Economic Survey 2018: Government must focus on tackling problem of vacant housing

While India‘s housing policies have mostly focused on building more homes and on home ownership, a key policy priority of the government to achieve the goal of Housing for All will be to take a holistic approach including the rental segment and vacancy rates.

“While there are good reasons for encouraging home ownership, it must be recognised that the rental market is also an important part of the urban eco-system. Rent control, unclear property rights and difficulties with contract enforcement have constrained the market in India in recent decades. These problems need to be resolved in order to allow horizontal and vertical mobility as well as to address a related issue – high vacancy rates,” says the Economic Survey.

Policies related to housing need to recognise that India has an increasingly fluid population. A successful housing policy should enable horizontal or spatial mobility, namely the ability to move to, between and within cities as job opportunities arise. It should also deliver vertical mobility so that an aspirational population can climb the socio-economic ladder. These concerns should be embedded in policies ranging from urban design to those related to transaction costs in the secondary market, it notes.

The Economic Survey has been tabled in Parliament by Finance Minister Arun Jaitley. The Survey pegs FY19 GDP growth at 7-7.5%. What are the key highlights of the survey, Sakshi Batra speaks to Gaurav Choudhury, Economy Editor, Moneycontrol to find out.

Providing statistics, the Survey says that the number of vacant houses in India have increased from 65 lakh in 2001 to 111 lakh in 2011. As per the national census, the number of vacant houses constitutes around 12 percent of the share of the total urban housing stock which as per 2011 Census and IDFC Institute statistics 2017 stands at 895 lakh.

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Maharashtra has the highest number of vacant houses

It also notes that the district-wise distribution of vacant housing stock shows a greater prevalence of vacant housing in the western half of the country. Maharashtra has the highest number of vacant houses (slightly greater than 20 lakh or 2 million) followed by Gujarat (around 12 lakh or 1.2 million). Gujarat has the highest share of vacant houses to the total residential stock (18.5 percent), followed by Rajasthan (17.3 percent) and Maharashtra (16.39 percent).

As for cities data, Mumbai has the highest number of total vacant houses (4.8 lakh or 0.48 million), followed by Delhi (3 lakh or 0.3 million) and Bengaluru (around 3 lakh or 0.3 million). In terms of share of vacant houses to total residential stock, Gurgaon ranks highest (26 percent).

The phenomenon of high vacancy rates is not fully understood but unclear property rights, weak contract enforcement and low rental yields may be important factors. The spatial distribution of the new real estate may also be an issue as the vacancy rates generally increase with distance away from the denser urban cores, it notes.

The Survey also points out that in Mumbai Metropolitan Area (MMR), vacancy rates are higher in the districts of Thane and Raigad than in the denser “Island City” and suburbs.

Share of rental housing declining

It also says that the share of rental housing has actually been declining in Indian cities since independence from 54 percent in 1961 to 28 percent in 2011. Although most parts of the country have witnessed a decline in the share of rentals, it is not uniform.

It notes that the decline has been especially sharp in the northern states (excluding the mountain states).

Gujarat, Maharashtra and Andhra Pradesh have high percentage of rental housing

As a proportion of all housing, renting accommodation is more prevalent in urban areas than in rural. According to the 2011 Census, the share of households living in rented houses was only 5 percent in rural areas, but 31 percent in urban areas.

A state-wise picture also shows that the more urbanised states, such as Gujarat, Maharashtra and Andhra Pradesh have a higher percentage of rental housing. Similarly, larger cities had greater shares of rented housing – from 28 percent for small towns, 36 percent for medium-sized towns, to 40 percent of total housing being rented in large cities, it notes.