A major reason we are hoping demand for rental residential market would rise is that new employment opportunities are getting created in big cities where the capital cost of good houses are too high for a starter to afford. But, the same person can afford to take an apartment on rent, which would enable him to lead a living that he aspired for, says Gautam Thapar, director of Thapar Builders
Excerpts from the interview:
WHAT ARE THE PROSPECTS OF THE RENTAL RESIDENTIAL MARKET?
Rental market has a great future in the coun try’s residential segment of the real estate. An increasingly globalized workforce and an all per vasive private multinational work culture have given a fillip to the growth of India’s rental resi dential space over the past few years.
At present, housing demand comes in two possible ways: one, people live in their own houses, or, two, in a property bought by others for which a fixed amount is paid each monthsimply put, in rented accommodation. Thus, mo bility is mostly limited.
In the present market scenario, no developer is constructing a project with the sole purpose of renting out housing units in it, as rental yields in the residential space are only about 3% per annum and most of us do not find it an attrac tive business proposition.
The cost of building a house is far higher than the returns on letting it out and it doesn’t make any business sense, so far.
On the other hand, residential properties are purchased by individuals or investors solely for their capital value appreciation and being able to rent them out and start recovering some amount that can pay towards the EMI is surely helpful to them.
WHERE IS THE DEMAND FOR RENTAL-ONLY HOUSING?
With improved educational facilities and a rise in the mobility of professionals, more and more people are moving to places where there are opportunities for work and study.
People would prefer this option when they have the liberty to experiment with career switches and still be able to find a decent accommodation.
A major reason we are hoping demand for rental residential market would rise is the employment opportunities in metro cities. But in these cities, the price of residential units is very high, particularly for those who just have started their career. In metro cities like the Delhi NCR, Mumbai, Bangalore, Pune, Chennai, and Hyderabad current housing rates are prohibitive high.
When a housing market loses its affordability, the natural tendency is for people to steer towards rental housing, till the time they can afford to buy their own house.
Today, executives with high mobility prefer to live in a good accommodation even on rent, which could enable them to live a life that they aspired for. They postpone the decision to by their own house till they can afford to pay the EMI.
BUT WILL THIS NOT CALL FOR HUGE CAPITAL INVESTMENT BY DEVELOPERS, WHO WANT TO BUILD HOUSES TO GIVE THEM ON RENT, PARTICULARLY IN METRO CITIES?
Yes, of course! But if you compute the yield over a long period of time, the investment is very good. It is attractive enough if one has the capital.The best part is that the risk is very low, if one does it in an organized way.
DO YOU THINK THIS MARKET WILL GROW AND MULTIPLE PLAYERS WILL JUMP INTO THE FRAY?
Yes! World over, as the economy of a country matures, the rental market grows in tandem with the outright sale-purchase market.
HOW DO YOU FIND THE PRESENT CONDITION OF THE REAL ESTATE MARKET IN THE COUNTRY, THE NCR IN PARTICULAR?
There is a huge opportunity in the real estate market in the country. But, right now, it is facing a huge challenge due to delay in completion of housing projects. But this will be sorted out soon.
WHO IS TO BLAME FOR THE DELAY IN OFFERING POSSESSIONS?
Delay in possession of flats is a big concern today. Any delay leads to cost escalation and increase in the base value of the housing project.
So who is responsible? We cannot pin the blame on any one particular party or on one reason for this. There are multiple reasons: unnecessary interference by local development authorities, lack of physical infrastructure at the time of construction, shortage of cash flow, etc.
But, ultimately, developers have to shoulder the responsibility in completing projects.
HOW IS THE MARKET? IS IT A GOOD TIME TO BUY OR INVEST IN PROPERTY?
There is no dearth of transactions in the residential segment, as buyers still flock to responsible developers who stand by their commitment on timely delivery.
This is best time to buy, as the prices have come into the affordable range in several pockets of Noida and Gurgaon. If you are awaiting further price correction, it is not possible.