BRIEF

“ Build-To-Rent
”
(BTR)
Private Residential Rental Developments in India is a potentially
and untapped substantial market awaiting investment

October 2020
 Executive Summary
The Indian residential sector has been languishing since 2015 on
account of over-supply and reduced availability of equity issues.
The residential rental housing market, is in our view an as yet
untapped market, for these reasons:

The Build to Rent (BTR) sub-market start with retail investors; in

in private rented residential stock is
designed specifically for renting  fund would be raised to invest in
rather than for sale. The product is
in many ways synonymous with the  story is established. At later stage
multi-family sector in the United
States which is typically owned by
institutional investors and managed
by specialist operators.
The Indian BTR market is worth an
estimated USD 8 billion. As per our
consumer behavior research,
millennials and Gen Z prefer to rent
than to buy real estate. This
generation gives more importance
to convenience, community than to
be invested in long term. This trend
has given popularity to Co-Living
segment and expected to spill
towards private residential segment
as well; India provides immense
opportunity in Private Residential
Rental development, in our view.
The BTR / private residential rental
development can generate a rental
yield of 5% to 6% with annual
escalations of 3% to 5%. Therefore,
the annual return on Investment
(RoI) can be expected to be in the
range of 8% to 11%. This would be a
compelling proposition for investors
considering the relatively low
risk-return profile of this product.
In first phase, BTR/ private
residential rental development can
second phase, specific institutional
this product after success
REIT can be floated.
BTR’s are attractive investment
options for residential REIT’s. A
residential REIT is a real estate
investment trust that owns and
operates rental property. Segmental
specialization includes:
apartment blocks, high-rise blocks,
social and affordable housing,
student housing and family-rentals
This paper defines the path for the
emergence of a new format of residential
development in India. In this article we
examine the potential and the viability of
private residential rental developments,
their attractiveness to investors and their
feasible as a development concept. We
also include some guiding principles that
can be readily applied.
This segment within the residential sector
shows great promise as it responds to the
changes within society and investor
preferences.
Meraqi is able to enable investors to find
the most lucrative of investment, to guide
them through the process and to advise
them to manage their investments too.

Build-To-Rent (“BTR”)
 Table of Contents

1. Introduction 04

2. Build to Rent “BTR”

(Private Residential
Rental development) 06

3 The Residential
Rental Market in India 10

4. Private Residential
Rental development in India 16

5. Conclusion/ Way forward 24

1 Introduction
 Co-Living has disrupted the residential rental market in most
Indian urban metros. We expect that private residential rental
developments, also known as Built-To-Rent (BTR) schemes which
are very popular in the UK, Australia and US will gain traction
here. BTR is still being nascent in India and it is our contention
that the BTR concept will gain traction here; already and in
accordance with our research, Indian demography, economics
and changing regulations are creating an opportune environment
for this lucrative residential product-type in India.

Changes in the investment landscape on account of COVID-19 is expediting the

emergence of private residential rental developments;

COVID-19 has changed the real escalations of 3% to 5%. Therefore,

estate landscape forever. Office,
Retail and Hospitality will continue
to undergo structural changes and
they will no longer remain the most
preferred investment segments
within the real estate sector.
the annual Return on Investment
(RoI) can be expected to be in the
range of 8% to 11%. This would be a
compelling proposition for investors
considering the relatively low
risk-return profile of this product.

For retail investors, limited The BTR sub-market in private

investment options are available in
rental yielding real estate and hence
diversification and innovation is to
be encouraged.
As per our research, the BTR /
private residential rental
development can generate a rental
yield of 5% to 6% with annual
rented residential stock is designed
specifically for renting rather than
for sale. The product is in many
ways synonymous with the multi-
family sector in the United States
which is typically owned by
institutional investors and managed
by specialist operators.

