Indian rental housing market

Indian rental housing market


Rental housing has been a much passed over subject in context of housing in India.
Even after 72 years of independence, there is no policy framework to catalyse private
sector participation in this vital subgroup of housing despite 21.72 million urban rented
households. Historically, the Indian housing policies have been directed towards
home ownership which alone cannot solve the housing conundrum. Zero or no policy
interventions for rental housing have been a big deterrent for creation of rental housing
stock in the country. As per the Census 2011 data, 11.09 million houses remain vacant in
urban areas despite the massive housing shortage. This is due to various factors such as
low rental yield, poor maintenance of vacant stock, forceful possession, dilapidated state of
buildings and lack of incentives. As an extension of these market realities, the prospects of
converting urban land into investment and provide a steady source of income to landlords
remains nil.

Sizing the rental housing opportunity

India’s real estate sector is expected to touch a market size of USD 1 trillion by 2030 and
start contributing 13% of the Gross Domestic Product (GDP) by 20251 . The growing Foreign
Direct Investment (FDI) in India is bringing in more transparency and accountability with
due diligence taking centre stage at many real estate development companies to keep
investors lured. As per the International Monetary Fund’s (IMF) last estimates2 , India’s
residential rental market was worth more than USD 20 billion, of which 68% or USD 13.5
billion is in urban areas. However, the largely unorganised 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 (UTs) with vacant houses contribute to 78% or 8.64
million vacant census houses with a huge potential of being brought under the purview of
several rental housing models in the country.

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