MUMBAI: One would imagine Mumbai’s rental pressure to have eased by now, given the redevelopment spree that started soon after the pandemic, with new towers sprouting and a burst of fresh stock. Instead, the opposite has happened. As one housing society after another signs redevelopment agreements, actual rental supply has shrunk, and prices have shot up rather than cooled.In Khar West, a builder and a housing society signed a development agreement two years ago that promised members alternative accommodation at Rs 140 per square foot per month. Due to construction delays, the society vacated a month ago but now faces market rents of Rs 250 per sq ft per month, compelling members to pay the shortfall out of pocket.Market sources said developers were reluctant to revise rents since development agreements were executed two to three years ago under different market conditions. In Bandra’s Carter Road, Pali Hill and Union Park areas, three to four societies have entered redevelopment and received notices to vacate within four weeks. This generated urgent demand for nearly 150 units of two and three-bedroom flats, but supply remained extremely limited. As a result, rentals rose by 10 to 20%.“Once that happens, it will be very challenging for members to find flats at the rental rates agreed upon in their development agreements. Many licensees may end up paying a substantial amount from their own pocket to bridge the gap,” said property consultant Ashok Narang. “This situation is becoming increasingly common across Mumbai, and the trend is expected to continue for at least the next 3–4 years, as the supply of rental flats remains constrained during redevelopment phases,” he said.In Bandra Reclamation, Jayant Sanghvi, whose building had just gone in for redevelopment, shifted to a rental flat in Goregaon. He said the monthly rent of Rs 57,000 offered by his developer forced him to move, as nothing was available at that price in Bandra.“The recent discourse around Mumbai’s rental market has been closely linked to the surge in redevelopment activity. A key driver of this conversation is the significantly higher rental compensation now being demanded by societies going under redevelopment from the developers. Builders have largely accommodated these expectations, buoyed by strong confidence in the free-sale component of forthcoming projects, which they anticipate will offset these additional outlays,” said Gulam Zia, senior executive director – research, advisory, infrastructure and valuation, Knight Frank India.He added, “This trend has effectively reset rental benchmarks across several micro-markets, with landlords finding willing tenants prepared to pay rents that exceed those paid by existing occupants. While this has influenced prevailing perceptions, a comprehensive assessment of the market indicates that only about 8% of total rental transactions and agreements currently stem from properties in various stages of redevelopment.“According to a Knight Frank study, 44,275 apartments in Greater Mumbai were let between 2020 and 2025, of which 32,353 are in the western suburbs, where maximum redevelopment is taking place.Five years ago, a 3 BHK in Bandra–Khar–Santacruz could be had for Rs 1.5 lakh. Today, that number feels almost nostalgic. “A 3 BHK today is nothing less than Rs 2 lakh. If any client comes to us for Rs 1.80 lakh or 1.90 lakh, we can’t even attend to them,” said real estate broker Lalit Lakhani, whose agency Lan Marc has been brokering rentals and sales in the area since 2002.A 1 BHK in a decent new building now rents for Rs 1.10 lakh, the sort of flat that once went for Rs 45–50 thousand. In an older three decade-old building, the rent for a 1 BHK is Rs 75,000–95,000, which may not even have a lift. Lakhani attributed the rise squarely to the redevelopment wave that had reshaped almost every lane in the neighbourhood.With no vacant plots left, “developers don’t have a choice but to take old buildings under redevelopment. Old building members have become so choosy and picky; they compare two to three developers, see who’s offering the best rent, corpus, and extra area. And they’re getting superb rentals from the developer,” he said. The trend had created “a kind of hyper-inflated ecosystem. Because of that, flat owners have become too greedy. Ultimately at the end of the day what matters to him is the higher rent”.When asked who was paying these rents, he replied, “Seventy per cent are people from the same vicinity whose buildings are being demolished. Then corporates who get transferred. They’ve also become smart. They say give us Bandra East instead of West. But honestly, prices are almost the same. 3 BHKs in the East go for Rs 2 lakh.”Despite the jump, product offerings remained unchanged. “Nothing like that,” he said when asked if landlords now provided wardrobes or modular kitchens and other amenities. “Pattern is the same as it was five years back. Some don’t even want to paint the house after taking such a huge rent. They should happily do it but no.” Lease terms continued to be standard: two- to three-year agreements with one- to two-year lock-ins. Redevelopment clauses had become routine. “It’s a fixed format now,” he said.“No matter the lock-in, if the building goes for redevelopment, we will give you three-four months’ notice. Every agreement has that.” High rents also drove up sale prices. “Earlier, it used to be a Rs 80,000 to Rs 1 lakh rent ratio. Now the rent is Rs 1.40–1.50 lakh, so while selling, they think accordingly, and the sale price is going to Rs 4–5 crore.”