Build-To-Rent (“BTR”) 05
2
Build to Rent “BTR”
(Private Residential
Rental Development)
 A. Residential Rental Property
Residential rental property refers to
homes that are purchased by an investor
and inhabited by tenants on a lease or
rental agreement basis.
Residential real estate is represented
across many formats: single-family
homes, condominium units, apartments,
townhouses and duplexes. The term
residential rental property distinguishes
this class of rental real estate investment
from commercial properties where the
tenant will generally be a corporate
entity rather than a person or family, as
well as hotels and motels where a tenant
does not live in the property long term.
Build-To-Rent (“BTR”)
B. How Residential Rental
Property Works
Residential rental property can be an
attractive investment. Unlike stocks,
futures, and other financial investments,
many people have firsthand experience
with both the rental market as tenants
and the residential real estate market as
homeowners. This familiarity with the
process and the investment makes
residential rental properties less
intimidating than other investments. On
top of the familiarity factor, residential
rental properties can offer monthly cash
flow, long-term appreciation, leverage
using borrowed money, and the
aforementioned tax advantages on the
income the investment produces.
07
 C. Benefits of BTR
BTR developments are specifically
focused on the priorities and
requirements of modern tenants.
Many of the major players in the BTR
market are concentrating on the quality
of the service on offer and in particular,
the wide range of amenities available,
which rival some 5-star hotels, such as on
site restaurants, resident lounges,
cinemas, rooftop swimming pools, health
clubs, work-zones (for the increasing
number of individuals that need the
option to work from home),‘chill-out’
spaces, and ultra- fast broadband.
BTR Developments are being constructed
which are tailored to tenants at all stages
of their lives. Many are aimed at young
professionals in cities, but there has also
been a focus on families, with some BTR
developments providing large communal
spaces and play areas for children.
Well-being is paramount (There is a
magic formula that applies: “happy
tenants = lower turnover = consistent
rent”) and those in the BTR sector are
aware of this, organizing social events or
virtual exercise classes for their residents
in a bid to encourage networking and try
to combat loneliness.
D. What is happening in other
developed economies in this
segment, including residential
REITS?
Firstly, a REIT primer
A real estate investment trust, or “REIT”,
is a specialized type of company that
invests in real estate assets. REITs that
invest in commercial properties are
Build-To-Rent (“BTR”)
known as equity REITs. REITs that invest
in mortgages, mortgage-backed securities,
and similar assets are known as mortgage
REITs. Generally, the term "REIT" is used
in reference to an equity REIT.
To qualify as a REIT, a company must
meet some strict requirements, including
distributing at least 70% (90% in the
USA) of taxable income to shareholders
as dividends and investing at least three
quarters of its assets in real estate.
If a REIT meets all the applicable
requirements, a real estate company
won’t pay corporate income tax on its
profits. The only taxation of REIT
dividends takes place after they're
distributed to shareholders. The lack of
corporate tax liability is still a big perk
for investors.
What's a residential REIT?
A residential REIT is a real estate
investment trust that owns and operates
rental property. Segmental specialization
includes: apartment blocks, high-rise
blocks, social and affordable housing,
student housing and family-rentals.
Residential REITs comprise some 10-15%
(by number of REITs listed) on the
Australian, UK, USA and RSA bourses.
Some residential REITs primarily grow
through development -- that is, by building
new properties from the ground up.
Others choose to grow through acquisitions.
They create value by purchasing (and
often improving) existing properties.
The route-map to listing a residential
property is varied:
Private Investor builds a residential
building, stabilizes the letting and then
sells the income-earning property into
the REIT
08
 A pension fund, seeking exposure to
affordable or social housing develops
a residential rental pool, that is sold
into the REIT
A luxury developer builds a luxury
complex including an affordable and
social housing segment, stabilizes the
income flow and then sells the
property into the REIT.
Most REITs do a combination of these.
Risks of investing in residential REITs:
Residential REITs can produce impressive
total returns over time, but they aren’t
without risk. While there are dozens of
potential risk factors when it comes to
stock investing, here are four in particular
that residential REIT investors should
know.
Interest rate risk
No discussion of REIT investing would be
complete without mentioning interest
rates, especially as rising interest rates
negatively affect REIT stock prices as
investors expect a "risk premium" when
investing in income-based stocks and
bonds.
Oversupply risk
There’s always a risk that commercial real
estate (even residential) supply could
grow faster than demand. Excessive
overbuilding blunts returns, until the
market stabilizes.
Financing risk
Most REITs rely on borrowed money to
grow their businesses. Higher levels of
debt add to a REIT’s risk level. If debt is
too high, a company can become unable
to pay its interest obligations without
cutting dividends or selling assets.
Build-To-Rent (“BTR”)
Housing market risk
Most housing investments fall into two
basic categories -- renting or owning. As
the homeownership rate climbs, there is
less demand for rental housing.
How do residential REITs hold up during
recessions and tough economies?
Residential real estate isn’t a very cyclical
industry. When times get tough, some
renters may move in with relatives to save
money, but generally speaking, residential
real estate is a pretty recession-resistant
business. Think of it like this: when times
get tough, people can cut back on discre-
tionary expenses like shopping at the mall
and going on vacation. Rent is typically
last on the list when it comes to cutting
expenses.
Unlike Commercial REIT leases, residential
leases usually use a structure called a
gross lease. This means tenants pay rent,
but the landlord pays the property taxes,
building maintenance, and insurance. In
residential properties, the REIT may be
responsible for paying certain utilities on
behalf of its residents as well. (Residential
REITs have several variable expenses to
worry about that tenants take care of in
other types of commercial real estate.)
Lease tenure is another potential draw-
back. The typical apartment is leased on
an annual basis -- two-year leases aren’t
unheard of, but it’s rare to see residential
leases longer than that. The annual lease
structure makes it easy for tenants to
vacate if they need to cut expenses. It
also means apartment operators can lose
pricing power easily during tough econo-
mies as they struggle to keep occupancy
high. Residential REIT’s represent a
yield-sweetener in investment portfolios,
providing a consistent and sustainable
income flow, during good and bad times.
9
3 The Residential
Rental Market in India
 A. Market Size of BTR in India
India’s real estate sector is expected
to touch a market size of USD 1
trillion by 2030 and will contribute
over 13% of the Gross Domestic
Product (GDP) by 2025.
As per the International Monetary
Fund’s (IMF) last estimates, India’s
residential rental market was worth
more than USD 20 billion, of which
68% or USD 13.5 billion is in urban
areas.
As per Meraqi Research, 40% to 60%
of the occupied residential units are
rented; the remaining units are
owner-occupied.
The Indian BTR market is worth an
estimated USD 8 billion
Build-To-Rent (“BTR”)
As per our consumer behavior research,
millennials and Gen Z prefer to rent than
to buy real estate. This generation gives
more importance to convenience,
community than to be invested in long
term. This trend has given popularity to
Co-Living segment and expected to spill
towards private residential segment as
well; India provides immense
opportunity in Private Residential Rental
development, in our view.
B. Current Status of the
Residential Rental market
in India
In India, investors buy units within
residential projects and then rent them
out to their individual tenants.
11
 Key market norms for this existing
residential segment:
Rental Yield: Villas (2% -3%); Luxury
residential units: 2%-2.5%; mid
segment residential units: 3%.
Security deposit: 6 to 10 months
Escalation: 5% per annum
Lease Term: 11 months
Scope: Semi furnished
Management: Owners needs to
manage renting-out, lease
management, tenant management,
rent collection, property tax
payments, key maintenance issues.
Currently, owners face 3 challenges:
Low Yield Rate
Ongoing management
Limited exit strategies (or sale of units).
Private Residential Rental development can
address all the 3 challenges noted above
Build-To-Rent (“BTR”)
C. Tax on Rental Income as
per IT Indian Rules
The annual taxable value of the
property is calculated by deducting
municipal taxes paid, and any further
deductions under section 24 from
the actual rent received.
Under Section 24 of the
Income Tax Act:
Standard deduction of 30% of the
value arrived after deducting taxes
from the rent.
Interest on the home loan.
D. Available Structure in
Rental Housing
In India, there are two types of agreement
prevalent between owner and tenants.
Leave and License
Rental Agreement
12
 Table 1: Difference between a Leave and License and a Rental Agreement

