Airbnb has skyrocketed rentals in India

Airbnb bookings have taken off in India since the end of the COVID pandemic.

According to The Economic Times (July 7, 2021), in India there are at least 70,000 properties registered on the site. National reserves increased by 80% in the third quarter of 2022 from pre-pandemic levels, while hosts collectively earned more than $12 million in reservations with families in 2022.

But there are serious questions about the effect this short-term rental explosion may have on housing and rentals across the country.

This is because there are already many affordable housing problems in Indian cities, as pointed out by the India Infrastructure Reportwhich documents that approximately 19 million urban households face a housing deficit, despite the fact that 11.1 million houses are empty in cities.

In addition, less than 1.8 million houses have been built as a result of various programs initiated by the government. Some studies estimate that more than two-thirds of the urban housing shortage is due to overcrowding in homes.

Indian cities are also experiencing a severe rental housing crisis affordable, with a steady decline in the rental housing market share from 54% in 1961 to 28% in 2011, according to the Census of India.

According to the airbnb website, the price per night for an Airbnb stay in an Indian city is around 4,800 rupees ($58). The most popular places for short term rentals are Goa, Bengaluru, Karnataka, Pune, Hyderabad, Dehradun, Jaipur, Raigarh, Ernakulam, New Delhi and Nainital.

The natural assumption is that in cities where Airbnb is active, accommodation and rental housing would be relatively more expensive. This is because we assume that such units are withdrawn from the housing market. It logically follows that the price of housing will also be pushed up, since the profitability of renting properties on Airbnb makes real estate investment more attractive, increasing competition.

A recent investigation found that Airbnb density has significant effects on apartment rentals of all sizes and house prices in Indian cities.

Prices and rents for three-bedroom apartments showed the largest effects. These results are quite pronounced given that Airbnb penetration in Indian cities (as measured by Airbnb density) has been quite limited in the emerging market. The results are also quite striking considering that the data on active rentals was collected during a pandemic, meaning the impact could be even more prominent under normal circumstances.

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The homestay market is estimated to be worth around $15 billion worldwide. Studies conducted in the United States have revealed that Airbnb has increased the price of rental homes in that country. In New York, rents rose 1.4%, or $384 a year. The investigation also found that Airbnb took between 7,000 and 13,500 long-term rental units off the market. According to a study, the sale price of a house in New York increased between 6% and 9% if the number of Airbnb properties located within 300 meters doubled.

Indian cities are also experiencing a severe rental housing crisis affordable, with a steady decline in the rental housing market share from 54% in 1961 to 28% in 2011, according to the Census of India.

The effect of rising Airbnb rentals in India leads to the question of whether and how it should be regulated.

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It might be a good idea for local governments to regulate Airbnb properties, for example by requiring hosts not to overcharge. This could limit the incentives to list properties on the platform in the first place, instead of putting them on the rental market. This, in turn, could mean more properties available for long-term rentals and make housing more affordable.

The effect of rising Airbnb rentals in India leads to the question of whether and how it should be regulated.

Airbnb hosts could also be required to pay taxes on property income. India currently exempts all Airbnb hosts who earn less than Rs 2 million ($24,178) from goods and services tax.

Airbnb itself has devised certain policy tools to ensure that its hosts and guests respect the communities in which they share space and agree the guidelines and standards that will be used for it. Much like the New York City mandate, Airbnb could also encourage the sharing of host and guest data with municipal governments, without sacrificing user privacy.

The result of all this regulation is that, in the long run, it becomes more restrictive for a potential host to list their property on Airbnb, which would likely lead to more affordable housing, although there is no guarantee that these policies will solve the problem. of housing affordability.

Article republished from The Wire as part of an agreement between both parties to share content. Link to the original article:https://thewire.in/south-asia/bangladesh-entrepreneurs-policymakers-economic-growth

She is a professor at the Institute for Social and Economic Change (ISEC), Bengaluru, India. She has been a Fulbright Nehru Visiting Scholar at the Luskin School of Public Affairs, University of California, Los Angeles, Department of Urban Planning, for 2021 and 2022, and a Visiting Scholar at UNU-WIDER, Helsinki, Finland, multiple times. She is the author or editor of 10 books, has written several journal articles and is on the editorial board of journals such as Area Development and Policy, Urban Science, Urban India and is frequently consulted by the Asian Development Bank for research on urbanization. She is among the top 10% of authors in the world in the Social Science Research Network.