Reasonable Rents Can Keep Rental Market Strong In The Face of Affordable Housing

In India, 90 per cent of housing shortage is in the economically weaker section (EWS) category and the lower income groups (LIG). Affordable housing should address the needs of this important segment of Indian population. Their monthly income won't allow them to buy a house. Both the down payment and the EMI, are beyond their reach which forces them to rely on rental housing. This is one aspect, where individuals depend on rental housing. But where rents are too high, the rental market may suffer a setback.

Ashok Gupta, CMD, Ajnara India Ltd. points out, "India has a housing shortage by almost 2 crore units. At the same time, major realty regions across India are witnessing oversupply of units by almost 7,50,000 throughout NCR, MMR, Bangalore, Chennai, Pune and few others. Thus, Indian realty market is in dire need of low-cost housing and the moment private sector and government come out with such assignments, there will be a major supply of affordable units across the nation and the demand will be well met. This, in turn, can take rental housing demand for a ride but the location is a key factor which will allow first mover advantage to people who invested in properties based on location advantage at an early stage."

Since many years rental housing served as the key driver in the property market and provided housing to many. Affordable housing is something new and at an emerging stage. Vikas Bhasin, MD, Saya Group points out, “There is still a lot of time for affordable housing shortage to be met and till that time, rental housing is the key to cater to the demand in the economy. It is true that affordable housing at its peak will be a dampener for rental housing segment and shift investors from the market, but till that time, rental housing will be the only viable option available to address the needs of those who want to look at low-cost housing. Moreover, developers can explore options of renting out unsold inventory to put those properties to use and draw something out of them till it is unsold.

Let's look at the factors which led the buyers opt for affordable housing over paying rent and what are the key areas which rental housing should pay attention to.

Growing urbanisation

Cities matter to any developing country. Over the next 20 years, urban India will witness 70 per cent of all new jobs across the country. This adds to the housing demand. A few years back, rental housing for these professionals was quite popular but with the huge push for affordable housing, millennials are giving more emphasis to owning a house.

Professionals from other states

Millennials who belong to small towns and migrated to metropolitan cities in search for better job prospectives are the core segment of the people that chooses rental housing. Either PGs (paying guest) or sharing room with their colleagues/friends or renting for self — they prefer rental housing and reasonable rents appeal to them.

Give good reason for rental price rise

With the kind of amenities (like – security services, elevators for highrise buildings, uninterrupted power supply, etc.) price rise in every 11-month rent agreement is somehow justified. In addition, location and related infrastructure also make the rental pricing high. But a financially stable individual who is paying rent and has the capability of owning a house through EMIs is also likely to shift his focus if rents become too high.