USD 20 Billion India Residential Rental Real Estate Sector
Housing needs of urban India are more increasingly being addressed by rental real estate. This can be attributed to rapid urbanization, consumption patterns of real estate consumption. Close to 500 million people or 35% of the Indian population lives in urban areas. Additionally, around 52% of the Indian population comprises of Gen Z and Millennials. The innate behavioral traits, real estate requirement patterns, lifestyles and purchasing power are often intrinsic to their nature of real estate consumption.
Size of India Residential Rental Real Estate
India’s residential rental market is sized to be worth more than USD 20 billion. Urbanization and affordability, two major factors contributing to this sector attribute almost 68% of the market size or USD 13.5 billion to urban areas. However, this size can be larger owing to the largely unorganized and informal nature of the rental housing market which is difficult to size. National Sample Survey Office (NSSO) as per their 2012 survey estimated that 71% of the households living in rented accommodation in India don’t have a formal contract to establish tenancy.??
Statewise distribution of Rented Households??
According to the last census in 2011, there are a total 27.37 million rented households across India of which almost 80% are in urban areas. Across India, 8 states and union territories comprise a 77% of the total urban rented households with Tamil Nadu sharing the highest percentage at 16.5%.?
In cities and urban areas, almost 20% of the citizens stay in rented accommodation. In 9 states that are housing countries top 8 cities, Karnataka, Andhra Pradesh and Tamil Nadu stand out with respect to the highest share of households staying in rented against owned apartments. The share of rented apartments in Karnataka, Andhra Pradesh and Tamil Nadu stands at 46%, 44% and 40% respectively.??
Global comparison?
Rental housing is a well-established and evolved asset class category in developed countries. It has a mix of private institutional, public and individual rental housing categories. Amongst the developed countries. Switzerland has the highest percentage rental housing stock at 65% of the total housing followed by Germany at 57%. The Netherlands, Austria and Republic of Korea also have a high share of rental housing stock upwards of 40%.??
Types of rented households?
Definition of household as per Census India states that a 'household' is usually a group of persons who normally live together and take their meals from a common kitchen unless the exigencies of work prevent any of them from doing so. Persons in a household may be related or unrelated or a mix of both. However, if a group of unrelated persons live in a census house but do not take their meals from the common kitchen, then they are not constituent of a common household. Each such person should be treated as a separate household. The important link in finding out whether it is a household or not is a common kitchen. There may be one member household, two member households or multi-member households.?
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The gentry of rented apartments can be segmented into households with single and double occupancy, nuclear family households with 3 to 4 members constituting a married couple with one or more children, large family households with 5 or more individuals. About 50% of nuclear families in India stay in rented apartments. Students, singles, and young couples constitute 18% of the total urban rental demand.??
Rental Yields across India??
Rental yields used to express the profitability of a real estate asset investment is the rental income against is total value denoted in percentage.??
Residential rental yields across India demonstrate a lower value compared to other developed countries. However, taking into the property price escalations, exit values and real estate perceived as a relatively preferred mode if investment for Indian’s one sees continued interest in residential real estate as an investment category for retail investors.??
A quick look at average rental values across Tier I and Tier II cities across the country present the following data:
Regulatory Framework of Rental housing??
Recognizing the potential for rental housing in India, and its role in Housing For All, the central government has come out with various policy initiatives and draft guidelines impacting rental housing. These include,?
The draft Housing rental Policy and Model Tenancy Act, were key initiatives to promote, regulate and institutionalize the rental market in India. The objective was to ensure interest protection of all stakeholders in the housing rental sector.??
As, we progress with India growth story and urbanization, rental housing will be the corner stone for fulfilling the housing needs for all citizens. There are crucial challenges for property owners and occupants that still need to be addressed to support this sector. For supply, or property owners challenges of tenant discovery, reliability, unorganized broker market, professional maintenance, upkeep and tenant management, Society management issues, Illegal occupancy and eviction form the key areas of concerns to be solved. For tenants, fear of untimely eviction, renting biases, security deposit return, property maintenance disputes, society restrictions and management, high transaction cost, property discovery.?
This is where platforms like Nestaway come in with rental solutions that come forth with tech enabled solutions to create transparency and trust amongst property owners and tenants. Superior rental solutions that employ technology and design to handle much more than maintenance issues are transforming the whole home rental network. No wonder it is India’s fastest-growing network that provides crucial information - available properties with addresses and honest customer ratings through its website and mobile application. This helps customers browse through available options, filter their preferences, and securely rent suitable properties in their network. Through its extensive network of properties, both business-owned and owned by individuals, Nestaway provides superior rental solutions with the help of technology and design.?
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