Impact on house rent in cities post-COVID-19

The rental market in several cities has observed a sharp decline in demand. And the reason is COVID! The period witnessed such an unexpected collapse in the real estate sector. The pre-COVID demand for houses in rent metro cities like Mumbai, New Delhi, and Bangalore was improving. However, due to a sudden halt, the need for rental properties kept sliding.

The COVID season has brought unrest for owners of all types of properties, be it paying guest house, commercial properties, standalone apartments or apartments of the top real estate builders. 

Landlords have faced huge losses during the pandemic year. Landlords who planned to repay housing loans from the rental income of invested properties were hit hard. They faced the loss of rental income and incurred fixed annual maintenance expenses and income tax on notional rent of the property. Many of the house owners negotiated with the tenants to retain them, but many failed due to high expectations and burden of fixed expenses.

Reasons such as job losses, an abrupt shift to work from home culture, and unpredictability of regularisation have made people shift to their hometowns or different areas to reduce expenditures.

The pandemic has altered things for both tenants and landlords. During the COVID period, there has been a substantial increase in the demand for properties situated in the city’s outskirts. These were the areas which were never approached before because of the inconvenience in the city reach.

But what is the logic behind that? 

Employees returning to the city may choose to live in cost-effective homes, with the organisations adopting work from home or partial work from home culture. 

Yes! the trend of residential stay may shift beyond the city limits. More spacious and affordable houses outside the city’s peripherals will attract tenants who work from home. Wow! Can imagine a perfect family home. This can also attract investment opportunities in those areas. Hence, buyers and tenants can both prefer to choose the peripheral regions. The pandemic has altered things for both tenants and landlords.

The job regularisation would be gradual and not sudden. Various organisations are yet to decide about the future working culture to be adopted. However, the prices for rented properties within the city limits are still a question mark. Hence, there may be negotiations between the tenant and landlord for the house property’s rent unless there is a complete normalisation. There will be a rise in competition because of many vacant houses available for rent in the market. 

Once life is back to normal, the rented property prices may bounce back to the pre-COVID situation. 

However, after some time when the rented properties’ demand is stable, the prices will get readjusted either upwards or downwards depending upon the work culture to be adopted in the future. Also, there would be preferences by the landlords between those regularly working from the office and those partially or completely working from home.  

Hence, the picture is still not clear. But the landlords are waiting for the usual trend and tenants to come back soon. 

For any clarifications/feedback on the topic, please contact the writer at namita.shah@cleartax.in