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.