In the wake of the COVID-19 pandemic, the popularity of Airbnb bookings has increased in India, with a reported 80% increase in domestic bookings during the third quarter of 2022 compared to pre-pandemic levels.
The rapid expansion of short-term rentals has raised important questions about its implications for housing and rental prices across the country.
According to The Economic Times, there are currently over 70,000 properties listed on Airbnb in India. Hosts have collectively earned more than $12 million from bookings with families in 2022 alone. While this has been a lucrative venture for many hosts, concerns have been raised about the potential impact on the already tense real estate market in Indian cities.
The India Infrastructure Report highlights that approximately 19 million urban households are facing a housing deficit, despite the fact that there are 11.1 million vacant houses in the cities. Government initiatives have resulted in the construction of less than 1.8 million homes, leaving a significant gap in meeting the demand for housing. Household overcrowding accounts for more than two-thirds of the urban housing shortage.
Indian cities are grappling with an affordable rental housing crisis, with rental housing market share having declined from 54% in 1961 to 28% in 2011, according to the Census of India. This backdrop sets the stage for Airbnb's potential impact on rental and housing prices.
According to data from the Airbnb website, the average price per night for an Airbnb stay in an Indian city is about 4,800 rupees (US$58). Popular destinations for short-term rentals include Goa, Bangalore, Pune, Hyderabad, and New Delhi.
Research has found a significant correlation between Airbnb density and rental prices and housing costs in Indian cities. The effects are particularly pronounced for three-bedroom apartments. These findings are noteworthy considering the limited scope of Airbnb's presence in the Indian market and the fact that the data was collected during a pandemic, suggesting that the impact could be even more significant under normal circumstances.
Similar trends have been observed in other global markets. Studies conducted in the United States found that Airbnb led to increases in rental home prices, with rents in New York City increasing by 1.4% or $384 per year. The platform was found to have taken thousands of long-term rental units off the market. In New York City, the sales price of a home increased by 6-9% if the number of Airbnb listings within a 1,000-foot radius doubled.
Given these concerns, there is a growing debate about the need for regulations to mitigate Airbnb's impact on housing affordability. Possible measures could include local government regulations that prevent hosts from overcharging and encourage long-term rentals. Taxing Airbnb income and sharing data with city governments, while respecting user privacy, could contribute to a more balanced real estate market.
While there's no guarantee that these policies alone will solve the housing affordability problem, they can help ease pressure on rental prices and increase the availability of long-term rental properties.
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