A Growing Market

In India, the affordable and low-cost housing sector is one of the few industries where the demand for goods outstrips supply by a significant margin. By 2022, the government estimates that roughly 30 million houses will be re­quired throughout urban and rural areas under the Pradhan Mantri Awas Yojana (PMAY). Numer­ous industry estimates, however, place these figures substantially higher, owing to the inc­reasing migration to urban regi­ons, population growth of roughly 1.3 per cent per year, nucl­e­arisation of families and rising income/aspirational levels of economically weaker sections and low-income groups.

On the demand side, the unprecedented repo rate drop led to house loan interest rates falling below 7 per cent. Additionally, a supportive mortgage structure, as well as actions such as stamp duty reduction and extension of the credit-linked subsidy plan, have boosted buyer sentiment and expedited housing demand.

Renters constitute an estimated 11.1 per cent of the total households in the country. This is higher than the 10.5 per cent registered in the 2001 census. Between 2001 and 2011, there was an increase of 7.1 million households living in rental housing.

The majority of rental housing is occupied by migrants, with a sizeable portion of the mi­grant population being underprivileged. This hi­ghlights the critical need for affordable rental ac­commodation. Additionally, urban areas ha­ve a higher percentage of population living in rental accommodation than rural areas. Accor­ding to the 2011 census, urban rental households accounted for 31 per cent of all households, compared to 5 per cent in rural areas. Furthermore, the proportion of rental housing increases with the size of the city.

Policies stimulating growth

The Model Tenancy Act, 2021, aims to bridge the trust deficit bet­ween tenants and landlords by clearly delineating their obliga­ti­ons. The act aims to enforce rental contracts and protect the rights of both landlords as well as tenants. It proposes a fast-track quasi-judicial mechani­sm for adjudication of disputes by establishing Rent Court and Rent Tribunal.

For tenants, rental or lease increases must be consistent with the terms of their agreeme­nt and security deposits must be limited to two months’ rent in the case of residential pro­perty and must be reimbursed by the landlord upon regaining control of the premises.

Under the same act, landlords receive double the rent for the first two months and  in the event of delinquency, a landlord may petition the court for the eviction of the tenant. Sub­le­tting by the tenant, in whole or in part, or making structural changes to the property are not permitted. With this act in effect, transparency will be enhanced, accountability will be established, and equality will be achieved. Unused and va­ca­nt houses can be repurposed, which will al­most certainly enhance rental yields, enticing investors.

Additionally, mass migration during the Covid-19 crisis brought to light the precarious living conditions and lack of adequate housing facilities for urban migrant labourers. Ack­now­led­ging this, the government established the Affordable Rental Housing Complexes programme, with the goal of providing affordable rental housing to urban migrants and the poor. The scheme is a subscheme of the on­go­ing PMAY-Urban programme. The goal is to provide a dignified living environment for ur­ban mig­rants/poor people by providing requir­ed civic facilities, as well as to foster an eco­system suitable to public/private investment in rental housing.

Emerging practices

In India, the co-living concept is gaining traction, which has resulted in the emergence of several innovative models in the private renting sector. To meet this increased rental demand, numerous buildings in desirable locations such as city centres and near job hubs such as information technology parks are being rebuilt, repositioned and rebranded as co-living hubs.

A number of factors are contributing to this, including rapid urbanisation (pre-pandemic), growing millennial workforce, fast evolving consumer trends, plug-and-play living, transition from owning to sharing, hassle-free standard practices for security deposits, notice pe­ri­ods and monthly rentals.

Consistent rise in the Indian student population, along with government backing for inc­reasing enrolment in higher education, has fu­nc­tioned as a powerful motivator for faster ex­pan­sion and increased the need for student hou­sing in India. At present, there are 34 million students enrolled in higher education in the country, with over 11 million of them being migrant students. These are the fundamental components of student housing. Only about one-third of these students live on campus, with the re­maining staying in paying guest housing or private hostels. Based on the Census 2011, an estimated 11 million houses are lying vacant across 159 cities. These, if rented out, can significantly bring down the housing shortage in the country. Of the estimated 11 million vacant houses, about 2 million are located in 12 Indian cities, with 500,000 in Mumbai alone.

A multifaceted approach is required for the success of the affordable rental housing sche­me in India. Affordable rental housing must be made a part of corporate social res­ponsibility. Real estate infrastructure trusts should be formulated for residential assets to get multi-channelled funding. Rental housing should be made available for various sections of society, so that eventually need-based, market-based and social rental housing segments can be evolved.

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