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Bengaluru, NFAPost: Rental housing in India could possibly see a boom in the next two years backed by the recent reforms announced by the government to address housing needs especially in urban areas, said a report by Savills India, a leading real estate consultancy firm.

According to the research report titled – ‘Rental housing in India: A study of the upcoming wave’, rapid urbanization, migration to cities and the rising cost of homeownership 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% of the total number of houses in urban India. Almost 80% of the rental housing market in the country is concentrated in urban centres.

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

Model Tenancy Law

The events and policy initiatives over the last few years – including the establishment of RERA, PMAY, Model Tenancy Law, and others – gave the foundation for the development of rental housing, the report said.  However, the Affordable Rental Housing Complexes (ARHCs), Operational Guidelines July 2020 released by the Ministry of Housing and Urban Affairs, has now laid a roadmap.  

Operational Guidelines for ARHCs has laid down 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 & private entities to create ARHCs on their own vacant lands.

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 2 years, the report said.

Stable returns

As per the report, the guidelines have laid a clear roadmap for investors looking at stable long-term returns. ARHCs can match the risk-return profiles of offshore wealth, insurance and sovereign funds, and give them a strong foothold in the large residential market of the country. ARHCs also open the prospects of having a residential REIT in the country.

Savills India Chief Executive Officer Anurag Mathur 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 Savills India Chief Executive Officer Anurag Mathur.

In due course, the Indian market would explore concepts applicable in countries such as Singapore, Hong Kong, Germany, UK, etc…These include longer tenures & ownership distribution, apartment REITs, creative & innovative income benefits and co-developing collateral propositions.

Housing units

 Savills India Research & Consulting Managing Director Arvind Nandan said the policy guidelines can be envisaged as an earnest attempt to bridge the shortfall of housing units across the country.

“Simultaneously addressing the core issues such as affordability and quality of life of weaker sections of the society,” said Savills India Research & Consulting Managing Director Arvind Nandan.

Savills in India is a full-service advisor offering Commercial Advisory & Transactions, Project Management, Capital Markets, Valuations & Professional Services, Research & Consulting, Industrial & Logistics, and Residential services.

The blend of in-depth, sector specific knowledge with entrepreneurial spirit gives clients access to unique and innovative real estate solutions backed up by the highest quality of service delivery.

Savills is India’s premier professional international property consulting firm. Savills began its India operations in early 2016 and has since seen significant growth.

With offices in Bengaluru, Mumbai, Delhi NCR, Chennai, Pune and Hyderabad; and also having serviced clients in Kolkata, Chandigarh, Guwahati, Bhubaneswar, Vadodara and Indore, Savills India has a robust pan-India platform to deliver to its clients.

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