Delhi: Top 5 micro-markets for higher rental returns

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1 Delhi: Top 5 micro-markets for higher rental returns The year 2014 began with anticipation among the real estate fraternity concerning the sixteenth general elections in the country. With the expectation from the new government to infuse fresh life and positive sentiments into the market, buyers got into the wait-and-watch mode. This political uncertainty was clearly reflected in the capital values, with most of the localities in Delhi recording a decline. However, rental markets flourished with rental values appreciating in the city. With market sentiments across Delhi being still wobbly, buyers are holding themselves from taking a plunge in the market. This has led to more people opting for rental accommodation. Thus, buyers who invested in a property for healthy rental returns evolved as winners. Rental returns is the simplest way to increase your secondary income. As more and more people migrate to Delhi in pursuit of better job and education opportunities, demand for rental accommodation is inching a new high every year. If you are looking to earn healthy rental returns, then let CommonFloor assist you. Out of several localities, our data highlights the top five localities with maximum rental yield that can garner you healthy returns on investment. But before going further, let s understand the definition of rental yield? Well, as per the web, rental yield is usually taken to be the annual rental value of a property as a percentage of its capital value or acquisition price. Thus, higher the rental yield, higher are the rental returns. Rental yield is mathematically represented as, X=annual rent*100/capital values, where X is rental yield. For instance, the annual rent of a locality is Rs 1 lakh and the capital value of an apartment is Rs 20 lakh, then the rental yield will be 5 per cent. In the following report, we will be analysing the market and growth factors of top five localities. These include Mayur Vihar, Lakshmi Nagar, Uttam Nagar, Malviya Nagar and Dwarka. As per data with CommonFloor, these tracked localities have been recording a significant rise in rental values. Table 1: Rental yield of localities in Delhi Locality Rental Yield (in percentage) Mayur Vihar 3.3 Lakshmi Nagar 3.1 Uttam Nagar 2.9 Malviya Nagar 2.6 Dwarka 2.4 Don t forget: Rent Agreement * Though just a piece of paper, but it holds a great importance in safeguarding the interests of both the tenant and the landlord. Not only it prevents unrealistic hikes but also prevents from eviction without prior notice of one month. * And this legal document can be effectively used to claim tax benefits as well. * In Delhi, it is generally made for 11 months. However, renewable agreements can also be made for three to five years. * Thus, if you are a landlord don t forget to visit the property registrar s office, pay the stamp duty on the tenure of the lease and register the lease. * And if you are a tenant, before moving in make sure to sign and take a copy of the rent agreement. * But do not sign the rent agreement before reading every clause of it. Source: Real Estate Insights by CommonFloor.com

2 i.mayur Vihar With the rental yield of 3.3 per cent, Mayur Vihar topped the list of CommonFloor s top five localities for rental accommodation. Let s find out what has worked in favour of this locality. Since the inception of metro, Mayur Vihar has never looked back. In addition to well-developed social and physical infrastructure, the area also got enhanced connectivity, which in turn gave a facelift to the realty market of the area. It enjoys fast accessibility to Noida, and thus evolves as a potential rental option for the IT and media professionals working in Film City and other sectors of Noida. Affordability (as per Delhi standards), is another edge that has helped the area to climb the realty graph. As per CommonFloor s data, more than 40 per cent of the properties available fall under the affordable category. Currently, the capital values in Mayur Vihar are in the range of Rs 12,000-15,000 per sq. ft. Thus, a 1000 sq. ft. apartment is available for Rs crore. Due to persistent rental demand, the rental values have also been appreciating at a sturdy pace. The data reflects that the average rental rate for a standard 2BHK (1000sq. ft.) have climbed up from Rs 21,000 per month in Jan-Mar,12 to Rs 24,000 per month in the same quarter of 2014, indicating a clear rise of 14 per cent in the last two years. Currently, a 2BHK apartment sized sq.ft. is available at a monthly rent of Rs 15,000-30,000, while a 3BHK unit of 1, sq.ft may command somewhere between Rs 24,000-60,000 per month. Though 2 and 3 BHK units are popular, one may also find smaller dwelling of sq.ft. at a monthly rent of Rs 5,000-10,000. Thus, by investing Rs 1-3 crore, one can garner rental return of about Rs 15,000-60,000 per month, depending upon the total built-up area and amenities in the apartment. As per the property type, multi-storey apartments top the ladder closely followed by builder floor apartments. Though developers are offering apartments in varied configuration, buyers interest is largely skewed towards 2BHK units, closely followed by 3BHK units. Thus, if you are looking for investing in a property in Delhi, Mayur Vihar definitely has the potential to enter your home search list. ii. Lakshmi Nagar With the rental yield of 3.1 per cent, Lakshmi Nagar is at the second position on top five preferred localities for rental accommodation in Delhi. Lakshmi Nagar s proximity to Noida and ITO via Vikas Marg has made it a perfect abode for people working in these places. In addition, being a hub for CA classes and institutes, several students studying CA prefer to stay in Lakshmi Nagar. Thus, demand for rental accommodation here is recording an appreciating trend y-o-y.

