Developing rental housing as a viable option in urban centersAlthough India’s housing segment accounts for almost 80% of the real estate and construction sector in terms of volume, we continue to have a housing shortage of approximately 19 million units. According to the Ministry of Housing & Urban Poverty Alleviation (MoHUPA), Government of India, the 10 states of Uttar Pradesh, Maharashtra, West Bengal, Andhra Pradesh, Tamil Nadu, Bihar, Rajasthan, Madhya Pradesh, Karnataka and Gujarat constitute about 76% of this urban housing shortage. Around 56% of this shortage is among households from the Economically Weaker Section (EWS) with an average annual household income of upto Rs. 1 lakh, while approximately 40% is among households in the Lower Income Group (LIG) with an average annual household income of Rs. 1–2 lakh. Nearly 96% of this housing shortage, therefore, lies among the EWS and LIG categories of urban India.
A primary reason for this supply–demand mismatch is the paucity of formal housing options for India’s large low income population with low affordability levels. The lack of access to formal credit along with high priced home loans and debt, leave the bottom of the housing market pyramid with little more than squatter colonies, urban slums and unauthorized settlements by way of affordable accommodation options.
Rental housing
To tackle this enormous shortage that is expected to accelerate with rising migrant population movements to urban areas, MoHUPA has been focusing on an affordable housing policy that includes a rental housing interventions program. Despite a housing shortage of approximately 19 million units, around 10.2 million completed houses are also lying vacant across urban India, which may be absorbed within a formal rental housing program to address issues of urban accommodation. Although the larger focus has traditionally been on ownership of housing, the significance of rental housing cannot be emphasized enough.
Vulnerable population groups either residing in or migrating to urban centers, in need of rental housing for employment or education, include:
• Single students
• Young, single executives
• Newly married couples
• Migrant families, and
• The elderly
Rental housing offers a convenient and cost effective option for all such migrant populations, who may not want to make long-term financial commitment in a city. While the higher and middle income members of these groups have the option of hiring apartments and bungalows in upmarket and middle class residential areas, the LIG and EWS groups are left with hiring rooms and/or jhuggi/jhopdis in unauthorized colonies and urban villages.
Legislative support
According to the Census 2011, around 69% of households in urban areas live in owned dwellings, while about 28% live in informal rented accommodation, and just about 3% in formal hired dwelling units. Taking cognizance of this scenario, a Task Force on Rental Housing was constituted by MoHUPA, whose objectives were to:
• Develop a strategic policy intervention to promote Rental Housing as a viable option;
• Create a legal and regulatory framework to enable Private Sector participation in rental housing; and to
• Improve the financial attractiveness of Rental Housing.
Based on the recommendations of the task force, a “National Rental Housing Policy” is currently under formulation. By way of legislative initiatives, this national policy also includes:
• The Draft National Urban Rental Housing Policy 2015,
• The Draft Model Tenancy Act 2015, and
• Rent Control Act 1992
The vision of the Draft National Urban Rental Housing Policy 2015 is to enable the growth of rental housing in a holistic manner. Its key objective is the promotion of:
• Basic shelter facilities (destitute, homeless and disabled)
• Social Rental Housing for the Urban Poor
• Affordable Rental Housing for specific target groups (migrant labors, students, women hostels, etc.)
• Rental Housing as a stop gap towards aspirant home buyers
• Institutional rental housing for the working class (Government, PSUs, corporate firms, industrial groups, NGOs, etc.)
• Formalization/regularization of Rental Housing on pan India basis
• Facilitate fund flows/incentives to Rental Housing
• Institution/organizations to construct, manage, maintain and operate Rental Housing (RMCs/housing companies, cooperative societies, RWAs, REITs, etc.)
The Draft Model Tenancy Act 2015, meanwhile, attempts to create a framework for the regulation of tenancy for commercial and residential properties. It tries to balance the rights and responsibilities of landlords and tenants alike through rental contracts; and aims for registration of rental contracts with Rent Authorities. The main objectives of the Act, however, will be to:
• Have rent fixed and revised by mutual agreement between landlord and tenant
• Unlock existing properties for renting out
• Address repossession issues in rental housing markets
The Rent Control Act 1992 is slightly skewed towards tenant protection, and is aimed at controlling rent. It tries to protect tenants from eviction and from having to pay more than a fair/standard rent amount. The Act may need to be revisited to make rental housing attractive enough for landlords as well.
The Government is currently working towards the promotion of rental housing stocks through such legislative support. A recommended strategy will lie in addressing issues related to institutional implementation to encourage adoption of the policy at central, state and municipal levels in a time bound manner.
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