Rental housing to see an uptick, says Savills India report

V Rishi Kumar Hyderabad | Updated on August 20, 2020

The Housing Ministry’s guidelines are a shot in the arm for affordable rental housing complexes

Rising cost of home ownership, increased migration are the demand drivers

Rental housing in India is likely to see a boom in the next two years backed by the reforms announced by the government to address housing needs in urban areas, according to a Savills India research report.

The research report ‘Rental housing in India: A study of the upcoming wave,’ states that rapid urbanisation, migration to cities and the rising cost of home ownership are the three key demand drivers for affordable rental housing in India.

As per the 2011 census, urban households on rent stood at over 21 million, which is around 20 per cent of the total number of houses in urban India. Almost 80 per cent of the rental housing market in the country is concentrated in the urban centres.

Greater urbanisation

While India’s urban population share has grown more than threefold in over a century from around 10 per cent in the 1900s to the current levels of more than 34 per cent, annual inter-State migration is estimated to be growing at around 9-10 million. The cost of house ownership across India has shown a CAGR of around 5 per cent in the past few years, said the report.

The events and policy initiatives over the last few years — including the establishment of RERA, PMAY, Model Tenancy Law, and others have provided the foundation for the development of rental housing, the report said.

“Rental housing is another market that is yet to be tapped, especially in the urban areas which have seen prices of homes go beyond the cusp of most of the city dwellers. The recently released operational guidelines on Affordable Rental Housing Complexes (ARHC) are a long-awaited giant leap in the right direction,” said Anurag Mathur, Chief Executive Officer, Savills India.

“The policy guidelines can be envisaged as an earnest attempt to bridge the shortfall of housing units across the country, while simultaneously addressing the core issues such as affordability and quality of life of weaker sections of the society,” said Arvind Nandan, Managing Director, Research & Consulting, Savills India.

Ministry guidelines

The Affordable Rental Housing Complexes (ARHCs), Operational Guidelines July 2020 released by the Ministry of Housing and Urban Affairs, has now laid out a roadmap.

These operational guidelines had chalked out two models. While the first model (M-1) envisages the operation of vacant government funded houses as ARHCs by a concessionaire for 25 years, the second model (M-2) provides for public and private entities to create ARHCs on their own vacant lands. ARHCs also open up the prospects of having a residential REIT in the country.

ARHCs can, arguably, be called the most important of all the policy measures since 2005, since it can enhance liveability in the quickest time — compared to other measures which require longer implementation timeframes. If implemented via one of the two models, the rental housing availability can begin in less than two years, the report said.

Published on August 20, 2020

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