Required : Government Rental Housing Policy In India

Providing housing to all on an ownership basis is difficult and may not be possible. Many of the urban youth, self-employed and urban poor pay high rents, but are unable to buy a home.


Required : Government Rental Housing Policy In India

Large scale rental housing complexes could provide basic amenities and social services, which will ease the process of developing new industrial complexes and urban areas.

Currently, housing for rent is provided by individuals only. Government and some very large industrial organisations especially in upcountry locations provide housing to their staff. Institutions whether owned by the government or privately owned are not providing housing on a rental basis to third parties.

Also Read: Special Policy For Affordable Housing, Rental Soon: Punjab

Housing is a key focus of the Indian Government. It has set for itself the objective of providing Housing for All by 2022. To realise its vision, the government put out for comments a “Model Public Private Partnership for Affordable Housing” in 2017. The key intent of the policy is to attract private capital, give access to cheap land, build affordable homes and provide them to the general public primarily through an ownership driven model.

However, providing housing to all on an ownership basis is difficult and may not be possible. Many of the urban youth, self-employed and urban poor pay high rents, but are unable to buy a home.

There are examples of organised rental housing in other parts of the world for example, housing for university students in the United States. Student housing can be owned by Real Estate Investment Trust (REIT), who in turn can rent out apartments to students for short durations while they study in the university.

Also Read: Affordable Homes Rental House for Women BMC plans for Mumbai

For private investment to flow into rental housing, ultimately the return on capital for rental housing projects would need to be competitive vis-a-vis returns earned from assets with similar risks/ alternate use of that money such as debt funds, etc. The business models in the housing sector and the income tax laws promote ownership driven models, with returns accruing primarily from capital appreciation. The rental yields in India are low. However, they are not uniform and can be relatively higher for smaller sized housing.

Other impediments for development of rental housing in India:

  • The income tax laws incentivise ownership of homes vis-à-vis renting of homes. No tax deductions are available on rental income to institutions or individuals i.e., taxes at full rates have to be paid on income through rent. In contrast, there are tax deductions on interest paid on loans for purchase of homes and tax rate at the time of realising capital appreciation are also low. One option for the Government could be to consider providing tax benefits for rental housing set-up through REITs.
  • The rent control laws prevalent in many states are perceived to increase the risk of repossession. Homeowners are often apprehensive about tenants overstaying and not vacating the houses. There are numerous anecdotal examples of legal disputes running over years and of owners selling their property at a discount. As a result, there are a large number of built up houses that continue to lie vacant in India.
  • While foreign investment is allowed in the real estate sector, however, the current FDI norms do not allow foreign investors to own and rent out houses, without undertaking development. This limits the amount of foreign capital that could flow in for rental housing.

It is recommended that government consider finalising a rental housing policy that addresses the impediments and would facilitate flow of institutional capital.

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