November 17, 2014

Housing For All: The Way Forward

In this Mint article, IDFC Institute's Vaidehi Tandel, writes with Sahil Gandhi, that:

Photo: Ramesh Pathania/Mint

"The National Democratic Alliance government has recently announced its intention to launch the Sardar Patel Urban Housing Mission to make good on its promise to provide housing for all by 2022...This requires an agreement on certain minimum acceptable standards of housing... However, minimum standards that are unreasonable or unenforceable could result in higher construction costs that would crowd out the poorer populations and lead to rampant violations...

... Unfortunately, rental housing has not received due attention in housing policies in India. The current restrictive rent control laws together with other regulations have all but killed off investment in rental housing in the formal sector. At present, rent increases allowed by law are usually lower than the inflation rate. For properties that are not under rent control, the returns on investments are low so that the opportunity cost for investing is high. As a

result, one sees that formal rental housing as a share of total housing has declined over the years throughout the country. The Census figures indicate that for urban India, the share for rental to total housing has fallen from 54% in 1961 to 28% in 2011.

The housing mission must ensure the revival of rental housing either by providing public housing units to be used solely for rental purposes and managed by housing associations that would set and collect rents or by incentivizing private investment in rental housing. Increasing private investment would require changes in rent control laws to allow for revisions in rents that would provide attractive returns to landlords while providing adequate protection to tenants. Some other regulations such as tax exemptions on incomes from rent, identical property taxes for rental and ownership housing units, would also help boost investments in rental housing. On the demand side, a policy of housing vouchers could be introduced so that the poor have access to private rental housing..."

Read the full article here.

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