Chennai’s rental market has seen a significant surge in recent years, and the once-affordable city is now grappling with rising rental costs that weigh on its middle and lower income residents. The effect is seen in central areas as well as the suburbs. This means that it’s not just housing in areas like Mylapore, Adyar or Anna Nagar that are costly; Velachery, Sholinganallur and suburbs like Pallavaram have grown heavier on the pocket, too. According to a piece in the Times of India, rents have sharply increased by 20-30 per cent over the last two years; for instance, a 1BHK flat in Velachery today commands a monthly rental of Rs. 22,000, a sum that has doubled in a short period of time. Multiple factors have contributed to this upward trend. For one, land prices have consistently risen, making new housing developments more expensive to build and maintain. For another, pandemic-induced construction delays have led to a shortage of new residential units in the market, tightening supply even as demand rebounds.
Infrastructure development – such as the expansion of the metro rail and road projects – has also made certain areas more attractive to live in, driving up both demand and rental prices. Further, the Greater Chennai Corporation’s annual 6 per cent hike in property tax has spurred many landlords to pass on the costs to their tenants.
While rental prices have soared, salaries have not – not at the same pace, in any case. According to the State Economic Survey, the city’s per capita income per 2022-23 records is Rs. 5.19 lakhs – a sum that translates to roughly Rs. 44,000 per month. Monthly rents for 1BHK flats can range anywhere from Rs. 18,000 to Rs. 30,000, and are on the higher side in desirable or well-connected areas. It is arguable that a significant portion of the population is spending a high percentage of their income on rent, likely greater than the traditionally recommended 30 per cent allocation. The growing gap between income growth and rental inflation raises serious concerns about long-term affordability, particularly for those who do not have the flexibility to relocate or negotiate better rental agreements.
The brunt is being felt most acutely by the middle and lower income populations. Many move to the city’s outskirts, where rents are marginally lower; but the savings often come at the expense of longer commute times and reduced access to essential services like healthcare and quality education.
The problem is further exacerbated by the nationwide decline in the supply of affordable and mid-income housing. According to the National Housing Bank housing price index, last year Chennai saw a 9.6 per cent increase in property prices – the second highest after Bengaluru’s 10.6 per cent. An article in Outlook Money points out that homes priced at Rs. 1 crore and below – budgets that meet middle-class needs – have declined in supply.
In Chennai, the housing supply has declined by 12 per cent over the last two years. This spells fewer options for those in need of budget-friendly homes; they must either contend with increasingly competitive rental markets or opt for shared accommodation, an alternative that is not quite possible for families with children or the elderly.
Rental increases may be natural in the wake of development and expansion, but left unchecked it can disproportionately burden the middle and lower incomes classes who serve as the backbone of the city’s economy. It is incumbent on the administration to take proactive measures to tackle the problem. Steps must be taken towards the development of budget-friendly housing units, including in areas that are well-connected and in high-demand.
It will also help to improve public transport connectivity in the outskirts – by making the peripheral more liveable and better connected, the city can reduce the pressure on demand for housing in core areas. Targeted interventions, better enforcement of rental regulations, and increased investment in infrastructure and affordable housing, can help stabilise the rental market and ensure that Chennai remains a home for residents of all income levels.