Blogs | Red Ribbon Asset Management

India gets an early Christmas Present…and it may well be the gift that keeps on giving

Written by Suchit Punnose | Dec 24, 2019 12:00:00 AM

India currently has 11.09 Million vacant housing units, accounting for almost half the number of properties currently being rented out in the subcontinent’s ferociously expanding urban hinterlands. So it's a safe bet strategic moves to tap into this unused stock of potential new homes will now play a central role in Prime Minister Modi’s policy of housing a further 223 Million urban residents by 2031: the enticing prospect of delivering more than 11 Million new homes more or less at a stroke is not easily overlooked, especially when the needs of an increasingly urbanised population are as pressing as they are at the moment. And the way to do it quickly may well be bound up in India’s proposed Model Tenancy Act, trailed so enthusiastically by the Finance Minister in her Union Budget Speech this year, providing a more structured and resilient framework for releasing all those untapped units onto the market. The legislation has all the hallmarks of being an early Christmas present for suppliers and consumers alike.

Under its core provisions, future tenancies will have to be input into writing and filed centrally to be enforceable, and unlike the current regime this means residential and commercial tenancies (but oddly not industrial premises); if the tenant fails to get out on time the agreement will automatically revert to a month by month letting for six months after which twice the agreed rent has to be paid two months and four times as much after a further two months (which is quite an incentive to leave). On the tenant’s side, there will be a cap on the amount a landlord can take by way of the security deposit (heralding the end of a much-abused necessity) and a ban on increasing the rental figure during the period of the lease. There will also be statutory recognition of a new Property Manager role, making estate and building management more coherent and rational, and certainly more effective than it is in downtown Mumbai at the moment.

Building on India’s new climate of corporate and public compliance, there will also be reinvigorated Rent Courts and Tribunals providing faster and more effective dispute resolution procedures in place of the existing shambles of labyrinthine systems that either don’t exist in any practical sense or take years to complete. Bad news for the lawyers perhaps, but very good news for everyone else involved.

Widely expected to be adopted in its current format following State consultation later this year, the new legislation will play a key part in securing the release of those 11.09 Million unoccupied units onto the market, meeting the demands of a rapidly expanding and increasingly urbanised population and, not unimportantly, also helping attract long term capital investment to the subcontinent’s housing sector: investors will be much more willing to take a stake in developments that are planned, conceived and completed in a culture of improved legal and regulatory certainty.

But of course, there are other ways to get housing units onto the market quickly…

In 2016 Savjibhai Dholakia, owner of a leading diamond polishing business in Surat gave away 400 flats to his employees. There’s no suggestion he repeated the feat in subsequent years so perhaps the business took a nosedive in the meantime, in which case he probably won’t have any future plans to recruit the young lady who gave her parents a particularly mercenary Christmas list last month: several bottles of Chanel No.5, Gucci Flip Flops, an iPhone and $4,000 in cash in case she’d forgotten something (and she’s only ten). At least she never asked for a house…

Whatever you find at the foot of your tree this year and no matter how dizzying or humble the price tag might be, we wish you a happy and peaceful Christmas from everyone at Red Ribbon.

 

Find out more about Modulex 

 

Modulex Construction is the World’s largest and India’s first Steel Modular Building Company, working to meet the opportunities of India’s real estate markets in a practical and focussed manner. It was established by Red Ribbon to harness the full potential of these fast-evolving markets and deliver exciting opportunities for investors: because, when it comes to investing on the subcontinent, nobody knows its markets better than Red Ribbon.

Executive Overview

We’ve been focussing closely on Indian real estate markets ever since Red Ribbon was founded more than a decade ago, and I’m very proud of the part Modulex has played and will continue to play in meeting the demands of the fastest-growing urban population in the world.

Particularly because there is also a pressing human story behind this demand, reflecting the needs of individual families struggling to find shelter and security is often very difficult urban conditions.

So as we gather at home with our families this Christmas, it’s appropriate that we should reflect on these realities and resolve to help to change things for the better in the years ahead.