The Rental Market in India is slated to boom over the next 2 years

April 13, 2022
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The Rental Market in India is slated to boom over the next 2 years

With widespread urbanization across the country, the influx of migrant populations into cities, and the popularity of ambitious housing missions like the Modi government’s “Housing for All,” India’s need for rental housing is high. The vast demand for the rental market in India, along with the fact that it has been underserved due to a lack of adequate business planning and the backing of a viable rental ecosystem, presents a strong case for the development of rental housing in the real estate agents across the country. The establishment of Affordable Rental Housing Complexes (AHRC) to address the escalating housing issue is a positive move in the right direction. 

India’s cities have experienced a massive influx of migrants in the last ten years. According to the 2016-17 Economic Survey, 9 million migrants each year moved to different cities across India between 2011 and 2016, up from 5.5-6 million per year between 2001 and 2011. They were looking for better job prospects, a better lifestyle, and being a part of the cosmopolitan life. 

While the constant influx of urban migrants into the real estate agents has been a source of concern, given the cities’ poor urban planning infrastructure, the staggering figure of 11 million vacant and 0.8 million unsold homes across India is reason enough for India to give the rental housing problem serious consideration. 

There is a slew of flaws at the root of the problem. 

High land costs in cities, a lack of landlord trust, and appropriate rental operations and management procedures have produced a wide chasm between demand and availability for rental units. Even though key governmental measures such as RERA, PMAY, and the Model Tenancy Law have established the groundwork for rental housing growth, the lack of feasibility and sustainability of rental models has pushed this concept farther away from development and distribution. 

When we look at the rental market in India, we can see that it has a long history of pro-tenant Rent Control Acts (RCA), making it unprofitable for landlords to rent out their homes while also maintaining them. Second, India’s abysmally low rental returns of 2-4 percent, the lowest in the world, provide little motivation to take the risk of long-term apartment rentals. 

The tonic you’ve been looking for. 

If India wishes to emulate the success of rental housing models in industrialized, industrialized nations such as Germany and the United Kingdom, it would need to change the rental housing market in metropolitan regions where costs are out of reach for most city inhabitants. 

The recently issued Affordable Rental Housing Complexes (AHRC) Operational Guidelines are what the Indian rental market needs to make rental housing more affordable for city dwellers. The policy guidelines are an earnest attempt to alleviate the country’s housing shortage while also addressing key concerns such as affordability and the upliftment of the lives of the poorest members of society. 

Aside from that, the AHRC recommendations have a shorter implementation period, which will reduce the time it takes for Indian rental markets to find rental homes to less than two years. Investors seeking long-term stability will be pleased to see that AHRCs can match the risk-return profiles of offshore wealth and other sovereign bonds, giving them a strong presence in the country’s multibillion-dollar residential market. 

Providers of rental and property management will rule the roost. 

While the AHRC rules have brought much-needed fire to the rental housing program, it has also opened up a window of opportunity for rental and property management businesses to capitalize on the disorganized rental market by bringing the vast supply of unoccupied dwellings into the rental market. 

India’s residential rental sector is about $20 billion, including $13.5 billion in the city, $0.8 billion in the countryside, and $5.7 billion in NRI property brokerage. Property management start-ups are optimistic about capitalizing on the lucrative rental industry by providing comprehensive and cost-effective qualities that provide a hassle-free and secure rental experience. 

A surge in rental space is expected. 

Rental properties management businesses, armed to the teeth with technology and digital marketing portals, are guiding both owners and tenants from the point of searching for the ideal rental homes to signing lease contracts. 

From ensuring that properties are rented out on time to conducting quarterly inspections and timely maintenance and repair work; and from educating owners on rental market prices to conducting background checks on prospective tenants, property managers have earned the trust of landlords and tenants while also addressing the problems of housing shortage and rental properties management hassles. 

In India, the rental and property management industry is still in its infancy. However, property management businesses’ emotional openness and rental certainty guarantees are attracting the attention of builders looking to turn their unsold inventory into sales. Azuro, Square Yards’ rental and property management platform, has earned multiple mandates in the last year, demonstrating builders’ faith in property management systems. 

Rental and property management companies will see a meteoric rise in demand as cities expand and become more urbanized as rental homeowners and NRI commercial property investors caught in the tangle of day-to-day lifestyle seek smooth management of their assets without external interference. 

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