Transforming the real estate sector through buy-to-let properties

By Suresh Rangarajan, Co founder & CEO of Colive Finance Minister Nirmala Sitaraman has recently announced the setting up of a Rs 25,000-crore alternative investment fund (AIF) for stalled projects in the affordable and middle-income housing segment. This comes as a welcome respite for India’s ailing real estate developers, who have been struggling with unfinished projects owing to the severe liquidity crunch. The government has earmarked Rs 10,000 crore towards the fund, and the State Bank of India and Life Insurance Corporation (LIC) will contribute the remaining amount. According to government estimates, 1509 housing projects comprising of approximately 4.58 lakh housing units fall in the stalled category, of which around 90% should be eligible or the new fund. Challenges plaguing India’s real estate industry The establishment of this crisis fund is a positive move, but it fails to address the multitude of challenges plaguing the real estate space. Especially, the residential real estate sector has witnessed a decline in sales and investments due to weak demand, high taxation, defaults and the rippling effect of the NFBC crisis. Adding to this is the fears of an impending economic slowdown, which can worsen the skewed demand-supply balance. As per industry experts, even if the AIF fund is utilized efficiently and it can cover only a fraction of India’s total stalled instruction. Another area of concern is that if the majority of these projects get completed but remain unsold, they will just add to the inventory of unsold housing units in India. The rise of buy-to-let properties At an uncertain time like this, buy-to-let properties present a window of opportunity for realty developers and investors. These can include family rental homes, student accommodation facilities and co-living spaces. The skyrocketing property prices make homeownership out of reach for a large percentage of India’s population. Millennials and Gen Z, in particular, prefer to take property on rent, rather than buying. This has resulted in heightened demand for rental houses, subsequently promoting more realtors to turn towards the buy-to-let model. Buy-to-let properties are the need of the hour as they can address not only the urban housing woes, but also the affordable housing crisis that India faces today. Additionally, they can narrow the demand-supply gap that exists in the rental housing sphere. This can be achieved by converting unsold inventories into ready-to-move-in homes. Another advantage of the buy-to-let-model is that it is open for disruption. Active involvement of multiple stakeholders is paving the way for tech-based innovation, reimagining and redefining the real estate industry in the country. The surge of co-living arrangements, for example, has added a fresh spin to the traditional shared living concept. Co-living: the Future of urban living Up until a few years ago, the term ‘co-living’ was rarely heard of outside the real estate sector. Today, co-living is looked at as the future of urban living in India and worldwide. Located near business centres and educational institutes, co-living facilitates to meet the housing needs of the young population. A typical co-living setting comes equipped with fully-furnished rooms and offers a host of standard and special amenities, including Wi-Fi and DTH connectivity, access to fitness rooms and games room, and tech-enabled security systems, among others. Moreover, residents can also avail daily meals, housekeeping facilities, laundry and concierge services, and on-demand maintenance support. Co-living is enabling a true plug-and-play experience, allowing people to move in immediately with just their personal belongings. The key highlight of co-living lies in its unconventional approach to utilizing spaces. In most cases, co-living residents share areas like the kitchen, terrace and the lounge. This strategic balancing of private and shared spaces saves both resources and costs, and also facilitates social interactions, group dining and other communal activities. Co-living may be in a nascent stage in India, but it is encouraging more real estate developers and financiers to embrace the buy-to-let model. As the possibility of another financial crisis emerges, but buy-to-let properties could be the only saviour of the country’s ailing real estate sector. Especially, the residential real estate space is expected to have a positive transformation buoyed by widespread adoption of this trend.