CHENNAI: Chennai’s residential yield, a component of net return a landlord can get by investing in property, is much higher than in cities such as Delhi and Mumbai, according to a report by IDFC Institute, an independent, economic development-focused think-tank to investigate the political, economic and spatial dimensions of India’s ongoing transition from a low-income, state-led country to a prosperous market-based economy.
According to the Institute’s India Infrastructure Report 2018: Making Housing Affordable, which uses data available on Numbeo, a crowd-sourced data platform of the costs of living in cities around the world, Chennai’s residential yield is 2.38 which is higher than Delhi (2.28) and Mumbai (2.18).
According to the report, Indian cities have residential rental yields between 2 to 4% which is much lower, compared to cities across the world. Interestingly, cities such as Hyderabad (4.37), Ahmedabad (4.33), Bengaluru (3.47pc), Kolkata (3.33pc) and Pune (2.83pc) have better rental yields than Chennai.
The report states that higher the house price, the lower is the rental yield for that city. “Low rental yields contribute to overall low returns on property investments, especially relative to alternative market investments with similar risk profiles,” the report states.
Citing pro-tenant legislations that have prevented market-based increases in rent, the report states that in 2016, 66.2 per cent of all civil litigations in India were related to land and property matters.“Landlords choose to hold on to their real estate assets primarily for capital appreciation rather than steady rental incomes. At the same time, landlords also face substantial hurdles in evicting tenants and securing property rights over their houses. The slow pace with which tenancy disputes are redressed creates strong disincentives for owners,” it adds.
Interestingly, the State Urban Housing and Habitat Policy (SUHHP), being drafted by German agency GIZ along with the state housing board, states that Tamil Nadu is facing a shortage of 1.5 million homes in urban areas and there is an urgent need to regulate and streamline private urban rental housing to enable access to the urban poor.
It is learnt that through the new policy, the policy and government subsidies towards housing will undergo a significant change with focus being more on streamlining private urban rental housing.