Leave and License

Parameter Rental Agreement
Agreement

Section 52 of Indian
Governing Act States’ Rent Control Act
Easement Act, 1882

Transfer of Interest &

No Yes
Property Rights created

Tenure Maximum 60 months No Cap

Eviction, Termination
Easily achievable Not easily achievable
or Cancellation

Currently, many owners are protecting their (ownership) rights by adopting leave
and license agreements (over regular leases) which gives limited rights to tenants.

E. Regulations for Rental Housing in India

Residential rental is governed by the Rent
Control Act 1948. This Act has been
modified by several states in 1990s but it
is still in favour of tenant and this has
impacted investments in rental housing in
India.
1. Rent Control Act
A Central Rent Control Act was passed by
the Indian legislature in 1948. It regulates
the rules of letting out a property and
ensures that neither the landlord’s nor the
tenants’ rights are exploited by the other.
It should also be noted that currently,
each state has its own Rent Control Act,
though largely similar to each other, they
carry some minor differences. Due to the
1948 Act being extremely stringent and
pro-tenant, the real estate market has had
difficulty in growing in some areas. There
are some properties that have been let
out that are still paying the same amount
of rent since 1948, disregarding inflation
and increased property valuations.
In 1992 the Central Government tried to
bring about amendments to the Act via a
proposed model to ensure that the
property is not devalued. Unfortunately,
the changes were opposed by the
constituency represented by the sitting
tenants and therefore failed to take effect.
In order to improve private participation
in the residential rental segment, the
Government of India presented the Model
Tenancy ACT in 2019.

