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

E Rohan, a resident of Malad West, has been scouting for a 1BHK in Evershine Nagar where his family could reside for the next three years, as his residence in an old building in the same suburb is likely to go for redevelopment soon.

- Ateeq Shaikh [e-mail]

MUMBAI: Finding a suitable house is becoming a challenge given the sharp disparity between the amount the developer has offered him for a stop-gap accommodation and actual real estate rentals.

"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 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 in 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, CEO 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, MD, Liases Foras, a real estate research and rating company, said the phenomenon stems from two prime factors. "The after-effects of the pandemic and the surge of redevelopment projects," said Kapoor.