3 As per the data, rental values have recorded a significant rise of 38 per cent in the last two years. An apartment that was available of Rs 13,000 per month in Jan-Mar 12 is now available for nowhere less than Rs 18,000 per month. So, what s available? Well, as per data with CommonFloor, affordable builder floor tops the list in property type followed by apartments. And 2 BHK units are most preferred configuration followed by 1BHK units. As per the rental values, a 1BHK unit sized sq.ft. is available in the price bracket of Rs 6,500-15,000 per month. And a 2BHK unit sized 5,00-1,000 sq.ft. can be availed at a monthly rent of Rs 12,000-20,000. However, for a 3BHK apartment of 1,000-1,700 sq.ft., one may have to shell up to Rs 15,000-32,000 per month. Though the area is a bit congested, but it does not disappoint on the livability front. Be it schools, medical shops, clinics or shopping malls, the area has got it all at just a stone s throw away. The area also falls on the blue line of Delhi metro and thus enjoys easy connectivity to every part of the city. Currently, the capital values of apartments fall in the range of Rs 6,600-7,500 per sq. ft. Thus, a 1000 sq. ft. apartment is available anywhere between Rs 65 lakh. And investing just about Rs lakh can fetch you monthly rentals of Rs 15,000-30,000. iii.uttam Nagar Investing in an apartment of Rs 43 lakh in Uttam Nagar can bring you a monthly rent of Rs 12,000-22,000. Shocked? Well, it s true. With rental yield of 2.9 per cent, Uttam Nagar has secured the third position on the list. Located in West Delhi, Uttam Nagar boasts of smooth accessibility via roadways and metro. Uttam Nagar Bus Stop and the metro station is at a distance of less than a kilometer from the residential area. Owing to robust social and physical infrastructure, the area also evolved as a good residential catchment. Affordability is another reason for the growing popularity of Uttam Nagar. When compared to Dwarka, which is just 5 km away from here, there is a large variation in the both the capital and rental values. As per data with CommonFloor, apartments of sq. ft. are available in the price bracket of Rs 6,000-12,000 per month. However, a similar size apartment in Dwarka would cost nowhere less than Rs 10,000-20,000 per month. Thus, the area also attracts the spill-over demand from Dwarka as people who cannot afford a home in Dwarka prefer Uttam Nagar. In line with demand, the area also has maximum supply of affordable units. Just to throw a number, about 70 per cent units in Uttam Nagar are priced at below Rs 40 lakh, closely followed by economic segment that represents the ticket size of Rs lakh. As per the BHK configuration, 2BHK units are the shows topper, followed by 1BHK units. Currently, 1BHK units of sq.ft. are available in the range of Rs 5,500-8,000 per month, while 450-1,000 sq.ft. 2BHK apartment would command somewhere about Rs 6,000-12,000 per month. Interestingly, as per the property type, there is more demand and supply of builder floor apartments as compared to multi- storey apartments. In Uttam Nagar, more than 80 per cent units are builder floors followed by multi-storey

