Experts believe that the gap between demand and supply in the mid-to-premium rental segment is widening further. In this regard, it has become necessary for developers and urban development bodies to strengthen the rental housing structure.
Sunil Sisodia, chairman of Neworld Developers, said that the impact of the rise in rental rates in metro cities is now spreading to tier 2 and tier 3 areas. Towns like Meerut, Sonipat and Bahadurgarh in NCR, while Tumkuru and Hosur around Bengaluru are fast emerging real estate hubs.
Housing rentals have seen a strong increase in almost all parts of the country in the first quarter of 2025. According to the latest data from digital property search platform Magicbricks, average rental rates in major metro cities of India saw an increase of up to 10% between January and March. Along with this, there was a tremendous increase in the demand for homes in tourist spots and hill stations.
How much did the rent increase in which city?
Bangalore saw a quarterly increase of 15.7% and Pune saw a quarterly increase of 12.5%. These cities were at the forefront in rental growth. Noida saw a 7.9% increase, Mumbai 10.2% and Delhi 7.3%. Kolkata also saw a 10.2% increase, while Chennai saw a 5.6% increase and Hyderabad saw a 4.8% increase.
Rents remained more or less stable in NCR micro-markets such as Greater Noida (3.2%) and Gurugram (4.1%). This indicates a balance of demand in these areas.
Vishal Raheja, Founder and Managing Director, InvestoXpert, says that India’s rental market is going through a structural change. He said, ‘The increase seen in Bengaluru and Pune is not just a post-Covid recovery. In fact, this demand shows that employment is increasing in innovative urban areas, while housing facilities are not increasing accordingly.’
Demand in premium and affordable segment
According to data from Magicbricks, 43% of rental demand in Mumbai, 37% in Gurugram and 26% in Bengaluru was concentrated in the premium budget segment of ₹ 50,000 to ₹ 1,00,000 per month. In contrast, Ahmedabad (49%), Pune (38%) and Navi Mumbai (32%) saw higher demand in the affordable range of ₹20,000 to ₹30,000 per month.
In Greater Noida, 86% of the rental demand was in the ₹10,000 to ₹20,000 per month segment. This shows that the demand for affordable housing is high in this area.
Improvement in return on rental investment
According to the report of Magicbricks Rent Index, gross rental yield has increased year-on-year in most cities (see table). Rental yield means – how much return the annual rent received from a property gives in comparison to its total price. It can also be called “return on property investment”.
For example, if you buy a flat for ₹50 lakh and earn ₹20,000 per month by renting it out, then the rental yield will be 4.8%. In India, rental yield usually ranges between 2% and 4%. A yield of 5% or above is considered quite good.
| City | Q1 2024 Rental Yield | Q1 2025 Rental Yield | shift (%) |
| Ahmedabad | 3.60% | 4.20% | 0.006 |
| Bangalore | 3.60% | 3.80% | 0.002 |
| Hyderabad | 3.40% | 3.70% | 0.003 |
| Mumbai | 3.80% | 3.90% | 0.001 |
There is a need to strike a balance between demand and supply
Experts believe that the gap between demand and supply in the mid-to-premium rental segment is widening further. In this regard, it has become necessary for developers and urban development bodies to strengthen the rental housing structure.
Sunil Sisodia, chairman of Neworld Developers, said that the impact of the rise in rental rates in metro cities is now spreading to tier 2 and tier 3 areas. Towns like Meerut, Sonipat and Bahadurgarh in NCR, while Tumkuru and Hosur around Bengaluru are fast emerging real estate hubs.