Housing market in India has changed because more people are moving to cities to find jobs and education. Home ownership is still in the heart of many families but a big urban population is also making affordable rental housing more of a necessity.
Niranjan Hiranandani, Chairman of National Real Estate Development Council (NAREDCO), believes rental housing should become a much larger part of India’s housing strategy.
Hiranandani said affordable rental housing can help India meet the needs of people who may not be ready or able to buy a home, especially migrants and workers moving to cities for employment. He has previously said affordable rental housing will be crucial in order to achieve the larger goal of “Housing for All”.
Need is more crucial as India’s major cities are growing and housing prices rise and demand in India’s large cities are becoming more and more expensive.
Rental Housing Issues for India?
India’s urban population is growing and millions of people move between cities every year for work. Many of these workers need housing close to their jobs but cannot afford to buy a property. Rent can be more attainable for such households.
But low-cost rental homes aren’t always available in work-based areas. Workers may then have to choose between paying a large fraction of their income as rent or living far from their workplace and spending time and money on transportation.
Such a better rental housing market could help. Low-cost homes around job centres closer to employment centres might make cities more accessible for workers and less expensive for families to pay for housing.
India has focused more on Home Ownership. Government housing policies have historically been focused on helping people own homes.
Many schemes like Pradhan Mantri Awas Yojana (PMAY) have been developed to increase housing access to low-income households. PMAY 2.0, launched in 2024, provides affordable rental housing as part of its urban housing interventions.
And ownership is only one way out.
A young professional who has recently moved to Bengaluru, Mumbai, Delhi or Hyderabad may not want to immediately purchase a home. The same could apply to a construction worker, factory worker or other migrant worker who moves between cities depending on employment opportunities.
Such rental systems are flexible for the groups in these situations.
Hiranandani has also been calling for more formalised policy to promote rental housing, along with other real estate leaders.
What Hiranandani Wants The Government To Do
Hiranandani has suggested policy changes which would help make affordable rental housing attractive to developers.
One of his top suggestions is to remove restrictive conditions from Section 80-IBA(6)(da) and extend tax benefits for affordable rental housing projects for at least five years.
He also suggested that rental income from properties held as stock-in-trade should be tax exempt for five years after construction is finished.
So developers will have more time and money to develop and operate rental properties. It is argued by industry leaders that without incentives to build in those areas, developers may prefer premium and luxury housing because the returns are higher.
This can result in a mismatch between what the market requires and what developers find financially attractive. Affordable housing is a supply problem
India’s affordable housing segment is seeing hardships in recent times.
Although demand for cheap homes is still high, developers are finding it increasingly difficult for them to make such projects financially profitable as prices for these projects are so high, especially in big cities where land prices are high.
The definition of affordable housing has also been a problem.
The current price ranges were established years ago, and since then property prices, construction costs, labour expenses and land prices have gone up very significantly.
Industry bodies have so far argued that the government should update the definition of affordable housing in line with current market conditions.
Without any changes, developers may have difficulty building homes that are technically affordable but still commercially viable.
High land costs are a major challenge
Land is one of the largest costs involved in developing housing in Indian cities.
Land prices in areas near employment centres make it extremely difficult to build low-cost homes.
With this, affordable housing projects are pushed to the outskirts of cities. But that is another problem. People living far from employment hubs may be forced to travel for hours to and from work. They may also have higher transportation bills.
Affordable housing is therefore far from simply the price of the home or monthly rent. Location matters too.
A slightly more expensive home closer to a workplace may be more affordable for a worker than a cheap home further away. Rental housing can help Migrant Workers.
One of the largest groups that could benefit from affordable rental housing is India's migrant workforce.
People move to cities because there are jobs; many have no money to buy homes but not many have the money to buy a house.
And formal rental housing might offer them better living conditions without a great deal of upfront investment.
This is also good for businesses because employees may find it easier to live closer to industrial areas, offices and commercial centres.
India has already tried schemes such as Affordable Rental Housing Complexes to provide rental accommodation for urban migrants and poorer households.
The bigger problem is scaling such models and making them financially sustainable.
Developers also need to have more policy support.
In order to provide affordable rental housing, private sector involvement is needed.
But developers need to be sure that the projects they work on will produce reasonable returns over the long term.
Hiranandani has argued that policy support can help create this confidence.
Tax benefits, easier approvals and access to suitable land could make rental projects more attractive to developers. Industry experts have also called for faster approvals and better infrastructure to support affordable housing development. The government therefore has a vital role to play but can’t solve the problem through subsidies alone.
In order to create a successful rental housing market, developers, financial institutions, local governments and tenants need to participate. Rental housing could help India’s urban growth. India’s economic growth will be heavily dependent on its cities.
As more companies grow in urban centres and create jobs, the demand for housing will continue to rise.
If housing supply is not kept up, rising rents and property prices are likely to make it more difficult for middle-income and lower-income people to afford.
Rental housing that can be purchased at a reasonable price can alleviate some of this pressure.
It can also make labour markets more flexible because people can move to cities for employment without first having to make a major investment in property.
Renting is a good way to reach that middle ground for young workers, migrants and families who are not ready to buy homes.
The Bigger Housing Challenge
Housing is not only about building more homes in India.
The country needs the right homes at the right prices and in the right locations.
Luxury housing has grown so rapidly in recent years, and cheap housing has been left behind. Recent research has also demonstrated that a more uneven housing market is emerging with higher-value properties accounting for more of the sales.
That is why the discussion of rental housing is so important. India needs a housing market that caters to different incomes and not just the wealthy who buy their homes.
What is ahead?
I think affordable rental housing will continue to be an important aspect of India’s urban development discussions. Hiranandani's argument is straightforward: India cannot only depend on home ownership to solve its housing needs.
As long as there are people moving from city to city, job to job, so will the housing market that they can find in the rental market and will be able to get the homes for them without the cost associated with buying it.
As for tax incentives, new affordable housing definitions, easier approvals and policies that encourage private investment, the government must support that.
Developers will have to create rental housing that is affordable to tenants and profitable as a business.
For India, the bigger goal is to make sure economic growth does not make its cities unaffordable to the people who keep them running.
And we are not only seeing the growing urbanisation but also the rise of affordable rental housing that is not only a pathway to ownership but also the basis of India’s housing future.
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