India’s appetite for rental housing is on the crest, with rampant urbanization nationwide, spilling of migrant population into cities and the popularity of ambitious housing missions like “Housing for All” formulated by the Modi government. The huge demand for rental housing in India and the fact that it has been underserved till date due to the absence of proper business planning and support of a viable rental ecosystem, makes a compelling case for immediate development of rental housing in cities across India. The announcement of Affordable Rental Housing Complexes (AHRC) to solve the rising housing crisis is the right step in this direction.
India’s cities have seen a radical spurt in migrants in the last decade. The 2016-17 Economic Survey saw 9 million migrants a year between 2011-16, (up from 5.5-6 million a year between 2001-2011) take the journey to different cities across India in search of better employment opportunities, lifestyle and be a part of the cosmopolitan life.
While this perennial pour of urban migrants into cities has been a cause of concern, given the dismal urban planning infrastructure of cities, the eye-popping figure of 11 million vacant and 0.8 million unsold homes across India, is reason enough why India needs a serious thought on the rental housing problem.
An underlying litany of issues
High land costs in cities, trust deficit among landlords and lack of suitable rental operational & management mechanisms, have created a huge crater between demand and supply of rental homes. Though major policy initiatives including RERA, PMAY, Model Tenancy Law, have laid the foundation for development of rental housing, the lack of viability and sustainability of rental models have pushed this idea away from proper development and distribution.
If we take a look at the rental market, we will observe that it has been historically loaded with pro-tenant Rent Control Acts (RCA) that makes it unviable for landlords to give out their properties on rent and maintain them at the same time. Secondly, the abysmally low rental yields in India of 2-4%, the lowest in the world, offer little incentive in undertaking the risk of renting apartments for the long haul.
The much-needed tonic
If India wants to be on par with the success of rental housing models in developed countries like Germany, UK, it has to modify the rental housing market in urban areas where prices go beyond the affordable range of most city dwellers.
The recently announced Affordable Rental Housing Complexes (AHRC), Operational Guidelines is the right tonic that India so acutely needed to make rental homes affordable for urban inhabitants. The policy guidelines formulated are an earnest effort to arrest the shortfall in housing units across the country while at the same time address the core issues including affordability and upliftment of life of weaker sections of the society.
Besides this, the AHRC guidelines have a shorter implementation time frame which will hasten rental housing availability for citizens of India to less than two years. Investors looking for long-term stable returns can also make merry at the fact that AHRCs can match risk-return profiles of offshore wealth and other sovereign bonds, allowing them a good foothold in the billion-dollar residential market of the country.
Rental & Property Management providers to rule the roost
While the launch of AHRC guidelines has provided the fire, the rental housing programme so acutely needed, it has also opened up a bright spot for rental and property management companies to capture this unorganized rental business by bringing the huge available stock of vacant housing into the rental market.
India has a $20billion residential rental market; out of which $13.5billion is urban, $0.8billion is rural and the rest $5.7billion consists of NRI property brokerage. Property management start-ups are upbeat on leveraging the lucrative rental market by bringing holistic and cost-effective attributes that open the gates to a hassle-free and safe renting experience.
Major cities like Mumbai, Chennai, Bangalore and Hyderabad are witnessing a rental boom owing to recent government regulations, tax reduction and the emergence of rental & property management companies. Cities like Delhi, Gurgaon and Noida are also fast catching up as rental trends like shared living and co-living are on the rise.
A boom in rental space in the offing
Armed to the teeth with technology and digital marketing portals, rental and property management companies are handholding both landlords and tenants from the point of searching for the right rental properties to closing tenancy contracts.
From ensuring that properties are rented out in the right time, to inspection of properties on quarterly basis and conducting maintenance and repair works on time; and from educating owners on rental market prices to doing background verification of prospective tenants, property managers have won the sentiments of landlords and tenants and at the same time are tackling problems of housing shortage and rental property management hassles.
The rental and property management business in India is still in a nascent stage. However, the unbridled transparency and rental assurance guarantees promised by property management companies are catching the attention of builders who are keen on converting their unsold inventories to sales. Azuro, a rental and property management platform by Square Yards has won several mandates in the past one year, which proves the trust builders are reposing on property management platforms.
As cities expand and get more and more urbanized in the near future, the need for rental and property management companies will see a meteoric rise as rental homeowners and NRI commercial property investors caught in the strenuous web of day-to-day lifestyle would look for smooth management of their assets without any external interference.
