Indian Rental Homes
Market - A Closer Look ..!
Interesting contrasts and similarities with China, USA and UAE
rental markets
By Mr. Ashwinder
Raj Singh, CEO - JLLR (JLL Residential)
In India, much is
written & discussed on the topic of home / house / flat purchase, because
homeownership is a topic close to the heart of most Indians.
Also, buying a home
invariably involves a very big part of an average Indian family's existing &
future finances.
This is why when
things go wrong in home purchase, the fallout can be quite severe. That
particular path obviously needs to be plotted very carefully.
The rental homes
market, on the other hand, gets much less mention even though it plays an
equally important - if not more important - part in the scheme of things.
This is because:
- The rental market does not involve very spectacular figures unless one is talking about ultra-luxury homes
- It is relatively easy to 'exit'
a bad rental home or deal
- The money spent on renting a
home is obviously not an investment which can yield returns.
This is why rental
housing does not get discussed nearly as much as home ownership - but the fact
is that a massive part of India's population depends on rental homes / flats to cater
to its housing needs.
Investors into residential housing may be in part
attracted to the relatively steady income that putting a home / flat out on rent can
earn them.
However, the fact remains that residential rental yields in India
are not the stuff that financial legends are made of.
It can be safely said
that residential investors are primarily in it for the capital appreciation a
well-chosen property purchase can yield over a few years, and that rental
income can be the icing on the cake.
Rental housing in
India comes in various formats.
The following 3 models are the predominant
ones:
- Single family rentals..! Here, an apartment / flat or a house is rented out to
one family which is in control of the entire property for a fixed period
of time as per the rent deed. This is the most common rental mode, given
the scarcity of affordable homes despite demand being extremely high. Such
rental homes can be empty, semi-furnished or fully furnished, attract
families with different needs and generate regular income for the
homeowners
- Paying guest accommodation..! This is yet another form of rental housing where
students, working professionals and others who need temporary
accommodation are given a part of a house on rent and essentially share
the premises with the owner of the house. This is quite an attractive
proposition for those with budget constraints looking for residential
options. The downside would be the lack of independence - one is living
with the homeowners, and there may be various limitations built in. Paying
guest (PG) housing tends to thrive in areas surrounded by educational
hubs or / business clusters
- Shared apartments..! In this model, working individuals or / students can
pool their money to rent an apartment and live in it together, more or
less on their own terms and certainly without the limitations of a PG
scenario. They have their own privacy and do not come under the owners’
scrutiny unless there are issues with other apartment owners, or the
apartment is not used as specified in the rental agreement. Like PG
accommodation, the shared apartment model is popular in areas which have
educational institutions or office complexes in the neighbourhood.
The Evolution of
Indian Rental Consumer...!
With rising incomes,
increased exposure to global housing standards and features and frequent
movement across cities for employment, the Indian rental housing consumer is
becoming more demanding of the value his or / her money buys in a rental home. There is greater demand for rental homes in projects with good amenities,
quality interiors and in well-connected and respectable localities. In the
categories of family rental homes and even shared apartments, tenants are
willing to pay a bit extra for these value-adding features.
The rental housing
market scenario in India throws up some interesting contrasts and similarities
with other countries. A quick look at what is happening in two of the largest
countries:
China Rental Market..!
When we compare Indian
rental housing market with that in China, one has to understand that the real
estate boom in China happened over two decades ago, and almost 90% of the
population now owns their homes. The rental housing market in China is still
evolving and rentals are quite high, given the quality of accommodation
available. In contrast, India does not have enough homes to cater to every
stratum of society, and growth in infrastructure is still in its nascent stage.
USA Rental Market..!
America has gone
through various cyclical ups and downs in its real estate market, the most
recent being the housing bubble burst of 2008. Currently, the American rental
market is growing as home ownership is becoming more expensive and the economy
is still not healthy enough to attract buyers despite the substantial
availability of residential projects. This is certainly reminiscent of the
Indian scenario.
UAE Rental Market..!
The UAE rental market
is going through a churn period. Even though residential projects available for
rent offer world-class facilities, rentals are headed southwards due to
changing macro-economic factors. Decline in oil prices coupled with a slowdown
in the economy has resulted in the creation of fewer top-level jobs and lower
salary rises. This has resulted in lowering of rentals across all segments, but
it still has not erased the sheen of attractiveness to owning a property to be
put up on lease, as the demand for rental projects is still high. As per
forecasts, rentals should bottom out by the year end, and start rising from
next year onward.
About the author..
Mr. Ashwinder Raj Singh is CEO at JLLR (JLL Residential)
For media Contacts
Arun Chitnis
Media Relations – JLLR
(JLL Residential)
Mobile: +91 9657129999
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