NEW DELHI: To provide housing facilities to a large section of people, including migrant workers, the government should channelise its own land for the development of rental housing, says a joint report by RICS and Knight Frank India. The report notes that owing to poor rental yields, much of India’s housing property remains vacated at urban centres.
“If a portion of government-owned landmasses is utilised by the government or its agencies for the development of rental housing properties, the incremental cost would be limited to only the construction cost. The rental yields, when calculated on the incremental cost to government (instead of the market value of the property), would work out to a range of 10-18 per cent, which would make rental housing projects feasible,” the report said.
Rental yields in most cities continue to be very low. The maximum rental yields observed are about 5 per cent and the lower bracket is close to 1.5 per cent. Such low yields are perceived to be insufficient to cover the risk of renting the property.
Beside low yield, risk of property litigations, the Rent Control Act, high cost of the transaction and the lack of an organised marketplace act as impediments to development of the rental housing market. The report also says that there are around 5 lakh houses lying vacant in Mumbai alone. In Delhi and Bengaluru, the number stands at 3 lakh each.
The report lauded the government’s latest announcement to promote the creation of rental housing for migrant workers through a Public Private Partnership model.
“We wouldn’t have faced the challenges we have seen with migrant workers... had they had viable living conditions... the recent announcements made by the Finance Minister on providing affordable Rental Housing are commendable,” said Nimish Gupta FRICS- MD, South Asia said.