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NEAR OR FAR

The work-from-home culture could change how Indians buy homes

By Anuj Puri

Chairman, ANAROCK Property Consultants

The Covid-19 era presents a radically transformed real estate market, with preferences changing to accommodate new realities. With the lockdown proving that work-from-home is a viable option, many future homebuyers will now shift to peripheral areas of a city for bigger homes and a better lifestyle—at more affordable prices.

The previous “gold standard” of Indian housing—the walk-to-work or short drive to work, by definition only in and around central corporate workplace hubs—may shed some of its popularity for the middle class. Central locations would retain their allure for high net worth individuals and C-suite buyers who can afford larger spaces there.

The work-from-home concept may become the next fulcrum for home-buying decisions, where the walk-to-work option had held the longest sway.

With the rise of the work from home culture, many may now prefer to live in more spacious and cost-effective homes in less central areas. While sufficient supply currently exists in most of the peripheries, this new demand will eventually also dictate fresh supply. Bigger homes, affordable prices, and more generous open spaces in the peripheral areas will draw demand from tenants and buyers alike.

Central vs peripheral: The price difference

Apart from changing real estate consumer preferences in a strengthening work from home environment, affordability is an enduring concern especially in the backdrop of a faltering economy and job loss, coupled with uncertainty. The peripheral areas are more affordable both from a rental and purchase perspective. ANAROCK has analysed the cost difference for India’s three largest economic dynamos—Mumbai Metropolitan Region (MMR), National Capital Region (NCR) and Bengaluru.

Mumbai Metropolitan Region 

The average price for a standard 1,000 square feet property in areas within the city limits is approximately Rs1.85 crore ($243,918), against Rs55.35 lakh ($72,980) in the peripheral areas—a 70% cost difference. Micro-markets within city limits considered include Andheri, Vile Parle, Goregaon, Malad, Kandivali, Chembur, Wadala, Ghatkopar, Vikhroli, Powai, Mulund, etc. Peripheral areas include Kalyan, Bhiwandi, Dombivli, Mira Road, Vasai, Virar, Thane beyond Kasarvadavali, and Owale Panvel, Ulwe, Taloja, etc.

Average monthly rent for a standard 2-bedroom house in areas within city limits is approximately Rs45,800, against Rs12,500 in the peripheries.

National Capital Region

The average price for a standard 1,000 sq ft property in areas within city limits is approximately Rs88.20 lakh, against Rs37.50 lakh in the peripheral areas—a 57% cost difference. Micro-markets within city limits considered include Vaishali, Vasundhara, Indirapuram, Noida, Golf Course Extension Road, Sushant Lok, Dwarka Expressway, New Gurgaon, Dwarka, etc. Peripheral areas include Ghaziabad-Rajnagar Extension, Faridabad, Greater Noida, Sohna, Bhiwadi, and Bahadurgarh, among others.

Average monthly rent for a standard 2-bedroom home in areas within city limits is approximately Rs22,000, against Rs9,500 in the peripheries.

Bengaluru

In Bengaluru, the average price for a standard 1,000 sq ft property in areas within city limits is approximately Rs69.80 lakh, against Rs43.50 lakh in the peripheral areas—a 38% cost difference. Micro-markets within city limits considered include Sarjapur Road, HSR Layout, Kudlu Gate, Singasandra, Hebbal, Jakkur, Yeswanthpur, Jalahalli, Whitefield, Marathahalli, KR Puram, J P Nagar, BTM, Jayanagar, Banashankari, and Kodigehalli, among others. Peripheral areas include Attibele, Electronic City, Yelahanka, Doddaballapura Road, Varthur, Budigere Cross, Kanakapura Road, Tumkur Road, Mysore Road, Kogilu Cross and International Airport Road (Bellary Road).

Average monthly rental for a standard 2-bedroom home in areas within city limits is approximately Rs18,500, against Rs9,500 in the peripheries.

Rent versus buy: What data says

The rent versus buy debate involves multiple highly subjective factors. However, since millennials are increasingly interested in homeownership post-Covid-19, it is worth calculating what works better for most in the current circumstances.

ANAROCK data reveals that the five-year rental outgo for tenants living within city limits is equivalent to 27-52% of the total property cost in the peripheries of the top three cities (MMR, NCR, and Bengaluru). Therefore, there is a strong rationale for homeownership in the peripheries. We have considered the total annual rental outgo for five years plus a 3.5% annual rental appreciation.

Also, the current home loan interest rates are at an all-time low, averaging around 7.15-7.8%, with the possibility of more reduction as the RBI recently cut repo rates even further.

  • MMR: The average monthly rental outgo in city-limit areas is Rs45,800. For five years, this equals nearly Rs28.66 lakh (including standard rental escalation for this period). This is almost 52% of the total average cost of a property in MMR’s peripheral areas.
  • NCR: The average monthly rental outgo in city-limit areas is Rs22,000. For five years, this equals nearly Rs13.77 lakh (including standard rental escalation for this period). This is almost 37% of the total average cost of a property in NCR’s peripheral areas.
  • Bengaluru: The average monthly rental outgo in city-limit areas Rs18,500. For five years, this equals nearly Rs11.57 lakh (including standard rental escalation for this period). This is almost 27% of the total average cost of a property in the peripheral areas.

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