Several questions on housing have been plaguing me. And because my current work engages with housing only tangentially, I find myself background thinking a lot of issues related to housing security, real estate markets and the nature of home ownership. The role of rentals in the housing market is something I’m rather excited about. So today’s question draws from the debate on in the UK about the growing role of buy-to-let home buyers. What’s the scenario in India?
We do know that speculative property purchases are on the rise in India. Notwithstanding the current slowdown, the post-liberalisation era has meant that favorable home loans terms and rising incomes have combined to put real estate into that sweet spot; real estate purchases have become a normal component in the portfolio of salaried urban Indians. Most of these investments are in second (or third) homes. Yet, there is the rise in the rental housing supply is not proportionate and we do know that a large number of houses in cities are lying locked up (ref: 2012 MoHUPA report on housing, which recommended push for rental housing).
Is there a larger role for buy-to-let home buyers in the Indian context?
Unlike the UK, Indians cannot avail of a buy-to-let mortgage, which are suited specifically for properties where rental incomes are more than the monthly installments. However, Indians do take out regular home loans to buy properties specifically for rental purposes. Though archaic rental laws are usually blamed for the slowness of rental markets, it is also true that speculative buying largely includes suburban properties that yield lower rents. The thrust of speculative housing investments has been the lure of higher returns through sale, not through rentals, which are relatively weak. Further, property management for rentals is not yet a well developed aspect of the real estate services industry and the responsibilities of being absentee landlords are daunting indeed.