One might be tempted to quit their job and become a PG or hostel owner in a metropolitan city, as India’s rent crisis has turned this sector into a goldmine, with skyrocketing rents and growing demand making it a lucrative source of easy money.
A recent tweet highlighting the exploitative practices of PG owners in Bangalore has sparked widespread discussion, revealing the harsh realities faced by tenants across major Indian cities.
India’s rent crises have got so bad that PG (Paying Guest) and hostels are demanding security deposits, often exceeding 1 lakh rupees and the rents have increased by 15% in past 6 months. Its not just Bengaluru that’s suffering from exorbitant rents and security deposist. It’s the case in pretty much all of the Indian metropolitan cities. To cite a few examples :
- Bengaluru: Average monthly rent for a 2-BHK surged to ₹38,000, marking a 22% increase since 20221.
- Mumbai: Average monthly rent for a 2-BHK rose to ₹45,000 in Q1 2024, reflecting a 30% rise from pre-pandemic levels1.
- Noida: Rents increased by 25%, with monthly averages reaching ₹32,0001.
- Hyderabad: Housing rents climbed by 25-30% in 2024 compared to 2019
Security Deposit and Rent Hikes
- Bengaluru has seen rents nearly double since early 2023, coupled with inflated security deposit demands1.
- In Mumbai’s Versova area, rent for a 3-BHK jumped from ₹64,000 to ₹84,000 per month—a
- 31% increase1.
(Infographics Courtesy – India Today)
Other than colossal surges in prices, the owners follow practices giving conditions like pay rent or leave. These practices are not only unethical but also illegal as The rent-control and tenancy laws stipulate that rents for non-commercial buildings can’t be hiked by more than 10 per cent a year (or on lease expiry). However, flat owners circumvent the laws by drawing up new agreements with unusually high rent hikes.
WHATS CAUSING THIS HIKE?
The sharp rise in rental prices across metro and non-metro cities in India is being driven by a combination of factors. According to Priyatham Kumar, Founder of Homes247, the surge in housing demand is primarily fueled by population growth and an increasing influx of people moving to cities for work and education.
This growing demand, coupled with steady borrowing rates, has led to higher housing prices, which in turn is pushing up rents. The real estate market’s boom, even in non-metro cities like Noida and Bengaluru, has further exacerbated this issue, as the demand for rental housing far outweighs supply.
Sarveshaa SB, Chairman of BHADRA Group, noted that the return of IT workers to office areas and a general migration of young people into cities for employment have intensified the shortage of rental properties. Additionally, the reduction in new rental units, with some reports indicating a 16.9% drop year-on-year, is contributing to this crisis. Rapid urbanization and improvements in infrastructure, such as the development of the Jewar airport and enhanced connectivity in Noida, have made these cities more attractive to renters, leading to further price increases.
Additionally, Jash Panchamia of Suraksha Group highlighted that the growing demand for larger living spaces, fueled by rising disposable incomes and changing lifestyles, is also contributing to higher rents. However, as rents rise, many tenants, particularly those in lower income brackets, are struggling to keep up with the escalating costs. The growing number of luxury residential projects, which come with high maintenance costs, has added to this burden. As Manju Yagnik from Nahar Group explained, property developers and landlords are shifting the increased costs of building materials, labor, and property taxes onto tenants through higher rents, compounding the financial strain.
Higher disposable income and need for a better space for living amongst the Gen Z can be blamed too. Although, many with higher incomes are willing to pay more rent for better housing and facilities, a larger number of people are struggling to cope with the ongoing rent crisis.
WHAT IS THE IMPACT ON DIFFERENT DEMOGRAPHICS?
The main victim of this fiasco are the young professional or the student relocating to a big city for better career prospects. The exorbitant rents and deposits are compelling most to compromise on the quality of living or, worse still, risk eviction from expensive PG facilities. In urban areas such as Bengaluru and Mumbai, young workers and students are left with little option but to shell out outrageous rents for dingy and poorly kept properties, as demand is far higher than supply. This is not only creating a financial stress but also a mental stress on the youngsters.
The situation has raised a critical question: Where is the government in all of this?
The government did introduce Model Tenancy Act (MTA) that Aims to streamline rental agreements by setting clear, standardized terms and conditions for both homeowners and tenants. But the act has its own drawbacks – Certain provisions of the MTA could be vague or open to interpretation, allowing landlords to impose conditions that aren’t explicitly prohibited. For example, there might be loopholes related to rent increases, security deposits, and eviction clauses, which can be manipulated to favor landlords over tenants. There are several other problems like Tenant’s Limited Awareness, Landlord Leverage in a High-Demand Market, Implementation Delays and Lack of Uniformity.
While MTA has the potential to regulate the rental market and protect the tenant’s right, its implementation and execution still hold a lot of scope for improvement?
All this fiasco raises a very i important question – are the young middle class people not supposed to dream? Are their ambitions useless? Are good things meant for the rich, well off people only?
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