4 apartments. This is mainly because Uttam Nagar is an old catchment. Further, as compared to the multi-storey apartments, the overall cost of builder floors and the maintenance charges are also low. iv.malviya Nagar Clocking rental yield of 2.6 per cent, Malviya Nagar secured fourth position on our list. Nestled between Saket and Hauz Khas, it is one of the prominent areas for the well-heeled buyers. This is also indicated by the data with CommonFloor, according to which maximum properties available fall within the luxury category and is followed by ultra-luxury. The area enjoys good connectivity to South and Central Delhi and Gurgaon. And with the advent of metro, even the far-flung areas have become easily accessible. Further, its proximity to upmarket Saket has also added value to it livability. Buoyed by this, the area also boasts of well-developed social and physical infrastructure. For your kids there are eminent schools such as Apeejay School and Amity International School and for tackling medical emergencies there are renowned hospitals such as Max Super Specialty Hospital and G M Modi Hospital. That s not all! To keep you busy over the weekend, South Delhi s prominent mall Select City Walk is just 1.5km away from Malviya Nagar. As per the BHK configuration, 2BHK units are most preferred, followed by 3BHK units. As per data with CommonFloor s, the monthly rent for a standard 2BHK sized sq.ft. is anywhere between Rs 12,000-35,000, while a 3BHK apartment of sq.ft. would command a monthly rent of Rs 20,000-55,000. Though 2 and 3BHK are the most preferred configuration, there are few 1BHK units also available in the price bracket of Rs 10,000-15,000 per month. Being an already developed locality, there is not much new stock coming up in the area. But, nonetheless, it is one of the actively transacted locality for rental accommodation. Currently, the capital values fall within the brackets of Rs 11,000-14,000 per sq. ft. Thus, a 1000 sq. ft. apartment would be available at Rs 1.2 crore, which can effectively fetch you monthly rentals of Rs 12,000-55,000, depending upon the size of your property. v.dwarka With well-fabricated social infrastructure, connectivity and several property options, Dwarka clocked the average rental yield of 2.4 per cent and secured fifth position in CommonFloor s list of top five localities for rental accommodation. Located in South-West Delhi, its proximity to Gurgaon and metro connectivity has helped the area score positive on the real estate graph. All major sectors of Dwarka have their own metro station. It also boasts of road connectivity through Delhi-Gurgaon Expressway, which connects Dwarka to Gurgaon. That s not all. Residents of Dwarka have another reason to cheer. Once the Northern

5 Peripheral Road gets operational, the traffic snarls at Delhi-Gurgaon Expressway will further reduce. Thus, for people working in MNCs in Gurgaon, Dwarka emerge as a perfect address for rental accommodation. So, does Dwarka have enough stock? Well, the answer is yes. There are several projects in the pipeline. Few active developers in the locality include Umang Reatech Pvt Ltd, Uppal Group, DPW Housing Organization, to name a few. These projects come decked with best-in-class amenities and offer varied BHK configuration. However, buyers interest in mostly inclined towards 3BHK units, closely followed by 2BHK units. Currently, a 2BHK unit of 600-1,600 sq.ft. would cost anywhere about Rs 8,000-20,000 per month, while for a 3BHK unit of 1,200-2,200 sq.ft., one may have to shell up to Rs 1, ,000 per month, depending upon the area and furnishing of the apartment. As per data with CommonFloor, multi-storey apartment is the most preferred property type, followed by builder floor with the market share of 60 per cent and 30 per cent respectively. Dwarka does not even disappoint on the liveability front. Be it eminent schools, healthcare centres, super markets, everything is within the radius of 3-5 km. At present, the capital value of apartments in Dwarka is in the range of Rs 8,700-9,000 per sq. ft. Thus, a standard 2BHK of 1000 sq. ft. would cost about Rs 87 lakh. And this can effectively fetch you a rent of Rs 15,000-60,000 per month. Furnished, unfurnished or semi-furnished? These top five localities offer an array of options from furnished, semi-furnished to unfurnished apartments. Furnished apartments come decked with amenities such as Wi-Fi connectivity, refrigerator, air conditioner, washing machine and all the bedding. However, amenities such as power back up, lift and reserved parking are common in all three options. Tips for owners for renting out a property fast *Spread the word among your relatives, neighbours and residential society about your requirements. *Nearby grocery stores, recharge shops, offices and other commercial centres may also be helpful in fining the tenant. *Last but certainly not the least, property portals are always a better option to showcase your property. Useful tips to help you locate good rental accommodation * Fix your budget and select few areas where you would want to stay in or which is closer to your workplace. * Check online property portals before actually pushing off to see the place. * Do research about the area s security, infrastructure, connectivity and public transportation.

6 CommonFloor.com, Bangalore maxheap Technologies Pvt Ltd #298,299 SGR Towers 7th Cross, Domlur, Bangalore Authors Nikunj Joshi Sr. Research Associate nikunj.joshi@commonfloor.com Bangalore Priyanka Kapoor Chief Editor priyanka.kapoor@commonfloor.com Bangalore Meha Singla Manager Research meha.s@commonfloor.com Bangalore Disclaimer: The document above is written by the Domain Research Team at Commonfloor.com, India s fastest growing real estate website known for its unbiased prognosis in Real Estate sector. The information provided in this report is based on CommonFloor data which is collected from various publicly known sources viz, websites, documents and maps. It should be considered as a guideline and not in absolute certainty. While care has been taken for groundwork, no responsibility is accepted for the accuracy of whole or any part. This information is confidential and the sole property of CommonFloor.com. It should not be reproduced in any form, in part or whole, without prior permission.