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Rental boost

The model law can help fix a struggling housing market

Topics
budget 2019 | Economic Survey | Real Estate

Business Standard Editorial Comment 



Urban India has a dysfunctional housing market. Too few houses are available for rent; those that are on sale are priced out of the market. As a consequence, there is both unfulfilled demand and a large inventory of vacant apartments. The 2018 estimated there were almost 500,000 vacant houses in Mumbai alone, and Delhi and Bengaluru possibly had about 300,000 apartments standing empty. Perhaps 12 per cent of the housing stock in urban areas of India is not occupied for living, in spite of millions of households who wish to buy or rent not finding satisfactory houses. The Survey blamed “unclear property rights, weak contract enforcement and low rental yields” for this structural problem. Home owners are unwilling to rent out their houses because the legal framework is loaded in favour of tenants. For similar reasons, there is a premium on ownership of a house, so that rental incomes are much smaller than the equivalent mortgage costs. This further depresses the incentive to rent out a house. In other words, the absence of proper and reliable contracting has led to a breakdown in the market.

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First Published: Tue, July 23 2019. 00:55 IST

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