New pol­icy likely to im­prove rental yield

HT Estates - - FRONT PAGE - -Van­dana Ram­nani

11.09 mil­lion n houses are va­cant in ur­ban ban ar­eas as per Cen­sus 2011. 1. The draft Na­tional Ur­ban ban Rental Hous­ing Pol­icy icy pro­poses that th­ese prop­er­ties rties be made sug­gests that at if th­ese va­cant houses are made avail­able for rental hous­ing, ous­ing, then some of the ur­ban hous­ing ng short­age could uld be ad­dressed The draft pro­poso­poses rental hous­ing us­ing mod­els such as PPP P and schemes such as rentt to own, shared own­er­ship, rental voucher and rental al­lowance.llowance. It also pro­poses in­come come tax con­ces­sions for in­sti­tu­tional titu­tional own­ers to cre­ate mass ass rental (es­pe­cially af­ford­able)able) hous­ing The Cen­tre, states and lo­cal gov­ern­ments s are likely to give direct and in­di­rect ndi­rect tax re­lief to home own­ers ners and ten­ants. Now, rent­ingg of homes is a “com­mer­cial” al” ac­tiv­ity, which means in­creased eased taxes for home own­er­srs voucher and rental­tal al­lowanceal­lowance. 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.

If the rental pol­i­cyp is able to ad­dress thet fears of land­lords and bring more hous­ing stock in the am­bit of rental hous­in­hous­ing, it will help im­prove rerental yield in times to come. In IndIn­dia, the resid­den­tial rental yield is about 1.5% to 3%. Ex­perts say that if the pro­pos­al­spropo un­der­lined­lined in the dr­draft pol­icy are im­ple­mente­d­im­ple­mented, res­i­den­tial prop­er­ties in In­dia, too, will be able to achieve a yield of 4% to 6%, as is the case in de­vel­ode­vel­oped mar­kets.

The rental yield of res­i­den­tialden­tial units is ex­tremely low in In­dia aat about 1.5% as com­pared to com­mer­cial­cial prop­er­tiprop­er­ties for which t he yield ii s any­thing be­tween 5% tto 10%. Also, the value of a com­mer- Al­soAlso, the gov­ern­m­gov­ern­ment 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 cial property is a de­riv­a­tive of rental value un­like in a res­i­den­tial property where the cap­i­tal value is the most im­por­tant de­ter­mi­nant. It is be­cause of this rea­son that most peo­ple in In­dia pre­fer to lease out com­mer­cial prop­er­ties but wait for prices of res­i­den­tial prop­er­ties to ap­pre­ci­ate, says Mu­das­sir Zaidi, na­tional di­rec­tor, res­i­den­tial at Knight Frank In­dia. The rent of most com­mer­cial prop­er­ties de­pends on the qual­ity of the build­ing and lo­ca­tion. Res­i­den­tial prop­er­ties on the other hand give a yield of only 1.5% to 3%. Glob­ally in de­vel­oped mar­kets, the rental yield for res­i­den­tial prop­er­ties is any­thing be­tween 4% to 6%, Zaidi says, adding that the pro­pos­als out­lined in the draft Pol­icy can im­prove rental yields in fu­ture. 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.

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