India Rental Housing Market Outlook to 2028

India Rental Housing Market Overview

• The India Rental Housing Market is valued at USD 20.29 billion based on a five-year historical analysis. The market is primarily driven by the rapid urbanization, increasing population migration to metropolitan areas, and the rise of nuclear families. In addition, government initiatives like the Pradhan Mantri Awas Yojana and the Model Tenancy Act have contributed to the formalization and growth of the rental housing sector, making it an attractive investment opportunity for developers and tenants alike.

• Major cities such as Mumbai, Delhi, and Bengaluru dominate the market due to their high population density, economic activity, and the influx of working professionals. These cities are economic hubs, attracting migrants in search of employment and educational opportunities, which creates a high demand for rental accommodations. Additionally, these cities offer a diverse range of rental options catering to various income groups, further cementing their dominance in the rental housing market.
• The Pradhan Mantri Awas Yojana (PMAY) Urban initiative has directly influenced the rental housing market by promoting affordable housing. As of 2023, the government has completed over 11.8 million homes under the PMAY Urban scheme, with nearly 9 million houses already constructed and delivered. This initiative also provides financial assistance to developers, encouraging the construction of rental properties targeting lower and middle-income groups, particularly in metro areas like Delhi and Mumbai.

India Rental Housing Market Segmentation

By Property Type: The India rental housing market is segmented by property type into apartments, independent houses, and shared accommodation. Recently, apartments have held a dominant market share under this segmentation. This is due to the growing trend of urban living, the convenience of amenities, and the availability of housing options for different income levels. Apartments are more accessible for working professionals and students who prefer proximity to city centers and office hubs. In addition, gated communities provide enhanced security and facilities, making them more desirable for long-term renters.

By Rental Category: The India rental housing market is segmented by rental category into affordable rentals, mid-range rentals, and luxury rentals. Affordable rentals dominate the market due to the high demand from the working-class population, especially in Tier 1 and Tier 2 cities. This segment caters to students, low-income families, and young professionals who seek budget-friendly rental options. Government initiatives that promote affordable housing and rental subsidies have significantly boosted this segment.

India Rental Housing Market Competitive Landscape

The market is dominated by a mix of local and national players who have carved a niche with their innovative solutions and tech integration. Key players such as Oyo Life, NestAway, and Stanza Living have focused on co-living spaces and technology-driven solutions to cater to the evolving needs of millennials and professionals. These companies have adopted digital platforms for property listing, rental agreements, and tenant management, making the process more efficient and transparent.

India Rental Housing Industry Analysis

Growth Drivers

• Urbanization and Migration: Indias rapid urbanization has led to a significant increase in demand for rental housing, particularly in major cities. In 2023, over 36.36% of the Indian population, or approximately 486 million people, resided in urban areas, with continuous migration from rural regions to cities like Mumbai, Delhi, and Bangalore. This migration is driven by employment opportunities in urban centers, and over 280 million people are globally migrated in cities like Mumbai. Such urban migration places immense pressure on the housing sector, particularly for affordable rentals.
• Changing Socio-Economic Dynamics: India's socio-economic landscape has seen shifts in income patterns and employment growth, influencing the rental housing market. The Indian middle class is projected to increase from 432 million in 2020-21 to over 1 billion by 2047, has spurred demand for better living conditions, including rental housing. Additionally, employment growth in sectors like IT, finance, and healthcare has created demand for housing closer to job hubs, further fueling the rental market, particularly in cities with high job creation like Bengaluru and Pune.
• Rise in Nuclear Families: The rise of nuclear families in India has transformed household structures, leading to a growing demand for smaller, individual rental units. This trend is particularly evident in urban areas where young professionals and newly formed nuclear families prefer compact living spaces. With this shift, cities such as Pune and Hyderabad have experienced a notable increase in demand for rental housing, as these family units seek more affordable and convenient housing options.

Market Challenges

• High Rental Costs in Urban Areas: Despite efforts by the government to promote affordable housing, rental costs in major urban areas remain prohibitively high, making it difficult for low and middle-income households to secure affordable rental options. Cities like Mumbai, Delhi, and Bengaluru are particularly affected, where rising living expenses and limited housing supply push rental prices to unsustainable levels. This issue is compounded by the broader cost of living challenges in Indias major cities, which continue to strain affordability for urban dwellers seeking rental accommodations.
• Regulatory Barriers: Complicated tenancy laws and delayed regulatory reforms present significant challenges in Indias rental housing market. The uneven implementation of the Real Estate Regulatory Authority (RERA) Act across states creates inconsistencies, leading to complications in legal disputes and compliance. States that have yet to fully adopt these reforms face heightened barriers, discouraging investments in the rental housing sector. The lack of a streamlined legal framework also leaves both landlords and tenants vulnerable, undermining confidence in the rental market and deterring long-term investments in this space.

India Rental Housing Market Future Outlook

The India rental housing market is expected to witness considerable growth in the coming years due to increased demand for rental accommodations, especially in urban areas. As the economy continues to grow and cities expand, the influx of migrants into metropolitan areas is likely to drive demand further. Moreover, the rise of co-living spaces and tech-enabled rental platforms is transforming the market into a more organized and transparent ecosystem.

Market Opportunities

• Growing Demand for Co-Living Spaces: As urban migration continues to rise and the number of young professionals increases, co-living spaces have become an attractive option in India. These shared living arrangements offer affordability and convenience, making them particularly appealing to millennials and Gen Z professionals. The flexible, community-oriented lifestyle provided by co-living spaces caters to the preferences of young urban dwellers, especially in cities where the cost of individual housing can be prohibitive.
• Expansion into Tier 2 & 3 Cities: Rental housing demand is no longer confined to Indias largest metropolitan hubs, as Tier 2 and Tier 3 cities are emerging as attractive rental markets. With improving infrastructure and growing economic opportunities, cities like Jaipur, Surat, and Coimbatore are witnessing an influx of professionals who are seeking affordable rental housing options. These smaller cities offer lower living costs compared to major urban centers, making them appealing for both tenants and property investors.