Shortage of Houses in India: Increase Rental Stock & Reform Draconian Rent Control Law!
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While Prime Minister Narendra Modi has listed affordable housing as one of the top priorities on his government’s agenda, we opine that one of the root causes behind the non-availability of affordable housing, is the draconian Rent Control Act!
Also Read: What is Standard Rent?
Courtesy - Pakistantoday
Why is Affordable Housing Still a Distant Dream for Most in the Country?
Rental housing Stock is the key feature of vibrant housing markets and an essential component of affordable housing. However, housing in India has come to be dominated by the wrong notions. Here whosoever wants to ‘have’ a house, he has to ‘own’ it. One cannot get a house easily on rent. This could be attributed to various reasons, including the nature of the existing rent control laws prevailing in the country. The draconian Rent Control Law is one of the major factors contributing to the shortage in formal affordable housing and distortions in the land market. The large scale disparity between supply and demand for realty stock need to be corrected.
How Grave is the Situation?
Whereas there are several thousand houses that lie vacant in most cities, many people though affording to earn a decent living, mainly from the unorganized sector, are compelled to languish in the slums. This is because, most property owners feel that renting their houses / premises might deprive him / her of his / her hard earned property following the Rent Control Law, which appears to be favouring the tenants. This unfortunate situation, eventually leads to a large scale scarcity of realty stock in most markets.
What could be the Possible Solution?
The first step in the direction to make affordable housing available to most segments of the society, would therefore be to drastically amend the Rent control Law prevailing in most states. This would also require political maturity. Because most political parties, mainly in the urban areas where the situation of affordable housing is more grave, avoid touching upon the subject probably fearing a back lash from a large segment of the tenants, who constitute their vote bank. However, even if amendment to protect the existing tenants along with a new cut-off date for the fresh rent agreements is announced, the problem of affordable housing would ease drastically.
Other Suggestions to the Government
Firstly, the government must amend the Rent Control Act so as to protect the interests of both the tenants as well as the owner. This could be done by making legal provision making it mandatory for the tenant to evict the premises strictly as per terms laid in the contract. This is also done by protecting the right of the tenants, who also need to feel secure. Also, the government may think of offering incentives in taxes by declaring a tax-holiday for developers constructing and renting out properties at affordable rates for common people or liberal concessions under 80 C in the Income-tax to individuals for rental income. Similarly, employers constructing houses for their employees may be allowed handsome or say 100% depreciation etc.
The new amended law for rent control also needs to be publicized largely so as to encourage a large segment of realty stock holders to release their stocks in the rental market.
Suggestions to the Banks or Financing Companies for Home Loans:
Banks and financial institutions providing home loans for affordable housing need to develop a liberal mind-set for home loan seekers. Ordinarily it has been observed that most banks treat home loan seekers at par with those seeking loans for industry or business. A large segment of people, mainly from the un-organised sector, though good earners cannot avail the home loan facility following the norms maintained by most banks / financial institutions. This, needs to be corrected!