Build-To-Rent (“BTR”) 13
 2. Proposed Model Tenancy Act 2019
The Model Tenancy Act, 2019 is a tenancy
law proposed by the Government of India
designed to overhaul the tenancy
legislation in India. The Act draft is
presently under review by the states and
union territories
The Model Tenancy Act seeks to
implement the following rules:
1. Formation of Rent Authority
department.
2. Residential housing security deposit is
capped at two months and one month
for non-residential tenancy.
3. Penalty on tenants for refusing to
vacate the premises after the tenancy
agreement expires or is mutually
terminated.
Build-To-Rent (“BTR”)
4. Landlord must provide access to basic
essentials and utilities, and cannot hike
the property rent in the middle of an
ongoing tenancy term.
5. Every executed tenancy agreement has
to be reported to the Rent Authority
within two months, and a unique
identification number will be issued.
6. Terms of the agreement will be binding
on the successors of both the landlord
and the tenant.
7. Tenants cannot sublet the property
without permission from the landlord.
8. Existing tenancies will not be impacted
by the Act.
14
 Affordable Rental Housing Complexes (“ARHC”s) Scheme
The COVID-19 pandemic has resulted in reverse
migration of urban migrants/ poor in the country.
Urban migrants reside in slums/ informal settlements/
unauthorised colonies/ peri-urban areas to save cost
on housing. They need decent rental housing at
affordable rate at their work sites.
Rapid urbanization, migration to cities and the rising
cost of home ownership are the three key demand
drivers for affordable rental housing in India. As per
the 2011 census, urban households on rent stood at
over 2.1 crore, which is around 20% of the total
number of houses in urban India. Almost 80% of the
rental housing market in the country is concentrated
in urban centres.
In order to address this need, in July 2020 Ministry of
Housing & Urban Affairs has initiated Affordable
Rental Housing Complexes (ARHCs), a sub-scheme
under Pradhan Mantri AWAS Yojana- Urban (PMAY-U).
This will provide ease of living to urban migrants/
poor in Industrial Sector as well as in non-formal
urban economy to get access to dignified affordable
rental housing close to their workplace.
The ARHC scheme will be implemented
through two models:
Utilizing existing Government funded vacant
houses to convert into ARHCs through Public
Private Partnership or by Public Agencies
Construction, Operation and Maintenance of
ARHCs by Public/ Private Entities on their own
vacant land
Salient features of ARHCs Scheme:
The primary target beneficiaries are expected to be
from the EWG and LIG sections. Urban migrants
and economically weaker engaged in sectors such
as manufacturing, hospitality, health, construction, etc.
Build-To-Rent (“BTR”)
The creation of a new rental housing ecosystem
with focus on dwelling units near the places of
work of the inhabitants
Each ARHC will consist of Dwelling Units (DUs) as
Single bedroom (upto 30 sq.m.), Double bedroom
units (upto 60 sq.m.) and Dormitory beds
(upto 10 sq.m.) as well
Dormitories can accommodate 4-6 beds per unit
Double bedroom DUs cannot consume more than
33% area. This is to avoid misuse of scheme
The initial rent of ARHCs will be fixed by the local
authority
Source: ARHCs Operational Guidelines
(http://arhc.mohua.gov.in/)
In future, the Indian market could explore concepts
applicable in developed countries such as Singapore,
Hong Kong, Germany, UK, etc. These concepts include
A. long lease & financing through Pension funds, B.
Residential REITs and C. Private Investments in
Rental Housing.
ARHCs guidelines have laid a clear roadmap for
investors looking at stable long-term returns. ARHCs
can match the risk-return profiles of offshore wealth,
insurance and sovereign funds, and give them a strong
foothold in the large residential market of the country.
ARHCs also open the prospects of having a residential
REIT in the country.
However, the success of ARHCs Scheme lies with
implementation. Private sector is always very skeptical
when a scheme which is largely dependent on
government participation. It will take at least 2-5 years
for private sector to gain confidence in this scheme if
implemented well.
15
4
Private Residential
Rental development
in India
 This section outlines expected path of emergence of private residential rental
development from investment structure, product type, target segment, return
profile,

A. Product Definition
Table 2: Product Definition

Parameter Definition

Young single working population, young couple and

Target Segment
Couple + 1 young child

Location Proximity to IT/ manufacturing hubs

Comprising of Studio: 300 sqft; 1 BHK: 420sqft – 450 sqft;

Type of Units
and 2 BHK: 650 sqft – 800 sqft.

