The road ahead

Ex­tra FSI clubbed with tax in­cen­tives for de­vel­op­ers can give a shot in the arm to rental hous­ing projects in the coun­try and pro­vide ten­ants with more leas­ing op­tions

HT Estates - - NEWS - Van­dana Ram­nani

Out of the 1.8 crore new houses built be­tween 2007-2012, owners of over 1.1 crore units in In­dia pre­fer not to let out the prop­er­ties fear­ing that that evict­ing ten­ants will be next to im­pos­si­ble. This is pri­mar­ily be­cause In­dia does not have a rental hous­ing pol­icy with in­cen­tives or ben­e­fits for pri­vate de­vel­op­ers who could be en­cour­aged to con­struct only rental hous­ing. Strin­gent le­gal safe­guards, too, are not in place for peo­ple wish­ing to rent out their prop­er­ties.

The gov­ern­ment has fi­nally wo­ken up to the need to ad­dress the is­sue of or­gan­ised rental hous­ing for those who can­not af­ford to buy their own homes, es­pe­cially those mi­grat­ing from small towns to cities to work. A gov­ern­men­tap­pointed task force has rec­om­mended a sep­a­rate law for reg­u­lat­ing res­i­den­tial rental hous­ing in In­dia and tax ben­e­fits to en­cour­age pri­vate de­vel­op­ers to set up rental hous­ing projects.

The 19-mem­ber panel headed by Jaithirth Rao, chair­man, Value and Bud­get Hous­ing Cor­po­ra­tion Pri­vate Limited was set up by the hous­ing and Ur­ban Poverty Al­le­vi­a­tion min­istry last year to an­a­lyse the causes of non-avail­abil­ity of suf­fi­cient rental hous­ing and rec­om­mend pol­icy in­ter­ven­tions for cre­ation of such prop­er­ties.

In its re­port to be sub­mit­ted in July, the panel has rec­om­mended set­ting up of a res­i­den­tial rental hous­ing act specif­i­cally for the rental hous­ing sec­tor on the lines of the Model Res­i­den­tial Ten­ancy Act 2011. A sep­a­rate law has also been pro­posed for res­i­den­tial and com­mer­cial rental prop­er­ties.

Other rec­om­men­da­tions in­clude bas­ing rent prices on con­trac­tual agree­ment be­tween land­lord and ten­ant in­stead of stan­dard prices at present be­ing reg­u­lated by a rent con­troller or court. It’s said ar­bi­trary in­crease in rent prices should be dis­cour­aged and a spe­cial fast track rental hous­ing tri­bunal be set up for speedy res­o­lu­tion of all rent re­lated dis­putes. Ac­cord­ing “in­fra­struc­ture” sta­tus for large rental hous­ing projects and tax ben­e­fits for rental man­age­ment com­pa­nies to help them op­er­ate smoothly have also been mooted.

The panel wants that af­ford­able rental hous­ing should in­clude af­ford­able hos­tels and dor­mi­to­ries and flats of less than 60 sq m and that the to­tal charges be kept to the min­i­mum per month per bed.

For large projects ear­marked for rental hous­ing, in­fra­struc­ture sta­tus should be con­ferred, thereby al­low­ing for a tax hol­i­day, lower fi­nan­cial cost, de­pre­ci­a­tion ben­e­fits etc.

Em­ploy­ers want­ing to of­fer rental hous­ing, rent-out fa­cil­i­ties to their em­ploy­ers could be given spe­cific grants or fi­nan­cial as­sis­tance by way of lower in­ter­est rates ear­marked for rental hous­ing projects.

It has rec­om­mended that rental man­age­ment com­pa­nies should be given tax ben­e­fits so that they are able to pro­vide the im­por­tant bridge be­tween the land­lord and the ten­ant and fa­cil­i­tate smooth tran­si­tion be­tween the two par­ties.

It has also pro­posed that once the project is com­pleted, there should be a track­ing sys­tem to mon­i­tor the ex­pen­di­ture of the projects.

Ac­cord­ing to Arvind Nan­dan, ex­ec­u­tive direc­tor, con­sult­ing, Cush­man & Wake­field, this is “a very pos­i­tive step for­ward. It will in­sti­tu­tion­alise that mar­ket seg­ment.”

Rental hous­ing can re­ceive a shot in the arm only if there is a wa­ter­tight leg­is­la­tion in place and tax in­cen­tives/sub­si­dies for ma­te­rial and land mora­to­rium on ini­tial in­vest­ment are pro­vided to the builder com­mu­nity to en­ter the field.

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