Bengaluru PG Sector In Crisis As Closures Rise Amid Regulations, Falling Demand

Bengaluru is currently witnessing a sharp uptick in the closure of paying guest (PG) accommodations, particularly in its prominent tech hubs.

A combination of stringent new municipal regulations and dwindling demand from laid-off tech professionals has left the once-thriving PG sector reeling.

Photo Credit: PTI

"In areas like Mahadevapura and Marathahalli, PGs are losing up to 25% revenue. Two PGs are shutting down every day," said investment analyst Hardik Joshi, who began investigating the issue after observing a surge in social media discussions.

"Turns out, this is a quiet crisis affecting thousands," he noted in a LinkedIn post that has since garnered major attention.

The situation stems from new rules enforced by the Bruhat Bengaluru Mahanagara Palike (BBMP) under Section 305 of the BBMP Act, 2020.

These regulations mandate PG operators to acquire trade licences, comply with hygiene and fire safety norms, and provide at least 70 square feet of space per occupant. Furthermore, PGs located on roads less than 40 feet wide are now prohibited from operating.

In April alone, authorities sealed over 100 PG kitchens in the Mahadevapura zone for breaches related to town planning and licensing. Civic officials have clarified that these measures form part of a wider enforcement initiative.

Additional requirements-such as installing CCTV cameras in all shared spaces, ensuring a minimum daily water supply of 135 litres per resident, and securing food safety licences if meals are provided-have significantly increased operational costs for PG owners already struggling with narrow profit margins.

Sukhi Seo, secretary of the Bengaluru PG Owners' Association, told the Hindustan Times that out of more than 12,000 PGs in the city, only around 2,500 are legally registered.

"Over 10,000 are still operating illegally without proper approvals," she said. "This is causing concern for investors, as BBMP can conduct raids on non-compliant properties at any time."

PGs were once seen as high-return investments, offering yields of 6-8%. That trend, however, is reversing. "Electricity is charged at commercial rates, and there are additional commercial taxes," Seo explained.

"The Bangalore Water Supply and Sewerage Board has increased water charges, which are adding to the expenses. Many PG owners are now running at a loss because they can't pass on the additional costs to tenants."

This evolving scenario is particularly ironic for a city built on the dreams of migrating tech workers and students. While often criticised as "chicken coops," PGs were vital stepping stones for many arriving in Bengaluru.

With this model now collapsing, concerns are growing that the city may be alienating the very demographic that fuels its economic engine.