Chennai residential yield higher than Delhi, Mumbai, says report

C Shivakumar @ Chennai:

Chennai's residential yield, a component of net return a landlord can get by investing in property, is much higher than cities like Delhi and Mumbai, according to a report by IDFC Institute, an independent, economic development-focused think tank to investigate the political, economic and spatial dimensions of India's ongoing transition from a low-income, state-led country to a prosperous market-based economy.

According to the Institute’s India Infrastructure Report 2018: Making Housing Affordable, which uses data available on Numbeo, a crowd sourced data platform of the costs of living in cities around the world, states that Chennai’s residential yield is 2.38 which is higher than Delhi (2.28) and Mumbai (2.18).

According to the report, Indian cities have residential rental yields between 2 to 4% which is much lower when compared to  cities across the world. Interestingly, cities like Hyderabad (4.37), Ahmedabad (4.33), Bengaluru (3.47pc), Kolkata (3.33pc) and Pune (2.83pc) have better rental yields than Chennai.

The report states that higher the house price, the lower is the rental yield for that city.

“Low rental yields contribute to overall low returns on property investments, especially relative to alternative market investments with similar risk profiles,” the report states.

Citing pro-tenant legislations that have prevented market based increases in rent, the report states that in 2016, 66.2 per cent of all civil litigation in India was related to land and property matters

“Landlords choose to hold onto their real estate assets primarily for capital appreciation rather than steady rental incomes.  At the same time, landlords also face substantial hurdles in evicting tenants and securing property rights for their house. The slow pace with which tenancy disputes are redressed creates strong disincentives for owners of vacant properties to rent them out,” it adds.

Interestingly,  the State Urban Housing and Habitat Policy (SUHHP) being drafted by German agency GIZ along with the state housing board, states that Tamil Nadu is facing a shortage of 1.5 million homes in the urban areas and there is an urgent need to regulate and streamline private urban rental housing to enable access to urban poor.

 It is learnt that through the new policy, the policy and government subsidies towards housing will undergo a significant change with focus being more on streamlining private urban rental housing.

The state will be looking at housing supply intervention in the state as an integrated market rather than sub-markets for different income groups as failure in any sub-market will have ramifications across the city.

Residential yields of Indian cities:

1.  Hyderabad (4.37)

2.  Ahmedabad (4.33)

3.  Bengaluru (3.47pc)

4.  Kolkata (3.33pc)

5.  Pune (2.83pc)

6.  Chennai (2.38)

7.  Delhi (2.28)

8.  Mumbai (2.18).