By: Pranay Vakil, Chairman, Knight Frank India
The ever-increasing housing needs in urban centers have caused home prices to shoot up to extremely unaffordable levels. According to CREDAI, this is because the equilibrium of demand and supply has collapsed and the supply curve has gone lopsided with demand escalating rapidly.
Rental Housing can go a long way in addressing the problem of urban housing for the economically weaker sections of society. While it is a plausible solution, what it requires is support mechanisms which incentivize rental housing in the housing policy, specifically for the lower income groups.
The Mumbai Metropolitan Region Development Authority (MMRDA) model is a good example of how government agencies can boost this sector by incentivizing development using the TDR model, Additional FSI Model and Model for Government Lands vested with MMRDA. The MMRDA has already sanctioned location clearances to a total of 34,63,720 square meters of land to accommodate 1,99,529 rental units to come up in the Raigad and Thane Districts.
Global markets have been known to support rental housing in a much better and organized manner. The advent of Real Estate Investment Trusts (REIT), Real Estate Mutual Funds (REMF), insurance companies and long term proprietary funds which invest up to 10 per cent of their corpus in real estate have provided a huge boost to the global residential rental market. These investment vehicles are yet to find a foothold in India.
It is estimated that nearly 60 per cent of all properties in Europe and the US are rental but people in India look down upon rental housing as owned property is perceived as a greater measure of financial prudence and wealth. Also, there is the risk of losing one’s property as the rental laws favor the interests of the tenant to a much greater extent.
