Understanding Bengaluru's Rental Yield

Bengaluru, the capital of Karnataka, has become a bustling metropolis with a significant influence on the real estate market. One of the striking trends in the city is the rental yield, which stands at 4.5%, the highest in India, marking it as more expensive than Mumbai (3.8%). This 4.5% yield makes Bengaluru costlier than even Delhi, which has a yield of 2.8%. When compared to Hyderabad, a city often considered as a better opportunity, Bengaluru is almost 40% more expensive. These figures should give potential tenants and investors a clear perspective on the economics of renting or buying in Bengaluru.

Comparison with Major Cities

Comparing Bengaluru's rental yield with its competitors provides a clearer picture of the city's real estate market. While Mumbai has a yield of 3.8%, Bengaluru's 4.5% makes it the most expensive city for rentals. Similarly, Delhi stands at 2.8%, and Hyderabad, often seen as a more affordable option, has a lower yield at 2.8%. However, Bengaluru's property market is far from being cheap; it is significantly higher than the major cities.

Investment and Property Investment in Bengaluru

Investing in Bengaluru's property market can be a lucrative option, but it's important to understand the costs involved. For instance, a 22-year rent yield of 4.5% would mean a tenant could cover a 100-flat unit cost in just over 15 years. Considering the rental increases, this timeline may shorten further. This figure underscores the long-term investment potential of the city, especially for those who are already in a committed living situation.

However, for white-collar workers or families, the situation is more complex. With a take-home salary of 1.6 lakh per month, salaries need to be sufficient to cover both living expenses and rent. The cost of living without rent in Bengaluru is around 1.23 lakh per month. Adding in rent, this leaves a shortfall. For a 2BHK apartment, a rent of 35,000 per month is common, which amounts to a monthly expenditure of 2,000 after rent. The takeaway is that for those making 25LPA (Lakhs Per Annum), their money is effectively 'sucked' by the city of Bengaluru. This scenario makes it clear that for families and white-collar workers, Bengaluru is not a cost-effective place to live.

Future Prospective and Retirement Consideration

Rent yields aside, Bengaluru is not a plausible option for those looking to save or invest for the long term. The city's cost structure, particularly when it comes to retirement, is not beneficial. Assuming a 25LPA salary, the return on investment in Bengaluru can be devastating. The cost to save for retirement will be approximately 1.7 times higher than in one's hometown, making the city unattractive for long-term staying residents.

Furthermore, with the rapid technological and economic growth, the property value in Bengaluru might not just remain stagnant but could slip in the future, which could result in a loss of substantial wealth. On a larger scale, if the job market does not improve and the current ratio of 0.2 (30,000 jobs for 15 lakh techies) persists, individuals working in tech-related fields might find it challenging to find employment. This situation suggests that while tech workers might see value in other tier-2 cities due to better job prospects, Bengaluru's cost of living and job market make it less attractive.

Current Safety Situation in Bengaluru

Bengaluru is today experiencing a return to a state of peace. While curfews have been imposed in 16 areas of North and West Bangalore, the city appears to be under control. The commercial areas are mostly closed, but it is expected that things will normalize within the next 24 hours. This stability is a relief to the city, but it also highlights the ongoing need for enhanced security measures.

Bangalore residents are urged to stay informed and prepared. The restoration of peace and the reopening of shops will be a positive development, but residents should remain vigilant. Safety measures, which may have been relaxed previously, should now be tightened again to ensure a secure environment for all.

For anyone considering a move to or from Bengaluru, both the economic and safety situation are important factors to consider. The city's rental yields, cost of living, and job market, along with current safety measures, paint a nuanced picture of the place. While Bengaluru offers significant economic opportunities, it is crucial to assess the long-term benefits and costs in the context of both personal and professional considerations.

Source: LinkedIn - Deepesh