by Anil Pharande, Chairman - Pharande Spaces & President - CREDAI Pune-Metro
The international standard for fixing rentals for properties is according to zones. While this is to some extent true in Indian cities, zoning alone does not dictate rental values - or even property prices. There are other factors involved.
In India, each area has a fixed guidance value or circle rate set by the state government, and property cannot be registered or sold below these values. While the circle rate determines the basic selling price of the area, properties are usually sold and rented based on market value.
Market Value & How It Is Fixed
The market value of a location is the rate at which the actual property transactions happen. The market value of a property depends on various factors including location, property category (affordable, mid-range, luxury, ultra-luxury, integrated township), developer's brand, the facilities and amenities in the project, and the property's age.
Property prices and rental values will vary from property to property, even within the same location - and sometimes even the same project.
Location & Facilities
A property's rental value depends on the location attributes (proximity to key places like shopping, schools, workplace hubs, and hospitals), size, age, property category, and whether it is furnished or unfurnished. In these times of Covid-19, project-level sports and health facilities like gymnasiums, golf courses, tennis courts, and jogging tracks also influence rental value.
For example - because they are close to important workplace centres like the Hinjawadi IT hub and the MIDC manufacturing belt, Punawale, Moshi and Ravet command good rental values in West Pune. The ability to reach one's office conveniently is one of the main factors that influence rental values in India.
Integrated township properties command a higher rental value than homes in standalone projects because they have many facilities, good infrastructure, and higher security 'integrated' into the project. These factors directly influence the quality of life of homeowners and tenants.
Even though they are usually on the outskirts, integrated townships have excellent social and physical infrastructure, easy access to important places in the main city, good public transport facilities, and the best project-level facilities. Some of the best townships also have office buildings and offer the very popular walk-to-work option to people who work there.
Literally cities-in-cities, townships offer residents all the benefits of a high-value location since they don't have to travel far for anything. Also, they have top-grade multi-level security features. Therefore, they command higher rental rates, whereas regular housing projects in outskirt areas invariably suffer from bad roads, water shortages, electricity outages, and other deficits. Thus, their rental rates are lower.
To Sum Up
Unlike the capital values of properties for sale, rental values are not determined by the state authorities but by several other factors and market forces. Therefore, tenants must carefully research their options and understand the area's inherent value and project before renting a home there.
Likewise, investors looking for lucrative properties for earning steady rental income must have a good grasp of how much they can expect to earn.