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A formal rental housing programme can address the challenge of urban accommodation

A formal rental housing programme can address the challenge of urban accommodation

realestate Updated: Jul 02, 2015 13:24 IST

Although 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 up to Rs1 lakh, while approximately 40% is among households in the lower income group (LIG) with an average annual household income of Rs1 to Rs 2 lakh. Nearly 96% of this housing shortage, therefore, lies among the EWS and LIG categories of urban India.

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 unauthorised 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 programme.

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 programme to address issues of urban accommodation. Although the larger focus has traditionally been on ownership of housing, the significance of rental housing cannot be emphasised enough. Vulnerable population groups either residing in or migrating to urban centres, 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 that might 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 or jhuggi-jhopdis in unauthorised 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, the objectives of which 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
Social rental housing for the urban poor
Affordable rental housing for specific target groups
Rental housing as a stop gap arrangement for aspirant homebuyers
Institutional rental housing for the working class
Formalisation/regularisation of rental housing on pan India basis
Facilitate fund flows to rental housing

(The author is a cmd, CBRE South Asia Pvt Ltd)