How Rental Policy Will Change Housing In India

How Rental Policy Will Change Housing In India

How Rental Policy Will Change Housing In India

According to Census 2011, over 27 per cent of India's urban population lives in rented accommodations, and most of these are informal settlements. Surprisingly, there is a shortage of around 19 million houses, while around 11.09 million houses are lying vacant in urban areas. While these areas have been witnessing large-scale migration from rural area, housing has failed to keep pace with the population increase.

What ails rental housing?

While the National Urban Rental Housing Policy (NUHHP) in 2007 laid emphasis on rental housing, not much was done to improve anything on the ground. In 2013, the then government had set up a task force on rental housing. However, nothing major changed for the segment.

Among the issues that hinder the growth of this segment in India are the lack of a regulatory framework, a low-rental yield, lack of clarity on house repossession and an inability to raise rates according to prevalent market prices.

In the second Five-Year Plan (1956-61), the government through public sector created rental housing. After that, no such projects were undertaken, as the government found it difficult to recover rents or evacuate units. This is also a reason why the private sector finds this housing segment financially unviable.

If the country's rental housing market is regulated better, it will promote the real estate sector because the demand from investors, who are inclined to rent out the purchased property, would increase. This would also encourage developers to undertake renting-based housing projects.

Also, while there has been an overbearing emphasis on ownership of houses in our policies, countries such as Austria, Hong Kong, the Netherlands and the UK also focus on social renting programmes. In fact, the Netherlands and Hong Kong have more than 30 per cent of their total housing under social renting.

Migrant and informal sector workers are often unable to buy houses as they are bound to change jobs frequently. Due to lack of social renting, they are compelled to live in slums. A healthy rental stock is also required to house students and working women.

The policy

Under its Housing for All by 2022 mission, the Prime Minister Narendra Modi-led government at the Centre also targets to revive rental housing. To achieve this, the Ministry of Housing and Urban Poverty Alleviation in October 2015 released the National Urban Rental Housing Policy (NURHP) that focuses on regulating the much-neglected rental housing market. A guiding framework, NURHP puts the onus of enforcing policies and making amendments on state governments and urban-local authorities. The policy is yet to get a Parliament approval.

To promote rental housing, the policy has proposed a host of fiscal incentives for house owners and other stakeholders.

  • At present, home owners have to pay higher municipal taxes for properties that they have rented when compared with the properties that they self-occupy. The draft policy proposes to treat both such units on par. Under social rental housing schemes, the policy also proposes to give tax incentives to home owners. 
  • The policy proposes to engage various sectors (private, non-governmental, cooperatives, industries, etc.) to promote rental housing. 
  • The policy talks about rental-housing vouchers for low-income households, to be used like food vouchers. The poor would be able to rent houses in social rental housing schemes by providing these vouchers. This would also ensure that the owners/managers of rental housing keep their houses in good shape to attract tenants.

What more?

  • Urban-local bodies are assigned the task of allocating land for affordable rental housing and to undertake construction. However, they are not provided with adequate sources of revenue which would be essential for undertaking projects of such magnitude. 
  • The Rent Control Act, 1948, needs to be replaced by The Draft Model Tenancy Act, 2015. The former is skewed in favour of tenants and discourages home owners to rent out properties. Owners also face problems when they want to get their properties evacuated. A law that that guards the interests all the stakeholders is a must. 
  • There is also a need for inclusive housing, where developers have to reserve a certain percentage of housing in each project for social rental housing. This would help house chauffeurs, housemaids, gardeners, washermen, sweepers, etc, within residential projects. This would enable them to become more productive and have a better quality of life. Such housing schemes are popular in countries such as Spain and the US.
Last Updated: Fri May 27 2016

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