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Indian rental housing to see an uptick in two years led by govt reforms, report

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Rental housing in India is likely to witness an uptick in the next two years driven by the recent reforms announced by the government to address housing needs especially in urban areas, said a Savills India report.

Rapid urbanization, migration to cities and the rising cost of home ownership are the three key demand drivers for affordable rental housing in India. As per the 2011 census, urban households on rent stood at over 2.1 crore, 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.

The events and policy initiatives over the last few years – including the establishment of RERA, PMAY, Model Tenancy Law, and others – has built 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.

“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 Anurag Mathur, Chief Executive Officer, Savills India.

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.

“The policy guidelines can be envisaged as an earnest attempt to bridge the shortfall of housing units across the country, while simultaneously addressing the core issues such as affordability and quality of life of weaker sections of the society,” said Arvind Nandan, Managing Director, Research & Consulting, Savills India.

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.

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.

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