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Welcome Initiative on Rental Housing

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The Budget announcement to unveil reforms to promote rental housing is welcome. Rental housing is of paramount importance in rapidly urbanising India. Millions of migrants will keep moving to towns from the hinterland to seek better opportunities.

So, India needs to build new towns to house these migrant hordes — else, our cities will be swamped into slums — and the new towns stocked with rental housing. Buying and owning a home in the town is not a viable option for poor migrants, especially if they already own a home back in the village.

The need is to boost housing stock to a level where people do not have to spend a large slice of their income on rent. And to have sensible rent laws that foster a market for rented accommodation, rather than hoarding of empty houses by owners fearful of losing possession of their investment to permanent tenants.


One way is public housing. As the construction sector is hugely employment intensive, it should have multiplier effects economy-wide, and boost cement, steel, construction and construction equipment manufacture. Public housing shelters 80% of Singapore’s population.

Singapore has also been able to keep a tight lid on prices. But that is not the case in Hong Kong where public housing accounts for about 21% of the total home ownership. Building vertically will bring down the costs in India and accommodate more people.

Also, governments in cities such as Delhi that are capable of housing denser populations must lift restrictive floor area ratios and encourage vertical urbanisation. The rules to alter land-use norms should be eased to make it simpler to convert rural land into urban land and do away with the artificial rationing of land.

Modernising the rental market is a must. Rightly, the government has acknowledged that the current rental laws are archaic as they do not address the relationship between the lessor and the lessee realistically and fairly. Irrational provisions in the rental laws that have led to a wide gap between urban housing demand and supply must be scrapped.

Source: economictimes

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