A new study reveals that ₹1.26 trillion is currently tied up in security deposits across India's top six cities, impacting tenant mobility and household finances. Mumbai and Bengaluru account for the largest shares of this capital, as rising rent burdens and a widening gap between home loan EMIs and rental costs keep many in long-term tenancies.
A massive ₹1.26 trillion is currently held by property owners as security deposits across India's six major metropolitan areas, according to a recent report by proptech firm NoBroker. This substantial amount of capital represents money that is unavailable to tenants for other financial uses, such as savings or investments, directly impacting their ability to transition into homeownership.
Impact of Security Deposits on Mobility
Mumbai and Bengaluru hold the highest concentrations of these locked-in funds, with ₹41,156 crore and ₹31,628 crore held as deposits, respectively. In Bengaluru, the financial barrier is particularly pronounced, as 75% of tenants reported that high security deposit requirements hindered their ability to move into their preferred homes. This trend is exacerbated by shifting demographics; younger tenants, specifically those in the Gen Z category aged 18-24, are relocating every six to twelve months, making these upfront costs a frequent and significant hurdle for them compared to older generations.
Rental Affordability and the EMI Gap
Financial strain in the rental market is becoming more widespread as rent consumes over 30% of monthly income for nearly half of all urban tenants. The pressure is most acute in Mumbai, where 40% of tenants spend more than 40% of their monthly earnings on rent alone. Simultaneously, the financial gap between renting and buying a home has expanded since 2021. The EMI-to-rent ratio—a metric measuring the cost of a home loan installment compared to monthly rent—has risen in key hubs. For instance, in Bengaluru, this ratio climbed from 2.07 to 2.38, while in Hyderabad it increased from 2.21 to 2.47. As this ratio widens, it makes purchasing a home less financially attractive than continuing to rent, effectively trapping many aspiring homeowners in the rental cycle.
Returns and Risks for Property Investors
For investors in the real estate sector, the market is favoring smaller housing units. The data indicates that 1BHKs and studio apartments provide higher rental yields compared to larger residential units. Bengaluru and Hyderabad currently offer the highest rental yields at 4.8% and 4.6%, respectively, while yields for 4BHK units have dropped below 3%.
However, the rental process itself carries risks for both parties. In Delhi-NCR, while 58% of tenants successfully recovered their security deposits in full, 30% faced deductions and 12% encountered significant disputes. These figures highlight a lack of standardized practices in deposit returns, which can create friction in the landlord-tenant relationship and potentially lead to legal or regulatory scrutiny in the future. Investors and tenants should track whether the industry adopts more transparent deposit management practices, which could eventually influence rental demand and regional real estate investment trends.