REAL ESTATE
State of Housing
India with its urbanisation at 30–40% of the overall population as recorded in Census 2011 will see a considerable rise in coming years. The rental housing market in India is pegged at 20 billion USD is much lower in comparison to other cities. Only 13% of housing at national level is rental which rises to 25% for urban India. In comparison to other countries, the investment in rental housing in India is very low.
State of Housing in India: Global Perspective
Demand for rental housing in Indian cities, however, remains extremely high, indicating that there is much scope for improvement in the rental market. The affordability and accessibility of existing rental stock as well as the creation of new rental stock are the chief concerns to be addressed.
Affordability
Housing affordability is one of the key factors that immensely impacts the rental housing market. Driven by decades of rapid urbanisation, the divide between accessible supply and specific demand of housing is constantly growing, thereby causing housing prices to skyrocket. Therefore, accessing affordable housing remains a pipe dream, especially for the Economically Weaker Sections (EWS) and Low Income Groups (LIG).
State of Housing in India: Affordability Conundrum
Metropolitan cities across India exhibit a high property price to income ratio. India’s property price to income ratio has risen to 7.5 in 2024 from 6.6 in 2020. A ratio greater than 5 indicates unaffordability, meaning that citizens in India would have to spend over 7 years worth of their salaries to buy a home of their own. While this number may not sound outrageous (Tier-II and Tier-III cities balance the number), the scenario is especially dire in Mumbai and other metropolitan cities.
State of Housing in the Mumbai Metropolitan Region: Affordability Conundrum
Meanwhile, the EMI to income ratio in Mumbai is currently 61% which indicates that a person pays over half of their monthly salary towards a home loan. Considering a median monthly income of Rs.70,000 (for median household income, we have escalated the income of ₹20,000 in 2008 — as per a World Bank report — using the average Consumer Price Index to achieve the figure of ₹70,000), a home loan interest rate of 9%, a repayment tenure of 20 years and the current real estate prices, it is estimated that over 50% of the population in the Mumbai Metropolitan Region (MMR) cannot afford a home within the region. The property price to income ratio is 29:1 on average in Mumbai though it may go as high as 47:1 in the Island City, indicating that a person would have to spend over 47 years of their income to buy a home. Current numbers show that one can only manage to afford a home in Vasai, a peripheral suburb of the MMR. Current home loan interest rates are 8–9% which is over double that of New York City (NYC), Berlin, Vienna and Singapore (see Case Studies for more information), yet government policies continue to encourage home ownership. Owning multiple properties and renting them out is not preferred due to the low rental yields (2–4%) and lack of adequate renting regulations and tax benefits in India.
State of the Housing Market in Mumbai
UNSOLD Housing
While the Indian urban population continues to grow, with 50% of the population projected to live in cities by 2047, the formal real estate market remains ill-equipped to meet the concurrently rising rental housing demand. An estimated 26–37 million households live in informal housing, which often lack basic services. Further, as of 2011, close to a million people remained homeless in India’s urban centres. At the same time, millions of housing units built for ownership remain unsold and therefore, inaccessible.
Unsold Housing across Indian Metropolises
According to data sourced from the Anarock Q3 2024 report on pan-India residential market; MMR remains the city with the highest share of available housing inventory, accounting for 33% of the total. Around 40–45% of this stock is older than 3 years. While some cities have seen a decline in available units, others have witnessed an increase since Q3 2023.
Cities like Bengaluru, Kolkata, and Chennai exhibited lower levels of available inventory. Analyzing the available inventory in terms of budget segmentation, MMR has the largest volume of available inventory in the affordable and mid-end segments, suggesting abundant availability of affordable housing units.
This indicates that there has been a higher production of housing in the affordable segment as the unsold inventory is largely owing to new supply rather than due to old projects in the last 2–3 years, and in terms of inventory overhang, it has reduced since, which is a good sign. It is important to know the age of the ‘unsold inventory’ in order to determine the pattern of available inventory.
Nature of Demand
Understanding Demand in Indian Cities
The type of housing demand in Mumbai is constantly evolving, with young professionals, students and migrant workers who constitute the majority of renters across income brackets. A highly mobile population, largely engaged in a growing gig economy, the youth prioritise job mobility and location flexibility over home ownership. To respond to the needs of this highly transient population, a varied and flexible housing market is urgently required. However, appropriate housing supply is invariably inadequate either in terms of volume, quality or location.
Changing Nature of Demand for Housing
Considering the above scenario, rental housing is a hugely important component of the housing market which holds immense potential in the march towards housing security for all. It provides much needed affordability, mobility and flexibility to those who are unable to or do not wish to own housing.
In Mumbai, 39% of the total population live in rented housing. Of this, around 63% renters live in informal housing, while only 37% rent from the formal rental market. This indicates a severe lack of sufficient affordable and flexible rental housing solutions can cater to varying housing demands and income levels. Further, the NSSO’s 2012 Survey indicates that 71% of rental households are without a formal contractual agreement. So, the demand could be much higher than projected by mapped statistics.
State of Housing: Typology