by 42% and 29% respectively. The company’s chairman Anuj Puri, put down the growth story to an “opportunity for investors who are looking for long-term capital appreciation, while rental-focussed investors must look to invest in localities where rents are rising steadily”.

To rent or buy?

Sarayu Menon has been residing at Chembur for the last four years, as it is close to her place of work. Back in 2021, she rented a 1BHK for ₹21,000 per month. After the rent was revised in 2024 to ₹24,000, she had no option but to look for an apartment in an old building which has no amenities, including a lift. “Rentals in new, redeveloped buildings are steep. The rent of a 2BHK closer to the station is at ₹75,000 a month as compared to what I am playing in an old building. We are living in constant fear that the building will go for redevelopment at any time,” said Menon.

Delays in redevelopment projects also contribute to the demand and rise in rents. Kurla East resident Sheldon Pinto vacated his one-room-kitchen flat in an old building in 2016, when the developer initiated a monthly rent of ₹19,000. “As the builder did not factor in the mandatory 5% hike the annual rent, I had to shell out the extra from my pocket. I rented a 2BHK for ₹25,000, which set me back by ₹6,000 every month,” he said. Three years on, he made the wise decision to buy a 2BHK in Kamothe, Navi Mumbai, for which he pays an EMI of ₹20,000 per month. “At least this is a house that I can call my own,” said Pinto.