Mumbai’s Luxury-Home Rents Tumble As Pandemic Makes Landlords Jittery
Rents for luxury homes in Mumbai, India’s costliest real estate market, tumbled during the pandemic as people either cut expenses or shifted to hometowns.
The cost of renting high-end properties—commanding at least Rs 2 lakh a month—has fallen 20-25% in India’s financial capital, according to real estate portal Zapkey.com. It collated data from property registration documents. BloombergQuint has verified some of the agreements.
The drop will be sharper for multi-year leave and license agreements signed in 2018-19 as they would invariably have an yearly increase built in.
An apartment in Beau Monde luxury towers in the business hub of Prabhadevi is available for about Rs 5.25 lakh a month now. That’s about a 25% drop from the pre-pandemic level of Rs 7 lakh.
Indians cut costs after job losses and salary cuts during the pandemic. Many moved out of Mumbai as companies allowed work from home. And a stamp duty cut by Maharashtra encouraged others to buy new homes. Landlords of premium properties, too, are giving in because they have to pay maintenance charges, in some cases as high as Rs 70,000, even if an apartment is vacant.
“Security deposit have come down from four-six months to two-three months of rent,” said Sandeep Reddy, co-founder Zapkey.com. “There is a pick-up in rents in 2021 compared to 2020 but it is still lower than 2018 and 2019.”
One reason Reddy cited was a pick-up in luxury sales aided by a cut in stamp duty till March. That prompted people to buy properties.
Ramprasad Padhi, a realtor, helped lease out three properties in Bandra-Kurla Complex and Bandra area at a 25% discount compared to the pre-Covid rents.
“In the luxury segment, especially for large 3/4 BHKs, we have seen a stagnation in rentals. Post-Covid vacancies have increased, and landlords have become jittery as they do not want to keep their apartments vacant for a longer period,” he told BloombergQuint.
The monthly maintenance of these apartments is quite high compared to mid or affordable flats and landlords are ready for lease out at a discount of up to 25%, Padhi said.
An apartment in areas like Dadar, Mahim, Prabhadevi and Lalbagh that commanded a rent of Rs 4 lakh a month prior to the pandemic now goes for Rs 2.5-3 lakh, according to Santosh Shinde, a real estate broker.
“This is because usually the big corporates used to rent these apartments for their senior-level foreign staff. Now they work online,” he said. “Many companies have also cut budget and moved staffers to smaller accommodations.”
It’s not just expats. Pankaj Kapoor, founder and managing director at property consultant Liases Foras, said many local senior-level executives have started operating out of their hometowns. And he pegged the decline in rents in the range of 20-30% over pre-Covid period.
Number of lease registrations, a measure of properties on rent, also declined for luxury apartments.
According to Shinde, the Mumbai market has far too many three and four-bedroom flats. “Earlier if there were 10 tenants among 100 for such homes, that number has come down to 1,” he said. “Now landlords are forced to negotiate whereas tenants have an upper hand.”
Kapoor agreed that luxury housing has a demand-supply mismatch. “Many investors who used to earlier give out properties on rent have now started selling, aiding sales.”
In addition, according to Ritesh Mehta, senior director and head-West India, residential services at JLL, lack of social infrastructure in central business districts like Bandra-Kurla Complex aided the decline in rents.
Covid scare also prompted landlords not to insist on yearly escalation of 5-6% and stick with existing tenants, he said.
"In 2020, we saw a decrease to the tune of 15-10% but this year we have seen an increase of 10-12%," Mehta said. “But I don’t see rentals going up in the next six-eight quarters. Old buildings will get more affected, while new ones with fresh supply will be able charge a premium.”