Furnishing Status Semi furnished plus or fully furnished

Club house, community kitchen, laundry facility (with

Amenities washing machines and drying area), private storage space,
fitness center, play area, recreation room and working area

Common Area Maintenance (CAM), Digital

Infrastructure, Housekeeping & cook personal can
Services be arranged (if required) and house furniture/
home appliances can be arranged on rentals
basis, if required

Community Activities Online & Offline

Build-To-Rent (“BTR”) 17
 B. Return Profile

In India, 40% -60% of the occupied of units, size and prevailing rental yield
residential units in apartment projects are across major cities in India for compact
leased. The table below captures the type apartment projects.

Table 3: Prevailing Rental Yield in Apartment Projects in Major Cities of India

Configuration & Gross Annual

City
Super Built-Up Area (“SBA”) Rental Yield

Studio (400-450 sqft) 5.0 % to 5.5%

Bangalore 1 BHK (540-690 sqft) 5.0% to 5.5%

2 BHK (872-1235 sqft) 4.5% - 4.8%

Studio (330-375 sqft) 4.4 % to 4.8%

Chennai 1 BHK (480-808 sqft) 4.2% to 4.5%

2 BHK (600-985 sqft) 4.0% - 4.1%

1 BHK (545-670 sqft) 3.7% to 4.1%

Hyderabad
2 BHK (860-990 sqft) 3.1% - 4.0%

Studio (220-380 sqft) 4.5 % to 4.7%

Mumbai 1 BHK (228-615 sqft) 4.3% to 4.6%

2 BHK (536-1050 sqft) 4.3% - 4.4%

Note: The rental apartment in consideration is semi-furnished.

As per our research, with efficient
design management, developers can
achieve the following SBA for different
types of residential units:
Studio: 300 sqft
1 BHK: 420sqft – 450 sqft
2 BHK: 650 sqft – 800 sqft
The function of these units can be
improved by providing some furniture
for these units. The furnishing cost
would be INR 450 – 600 per sqft
(which is 7% to 10% of current capital
value of residential units)
Post the application of improved area
optimization and the provision of furni
ture, the annual rental yield would be
between 5% and 6%.
(Note: As per our research, investors are
able to achieve up to 20% higher rentals
for fully furnished apartments as com-
pared to apartments that are partly or
unfurnished)

Build-To-Rent (“BTR”) 18
 C. Business Model
The residential units are sold to retail
investors and leased back from them with
at least a guaranteed rental yield of 6%
with a 3%-5% annual escalation.
Scope of Developer:
The developer develops the property,
sells it to investors and also signs off the
lease-back agreement between the
developer, rental housing firm and the
investor.
Scope of rental housing firm:
Manages the property as agreed and
earns its income by renting out the units,
earning itself a brokerage fee and also
managing the common area and
providing services (where agreed)
including community kitchen, laundry,
private storage and providing in-house
housekeeping, margin on facilitating extra
furniture/ home appliances through other
parties. (expected income for the
property management company)
D. Comparison of current
residential rental units and
proposed private model:
The table below compares different
aspects of ongoing residential rental units
and proposed private residential rental
projects.

Table 4: Comparison of Current Residential Rental units and Private

Residential Rental projects
Current Residential Private Residential
S# Parameter
Rental Unit Rentals Project
1 Ownership Mixed (Owner & Tenants) Tenants
Compact Units comprising
2 Unit Type All
of Studio, 1 BHK and 2 BHK
3 Lease Terms 11 months 3 months +
4 Security Deposit 6 – 10 months 3 months

Club house, community kitchen, laundry

facility (with washing machines and drying
5 Amenities Club house, gym area), private storage space, fitness center,
play area, recreation room and working area
Common Area Maintenance (CAM), Digital
Infrastructure, Housekeeping & cook
6 Services CAM personal can be arranged (if required) and
house furniture/ home appliances can be
arranged on rentals basis, if required
Community Limited,
7 Regular Online & Offline
Activities per RWA norms
Furniture/ Home
Fully fitted-out option/ home appliances
Capital Appliances need to be
8 also can be provided or arranged by
Expenses arranged by tenants
management firm on rental basis
(buy/ rent)

