A better future for rental market
Innovative schemes, use of vacant homes, PPP model recommended in draft Rental Housing Policy
Many people investing their hardearned money in a house hesitate t o rent i t out. Fearing that their tenants would either default on rent payment or not vacate the house, they prefer to sit back instead and wait for prices on the property to appreciate. Low returns on rentals are a problem too, with 1.4% returns on residential property contrasting sharply with 6% to 7% returns on commercial properties.
The draft National Urban Rental Housing Policy report released last month seeks to address all rental market issues. It acknowledges that 11.09 million houses are vacant in urban areas as per Census 2011 and suggests that if these are made available for rental housing, the urban housing shortage issue could be largely sorted out.
Real estate experts are of the view that the gap between vacant housing stock and actual housing requirements needs to be bridged, a task which can be accomplished by drawing up an inventory of empty houses. Amit Bhatt of Embarq India suggests that the government could consider the Singapore model of providing housing to people for a fixed tenure, getting the government to take over the units later to consider their redevelopment potential.
“The new draft policy seeks to address some of the fears landlords have but it remains to be seen how it gets implemented,” says Sunil Tyagi of Zeus Law, a law firm.
The draft proposes rental housing models such as PPP and schemes such as rent to own, shared ownership, rental
voucher and rent alt al allowance allowance. It also proposes income tax concessions for institutional owners to create mass rental, especially affordable, housing.
“The policy is expected to enable formalisation of rental housing through regulatory and legal frameworks; enhance fund flows along with incentives for rental housing; and promote institutions/organisations for constructing, managing, maintenance and operations of rental housing stock, thereby helping achieve the goals of Housing for All by 20222022. The draft policy has called for developing a strategy to deal with the vacant or locked properties in consultations with various stakeholders and come up with options,” says Dr Debolina Kundu, associate professor at the National Institute of Urban Affairs (NIUA).
The draft proposes bringing in rental management companies to ensure efficiency in operations, maintenance and management of large scale rental housing projects/schemes.
According to Kundu, his- toricallytorically, housing policy and prog ramme i nterventions have been oriented towards promoting ownership housing. The share of households living in rented accommodation was reported at 27.5% in 2011. This share was over 50% in 1971. Rental housing in India has reported a decline over the decades.
The housing shortage will be addressed by bringing in more housing stock for various income categories that cannot afford or plan to buy property.
Also Also, the gov er nm government role has shifted from provider to facilitator, which is why the PPP route has been mooted as the government cannot on its own meet housing requirements.
The Centre, states and local governments are likely to give direct and indirect tax relief to house owners and tenants. This has been proposed as renting of homes is a “commercial” activity, which means increased property tax for individuals and service taxes for institutional rental housing operators of hostels/PGs and dormitories wherein electricity and utility rates are calculated at par with commercial properties, reducing the rental yield.
The document has suggested different “need- based rental housing” models to address diverse housing needs for various segments of the population such as students, working men/ women, construction workers and migrants. These can be owned by individuals, private players, companies and government.