Home / Money / Calculators /  What is rental housing?

The most unaffordable basic necessity is undoubtedly a roof over the head. Leave aside owning a house, even taking a small house on rent in most metros is unaffordable. Things get more difficult for those who move to bigger cities from smaller towns for education and employment. Though the government has ambitious plans of providing “housing for all by 2022", it is not easy to buy a house.

To supplement the need of housing, the government has been planning to bring in “rental housing".

What is rental housing?

According to the National Urban Rental Housing Policy (Draft) 2015, issued by the ministry of housing and urban poverty alleviation, rental housing refers to a property occupied by someone other than the owner, for which the tenant pays a periodic mutually agreed rent to the owner.

The need for rental housing was first mentioned in National Housing Policy, 1988, but not much has been done so far. In January this year, the Punjab cabinet approved a policy on rental housing for students, corporate professionals, senior citizens, migrant labourers and others in the state.

Types of rental housing

The draft broadly differentiates the rental housing in five categories.

Formal and informal: In case of formal rental housing, the owner and tenant enter into an agreement and get it registered with the competent authority. Under informal rental housing, there is no such registered agreement.

Market driven: This is provided by individual owners or institutions or private rental housing operators (such as hostel owners) wherein owners finance the construction and management of the housing, without any assistance or aid from the government.

Need-based: This is based on the need of different groups (such as students, teachers, working women or men, nurses, construction workers, migrants) who have a source of income, but find it difficult to afford rent.

Public: This refers to social rental housing owned by the government, local authority or its entities.

Social: Here the rent is set at a level below the market rates to make it affordable for poor people (economically weaker section and low income group). It may be owned and managed by the government, local authorities, public sector undertakings, non-profit organisations, private or any others charitable institutions.

Rental housing does not include hotels, lodging houses, dharamshalas and so on.

In September last year, the housing ministry announced a new public-private partnership (PPP) policy to promote private investment in affordable housing, including rental housing. As per the policy, the government will promote “Direct Relationship Rental Housing" by providing land to the builder to build rental housing and allowing the builder to recover the cost of construction through rental income. Tenants of such rental housing are also eligible to take benefit of central assistance of up to Rs2.50 lakh per house under different components of Pradhan Mantri Awas Yojana (Urban).

Given that National Urban Rental Housing Policy is still under construction and there is lack of clarity on rules and regulation related to rental housing, private developers may not be in a hurry to join the initiative. Not surprisingly, the wait for rental housing in India could be long.

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