Mumbai has highest vacant housing inventory

The Economic Survey has raised concern about the vacant housing inventory, especially in metros such as Mumbai, Delhi and Bengaluru.

The Survey points that despite a housing shortage, there is an inventory overhang. Mumbai tops the list with 0.48 million vacant houses, followed by Delhi at 0.3 million and Bengaluru at 0.3 million.

In terms of share of vacant houses to total residential stock, Gurugram ranks the highest, at 26 per cent.

Despite the shortage of housing in urban India (more than 18 million households in 2012) (MHUPA, 2016), there is also a trend of rising house vacancies, from 6.5 million in 2001 to 11.1 million in 2011.

According to the national census, vacant houses constitute around 12 per cent of the share of the total urban housing stock.

“The phenomenon of high vacancy rates is not fully understood, but unclear property rights, weak contract enforcement and low rental yields may be important factors. The spatial distribution of the new real estate may also be an issue, as the vacancy rates generally increase with distance away from the denser urban core,” the Survey points out.

Holistic approach

The Survey notes that a holistic approach needs to be taken with respect to housing stocks. “The above data suggests that we need to take a more holistic approach that takes into account rentals and vacancy rates. In turn, this needs policymakers to pay more attention to contract enforcement, property rights and spatial distribution of housing supply vs demand,” it adds.

As a proportion of all housing, renting accommodation is more prevalent in urban areas than in rural. According to the 2011 Census, the share of households living in rented houses was only 5 per cent in rural areas, but 31 per cent in urban areas.

The Survey says a State-wise picture also shows that the more urbanised States, such as Gujarat, Maharashtra and Andhra Pradesh, have a higher percentage of rental housing.

Similarly, larger cities have greater shares of rented housing.

“In many countries, including India, home ownership is encouraged as part of socioeconomic policy. While there are good reasons for encouraging home ownership, it must be recognised that the rental market is also an important part of the urban ecosystem. Rent control, unclear property rights and difficulties with contract enforcement have constrained the market in India in recent decades. These problems need to be resolved in order to allow horizontal and vertical mobility as well as to address a related issue — high vacancy rates,” the Survey has observed.