People have only two options available for having access to shelter- ownership and rental. Both options have their merits, demerits, constraints and compulsions. While ownership housing may be limited to a relatively small section of population, there are several factors that make rental housing an inevitable choice for a large segment of population.

It is interesting to note that the promotion of rental housing can make a significant impact on the economy in the following ways:

	It can be effective means of reducing shortage of housing for a large population for which ownership is not affordable.
	Housing activity is labour-intensive. For any given investment in housing the employment generated is therefore higher than in many other sectors of the economy. It generates employment for both skilled and unskilled labour, but more for the latter.
	Housing/ construction activity has backward and forward linkage with many other industries. It has a large income multiplier effect.
	It can help in stabilizing real estate prices and checking speculation and thus making housing more affordable to the weaker section.
	It helps to check proliferation of slums in a significant manner.

However, one major hurdle in the way of growth of rental housing in India is that the prevailing regulatory regime is heavily inclined in favour of the tenant. It is a severe restraint to invest in rental housing.

The operation of the existing laws makes real estate transaction considerably more expensive and the process of buying and selling far more complex than in may countries where the government has practically no role to play in such transactions.

The fiscal concessions offered by the government are of benefit only to the taxpayers since the concessions are by way of reduction in the tax liability.

People whose incomes are so low that they are out of the tax net are not entitled to any concessions.

High rate of local taxes make rental housing unviable or less viable. There is differential treatment for self occupied and tenant-occupied properties, with the latter being taxed more which acts as a deterrent to rental housing.

In India, unaccounted money forms a substantial part of the total economy and has the potential to fulfill enormous financial needs if it is allowed to come out and be gainfully utilized as it has been a number of times earlier under special schemes of the government. A recent (1995-96) estimate of unaccounted money puts it to be to the extent of 40 per cent of the GDP.

The total investment requirement of Rs 55,000 crores is much larger than the actual investments made. The situation points to any urgent pump are substantial additional investment into this sector to boost the economy to a high level, which India is capable of achieving, and at the same time to make a tangible impact on poverty.

With two million housing programmes under various stages, a projection indicates reduction in housing shortage in the urban and rural areas. A large part of the usable housing belongs to higher income groups and lower income group suffers a major proportion of the shortage. Also the shortage is more acute in urban than in rural areas.

RECOMMENDATIONS

	To bring in more investments into the housing/ construction sector and to have a tangible impact of such investment, one major source could be unaccounted money. This money may be brought into circulation for productive use in developing infrastructure. It could be made possible through rationalizing and liberalizing the tax regime.
	Raising indirect taxes can also raise resources. Tax on commodities like cigarettes and alcohol can be hiked and new tax can be imposed on cars. Hiking the price of electricity may be carried out selectively so that the poor are not affected, though it may have an inflationary effect. Abolishing fertilizer subsidy may also have a similar effect. Hence some counter-measure should be in place to check the inflation. Such measures will ultimately create more employment and benefit the economy as a whole.
	House/ property tax for rented and self-occupied houses should be at par and should be based on the floor area.
	Rental income from housing property should be tax-free like agriculture income so that rental housing is more viable. The exemption in tax may be allowed initially for houses that have a floor area upto 1500 sq ft.
	To attract more investment in rental housing, investment in rental housing maybe exempted from tax up to a reasonable amount may be up to Rs 5 lakh dwelling per unit.
	Rental housing may be promoted through increased supply of serviced land by private/ public sector, cooperative sector and NGOs.