Although homeowners are richer than renters, an interesting shift has occurred in the Indian rental market. A new wave of high-income renters has entered the market. The number of households who earn six figures and choose to rent has grown 48% over the past decade, and now represents the fastest-growing segment of the housing population.
Even with high incomes, homeownership is still out of reach for many Indians. The steep cost of purchasing a home in addition to other financial burdens has made owning a home a difficult proposition for many. Those who cannot overcome these hurdles are opting to rent. Now more than ever, working-class and wealthy Indians are demanding rental options.
This change is prevalent in both rural and urban India, but is growing fastest in mid-size cities powered by strong economies. Three Indian cities top the list for high-income renters: New Delhi, Mumbai, and Bangalore. In these pricey markets, wealthy people choose to rent instead of own.
We analyzed four key factors that are encouraging this shift in the rental market.
- Multi-family construction has quadrupled since 2010, at the high-end especially. It now exceeds pre-recession levels. Luxury apartment complexes with beautiful amenities are available for the wealthy at decent prices.
- Millions of single-family homes are now more often being converted into rentals after being vacated. Taking advantage of the resulting low prices from the economy, many investors bought up many of these homes and converted them into rental properties. These types of homes are the fastest growing supply segment in the housing market.
- Many high-earners increasingly value the flexibility afforded by renting and want to live close to high-paying jobs in cities. This is especially true in popular cities like Delhi NCR and Mumbai, where owning a home near the city is immensely expensive.
- Even with high-incomes, many are locked out of homeownership by the growing cost of affording a home while managing loan debts and stricter lending standards. Income has grown at a slower rate than home prices.