How rental housing benefits our cities
Recently, the Indian Government announced its intention to deploy a modern tenancy law with the aim to promote rental housing in Indian cities, giving due heed to the requirements of contemporary tenants. The planned National Urban Rental Housing Policy intends to address the needs of people migrating from rural areas to cities. It will benefit intending landlords who have so far shied away from renting out their properties, by means of fiscal incentives specifically designed to encourage rental housing.
If this policy becomes a reality, we will see a significant increase in investor demand for housing in areas where there is a huge requirement for rental housing. The result will be a far better availability of rental housing in cities where it is needed the most.
The rental housing conundrum
India’s cities are continuously growing in terms of population, and increasing population has consequently led to more pressure on their housing markets. The rental property market is the only option for most people who have newly migrated into a city for employment, or are just at the outset of their careers. Given the huge inward migration that Pune sees each year, the city’s rental housing market is literally a lifeline for countless individuals and families. As a result, rental housing is also a prime focus for real estate investors.
This is a trend we see in cities the world over, where the rental market thrives even when end-user housing sales are constrained due to macroeconomic factors. If we look at the US market, even while home ownership was a common trend during the 1900’s, the share of the rental market was seen as increasing. Between 2004 and 2012, the rental market grew from 31% of 35%. In 2013, the total number of renters in the US was more than 43 million.
This trend also reflects in countries like India, where rental housing is always in demand – regardless of how the home sales market is performing. There are several factors driving this phenomenon, but one of the most pertinent facts is that rental housing has positive impacts to the overall economy and development of a city, as well as the country as a whole.
Developing cities have always attracted greater migration of talents from neighboring cities. This naturally puts pressure on the existing residential stock. Rental housing is the only bulwark against the growing cost of home ownership; it offers a greater flexibility and puts significantly lower financial strain on people. Further, rental opportunities attract a vast cross-section of households and individuals from diverse age groups, ranging from students to high-ranking executives. Almost every Indian family with the budget to buy their own home has inhabited rental properties at some point.
A range of housing options
Rental properties come in a variety of configurations – the higher one’s budget is; the better the space will be in terms of location or size, and also the available amenities. They range from single family homes to high-end multi-bedroom apartments. Rental homes meant for modest income groups are generally concentrated around the cheaper suburbs, while higher rentals occur in the classier areas of the city. Thus, rental housing caters to the whole spectrum of incomes. As cities experience higher inflow of migrated population, the suburbs and surrounding spaces must develop their rental housing capacities to meet the demand.
Rental housing decreases slums and other irregular developments
In the absence of adequate rental housing in a city, migrating populations – especially the lower income groups – are apt to occupy slums or other kinds of irregular housing which tend to blight the urban landscape of growing cities. This adversely showcases the quality of growth of the city, and also creates a range of problems that range from increased crime rates to sanitation challenges. Affordable rental housing is therefore an important preventive of unorganized growth.
With more families able to depend on rental properties, the city’s housing market as a whole gets more standardized. Increased competition among property developers and agents ensures that real estate prices are managed within the ‘affordable’ range. This also goes on to boost the overall economy of the city.
Rental housing encourages influx of valuable talent
One of the primary concerns among the migrating workforce is the availability of adequate housing. A city that offers limited or unaffordable rental housing options will also not be able to maintain its skilled manpower equity. The influx of qualified and skilled working population is necessary to encourage growing services sectors like healthcare, manufacturing, education, entertainment and retail.
In short, affordable rental housing must always be encouraged in a city which seeks to grow and prosper. A city’s town planning authorities and state governments alike must take heed of the fact that growth in the rental housing sector is a very essential quality and component of overall urban growth and development.