Indian developers are increasingly avoiding build-to-rent projects as slow investment returns continue to dampen interest in the sector. The shift has raised concerns among housing experts and policymakers, who warn that it could lead to a shortage of affordable rental housing in major urban centres. The decision comes amid a broader economic slowdown, with many developers opting to sell properties rather than hold them for long-term rental income.
Build-to-Rent Sector Faces Decline
The build-to-rent model, which involves constructing homes specifically for rental purposes, has been a key component of India’s housing strategy in recent years. However, developers are now steering clear of the sector due to low returns and regulatory uncertainties. According to a recent report by the National Housing Bank, the average rental yield in major cities has dropped below 3%, making it less attractive compared to other real estate investments.
“Developers are looking for quicker returns, and the rental market is not delivering that,” said Ravi Mehta, a real estate analyst at Indus Properties. “The cost of construction, maintenance, and regulatory compliance is high, and the rental income is not keeping up.” This trend is especially visible in cities like Mumbai, Delhi, and Bengaluru, where the rental market is already under pressure due to rising demand and limited supply.
Impact on Housing Affordability
The withdrawal of developers from the build-to-rent sector could have a direct impact on housing affordability, particularly for middle-income families. With fewer rental properties being constructed, the supply of affordable housing is likely to shrink, pushing up rents and making it harder for lower-income groups to find suitable accommodation.
“This is a worrying trend,” said Priya Kapoor, a housing rights activist in Delhi. “If developers stop building for rent, it will only worsen the housing crisis. Many people rely on rentals, especially in urban areas where buying a home is out of reach.” The impact is already being felt in cities where rent prices have risen by 10–15% over the past year, according to the National Sample Survey Office.
Government and Policy Response
The Indian government has been promoting the build-to-rent model as a way to meet the growing demand for rental housing. However, the current slowdown suggests that more needs to be done to incentivise developers. Some experts suggest that tax breaks, streamlined approvals, and long-term rental guarantees could encourage more participation in the sector.
“The government needs to create a more attractive environment for developers,” said Anand Desai, a policy analyst at the Centre for Policy Research. “Without clear incentives, the build-to-rent model will struggle to gain traction.” The Ministry of Housing and Urban Affairs has acknowledged the issue and is exploring ways to revamp the sector, but no concrete measures have been announced yet.
What’s Next for the Rental Market?
As developers continue to avoid the build-to-rent sector, the onus may shift to private investors and institutional players to fill the gap. However, these entities often focus on high-end properties, which do little to address the needs of the middle and lower-income groups.
“We need a more diversified approach to rental housing,” said Mehta. “It’s not just about building more homes, but about ensuring they are accessible to those who need them most.” With the rental market at a crossroads, the coming months will be critical in determining whether the sector can recover or if the current trend will lead to a deeper housing crisis.
