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Affordable Rental Housing Sector Set For A Boom
As per the IMF, India’s residential rental market is worth US$20 bn, of which 68% (US$13.5 bn) is in urban areas: Primus Partners webinar
Photo Credit : Ritesh Sharma
India’s residential rental market is set to grow manifold over the next few years, having already touched annual figures of over US $20 billion, as per findings of the International Monetary Fund. Of this, 68 per cent, or US$13.5 billion is in urban areas. Further, India’s real estate sector is expected to touch a market size of US $1 trillion by 2030 and start contributing 13 per cent of the Gross Domestic Product (GDP) by 2025. These were some of the discussion points at a webinar hosted by Invest India, management consultancy firm Primus Partners, in collaboration with Guesture Coliving.
During this webinar, a report, titled ‘Roadmap to Rental Housing in India’, was also released, which highlights the unprecedented growth of Indian cities and the need to fast-track the development of rental housing. The report focuses on the need for an encouraging policy & regulatory environment conducive for investments in rental housing, to meet the vision outlined by the Government.
The boom in the residential rental market got a fillip last week when the Government of India announced the Affordable Rental Housing Complexes (ARHCs) scheme, being implemented by utilizing existing state-funded vacant houses to convert into ARHCs, as also construction, operation and maintenance by public and private entities on their own available vacant land. 24 Indian states and Union Territories have already embraced the scheme and many private sector organizations have already expressed keenness to partner in the program, including funding and operating the ARHCs.
“Housing in India is the paradox of 3As: Affordability, Acceptability and Availability. If acceptable and affordable, it may not be available as there may not be enough supply. However, if affordable and available, it may not be acceptable since concerns could encompass quality and inconsistent formal development control regulation standards. The lack of affordability, on the other hand, could hinder acceptability and availability. We need to overcome this issue of 3As and encourage rental housing.” Mr Gautam Chatterjee, Chairman, Maharashtra Real Estate Regulatory Authority, said.
In order to encourage and make Rental Housing a Financially sustainable option, the Government needs to play a significant role. Some of the actions that need to be undertaken would include reservation in DP for cities for rental housing, ensuring correct targeting of beneficiaries of ARHC till the supply copes up with the demand, much stronger O&M of the ARHC complexes, he added.
Mr Anshaj Singh, Chief Administrator, Housing Board Haryana, said: “the Haryana Government is rolling out first-of-its kind scheme for Rental housing in India and shall soon make available about 5,500 houses for rent for the Economically Weaker Sections (EWS) category at around Rs. 3,000 per month. For the first time in India such a large scale rental housing scheme is being undertaken. On success this shall further be expanded by 18,000 houses and then more. HBH shall implement this scheme in collaboration with all stakeholders including Colonisers, Housing societies, Private Rental Institutional Players and so on. HBH shall extensively leverage technology to ensure seamless service delivery and efficient monitoring ... This scheme shall pave the way for rental housing in India.”
Mr Sriram Chitturi, Founder, Guesture Coliving, said: “Facilitating faster implementation of projects, private sector investments and community partnerships in rental housing will play an important role in bridging market imperfections. Granting rental housing ‘Infrastructure status’, demarcating spaces for rental housing during city planning, facilitating low-cost funding for rental housing will help attract greater private participation in the sector. Clearly, we have to focus on how the cost of living of migrant workers people can be reduced. Private players and rental management companies offer best-in-class front-line assessments to various basic components, including market size, share, net benefit, deals, income, and development rates.”
Rental housing has always been an integral part of urban housing response across the world. In India, about 31 per cent of the urban population resides in rental housing. Despite this, the policy and legal framework for rental housing are underdeveloped, as all Government interventions have hitherto been more focused on home-ownership rather than rental housing. Large-scale migration during COVID-19 crisis brought into sharp focus the dire living condition of millions of migrant labourers and their lack of decent housing.
“This is a timely intervention. Over the last four to five years, we have seen a lot of interest from global private equity investors,” Mr Deepak Bagla, Managing Director of Invest India, said. “The returns coming out of these projects are potentially extremely encouraging, which make it very attractive from the investment perspective. Look at the travel figures – over 8 billion people travelled on trains last year alone. That’s more than the population of the world. The New India is ready for a boom, and projects such as these under the aegis of Prime Minister Narendra Modi will fuel growth and a resurgence in the economy,” he added.
“Cities are growing at an unprecedented rate, providing opportunities for economic and social growth. But as the economy grows, market opportunities grow, and migration becomes inevitable,” Ms Aarti Harbhajanka, Co-Founder & MD, Primus Partners, said. “Millions of people migrate into cities, but only a few can afford housing – such a scenario is not sustainable. To address this, the Government has added the new ARHC vertical to its flagship scheme, Pradhan Mantri Awas Yojana. This paves the way for the development of rental housing in India and brings renewed focus to the importance of residential rentals in our society.”
The session participants also included Mr Mahendra Mahajan, MD ITI Alternate Funds Management, Mr Rishi Sreedharan, CEO, Dwellingo and Shri Kahraman Yigit, Co-Founder & CEO, Olive by Embassy. At the session, participants, also discussed the existing rental housing scenarios and development opportunities across the country. They also debated on how, in post-COVID-19 times, rental housing as an alternate project structure could work out both from the perspective of consumers and developers. Finally, the participants evaluated measures for ease in cash-flows for developers in rental housing projects.
However, the largely unorganized and informal nature of the rental housing market has made it tough to arrive at the actual market size despite holding a massive potential to address a part of the housing shortage in India. The top 10 states and Union Territories with vacant houses contribute to 78 per cent or 8.64 million vacant census houses with a vast potential of being brought under the purview of several rental housing models in the country.