As per the 2011 Census, over 21 million (27.5 per cent) urban households live in rented accommodations. The rental housing market is therefore projected to grow at a faster rate than rate of urbanisation over the next 20 years, says a Knight Frank report. The population living in rental housing has no willingness to own and landowners find rental housing unattractive due to low residential yields, high risk of property litigation and cost of transaction, which leads to a high number of vacant houses in large urban centres.
Mumbai alone has about 5 lakh vacant houses, followed by Delhi and Bengaluru at 3 lakh, Pune and Ahmedabad at 2 lakh, Jaipur at 1.2 lakh, Hyderabad at 1 lakh, Kolkata at 80,000, Bhopal and Gurugram at 75,000, Lucknow at 65,000 and Ghaziabad at 55,000, as per the Knight Frank report.
The report further goes to suggest strategies that can adapted for developing rental housing in urban India.
- Channelising government owned land for rental housing development: The government has significant volumes of underutilised lands, if a portion of these land masses is utilised by the government or its agency for development of rental housing properties, the incremental cost to government would be limited to only the construction cost.
- Rental management companies to pool private houses: There is an opportunity for promoting public or private rental housing management companies, who in turn pool private properties to a common marketplace, where prospective tenants can select the properties of their choice, this would significantly bring down the risks through professional management and lower pooled risks.
- Knight Frank experts highlight that with “Housing for All” insight and the government moving to achieve the target, it is imperative to address the root cause of future housing shortage and suggests some counters to attack the challenge.
- Transitional buffer housing stock: Metro cities in India welcome thousands of migrants everyday who come to urban centres for job opportunities, education or simply for better lifestyle. Migrants belonging to lower income groups find it very difficult to find a shelter in the city due to high price of urban houses. Transitional buffer housing or short-term housing can be an appropriate solution to address this issue.
- Shorter tenure titles: Properties, if offered with an initial tenure of 30 years with an option to extend the lease for an additional period of 30 years on payment of renewal premium, can be priced 20 per cent lower than a similar long tenure property. Such a tool can be effectively used in subsidised housing on the principle of government subsidising the housing need of a household for a period of 30 years, post which the housing unit can revert to a common pool of public housing
- Rent to own: Often the prospective buyers do not have sufficient funds to complete the equity component of a transaction. In all such situations rent to own contracts can come in handy. They allow a person, even if one is unable to afford a mortgage on the whole of the current house value, to purchase a partial share of the house and pay rent on the remaining share.
- Housing boards 2.0 – rental development and management companies: Prime government owned land parcels continue to be under sub-optimal usage in the hands of port trusts and agricultural collages If housing boards are able to mobilise a fraction of these underutilised lands for the development of rental housing developments, the incremental cost to government would be restricted to construction cost of these properties.
- Zoning reforms to address land market imperfections: Land use zoning can be used as a successful tool to create an inclusive urban fabric. Inclusionary Zoning (IZ) is a land-use planning tool which reserves land or earmarks zone to be exclusively used for affordable housing purpose.