The government needs to address issues such as rent control and unclear property rights rather than focussing on building more homes under its scheme to provide ‘Housing for All’ by 2022, according to the Economic Survey 2017-18.
The Survey pointed out that India’s housing requirements are complex but till now policies had been mostly “focused on building more homes and on homeownership... We need to take a more holistic approach that takes into account rentals and vacancy rates.
“In turn, this needs policymakers to pay more attention to contract enforcement, property rights and spatial distribution of housing supply versus demand,” it said. The policies on housing needed to recognise that India has an increasingly fluid population.
A successful housing policy should enable the ability to move to, between and within cities as job opportunities arise.
It should also deliver vertical mobility, so that an aspirational population can climb the socio-economic ladder, the Survey explained. It highlighted that two important areas that need to be looked at are the rental segment and vacancy rates.
‘Rental share declines’
Rental housing is important for both horizontal and vertical mobility as it allowed people to access suitable housing without actually having to buy it.
However, the share of rental housing has actually been declining in Indian cities since independence from 54% in 1961 to 28% in 2011.
As a proportion, renting accommodation is more prevalent in urban areas than in rural. According to the 2011 Census, the share of households living in rented houses was only 5% in rural areas, but 31% in urban areas.
“While there are good reasons for encouraging home ownership, it must be recognised that the rental market is also an important part of the urban ecosystem. Rent control, unclear property rights and difficulties with contract enforcement have constrained the market in India in recent decades,” the Survey said.
It pointed out that despite the shortage of housing in urban India (more than 18 million households in 2012), there is also a trend of increase in vacant houses: from 6.5 million in 2001 to 11.1 million in 2011.
According to the national census, vacant houses constituted around 12% of the share of the total urban housing stock. Mumbai has the highest number of total vacant houses (0.48 million), followed by Delhi (0.3 million) and Bengaluru (around 0.3 million). In terms of share of vacant houses to total residential stock, Gurgaon ranked highest (26%).
The phenomenon of high vacancy rates is not fully understood but unclear property rights, weak contract enforcement and low rental yields may be important factors. “The spatial distribution of new real estate may also be an issue as the vacancy rates generally increase with distance away from the denser urban cores.”