Rent to Owner;
CAM: INR 2.5/ sqft to Rent to Owner and CAM Charges;
Rentals &
9 INR 4.0/ sqft; invests in for all availed services it will be
Other Charges
capital expenses for pro-rata basis.
furniture and others

Build-To-Rent (“BTR”) 19
 E. Proposed investment
structure
Stage 1: The project needs to be devel-
oped by selling units to retail investors.
The owner’s rights can be protected by
the adoption and application of suitable
legal documentation; we suggest that a
leave and license agreement is used.
Stage 2: Post approval of the Model
Tenancy Act 2019, institutional fund
houses may invest in this segment.
Stage 3: Post maturity of this segment,
residential REITs may be possible for this
segment.
F. Comparison between
different real estate investment
assets for retail investors
HNI’s have been investing in the real
estate sector, mostly in the commercial,
land and residential segments; the
Co-Living segment is also emerging as an
option for investment. The table below
compares rental yielding assets available
for HNI investment: Commercial, Co-Liv-
ing and proposed private residential
rental development. It also captures key
investment attributes important for HNI
as well.

Table 5 : Comparison of Real Estate Rental Yield Assets for HNI investors

Alternative Living
Proposed Private
Particulars Commercial Space (Purpose
Residential Rental
Built Co-Living/
Development
Student Housing)

Availability Limited Limited Can be high

ROI: 11% to 14% ROI: 9% to 13% ROI: 8% - 11%

(Rental Yield: 6% (Rental Yield: 6% to (Rental Yield: 5% to
Return Profile to 9% & Annual 8% & Annual 6% & Annual
Escalation: 5%) Escalation: 3%-5%) Escalation: 3%-5%)

Market Outlook Unstable Stable Stable

Investment Attributes (Important from retail investor’s perspective)

Very limited; Mostly for Multiple numbers of

Asset Backed retail investor it is units can be bought;
leasing independently Yes
undivided share of space
is challenging.

Independence of
No No Yes
investment
Management Managed by developer Managed by operator Managed by operator
Hassle
Guaranteed Return Yes Yes Yes

Proven track record

in terms of asset Yes No/ Emerging segment Yes
performance

The proposed private residential rental development looks promising segment for HNI
investments from availability, returns and investment attributes aspects.

Build-To-Rent (“BTR”) 20
 G. Benefit for different stakeholders of rental private residential
developments

Table 6 : Benefit for different stakeholders

S# Developer Investor Tenant / End-Use

1 Rental trend is the future Asset-backed Community

Selling apartment is Convenience:

2 Lower ticket size
not easy Easy Moving process

Large numbers of retail

investors have limited
options in real estate at low Less capital spent (fitted
3 ticket size/ people prefer Stable asset class out space available)
best of asset backed and
convenience (Faster
Absorption Rate)

Bifurcated end-solution . . Affordable living &

Comparative high yield to
4 a sale and a managed better standard of living
traditional residential assets
saleable product

Convenience
5 Steady Income End-use investment / REIT Professionally Managed

Minimal Management
6 Economies of Scale involved lesser Risk through Guaranteed Tenure
forward funding (Leverage)

Build-To-Rent (“BTR”) 21
 H. 8 Guiding Principles for successful development of residential
rental or Built To Rent (BTR) properties
The following 8 guiding principles
captures all of the important aspects that
should be followed for the successful
implementation of a private residential
rental development:
1. Select the right location / project. As
with any housing project, location is
vitally important. And, as residential
rental development is a service-driven
housing solution, the audience for the
scheme is crucial. Residential Rental
projects can offer housing in connected
locations that would otherwise be
unaffordable to commuters, but the
location needs to be right to support the
density and sustain the community.
2. Measure out the right quantities.
From an operational efficiency
perspective, over 200 units are needed
for a scheme to be viable for residential
rental developments. Smaller schemes
aren’t ideal because they cannot support
the operational cost, except for a few
exceptions that are designed with light
touch amenity packages. In order for a
scheme to deliver all the residential rental
developments bells and whistles, it
requires 500+ units.
3. Mix it up. Residential Rental
development can work with a variety of
other tenure mixes, alongside retail space
or other commercial uses. It can be part
of the ‘co’ revolution with co-working and
co-living creating outward facing
communities. Alternatively, it can work as
a stand-alone development. The
development shouldn’t be a gated
community, but needs to interact with the
public realm, whilst maintaining
all-important private space for the
residents.
Build-To-Rent (“BTR”)
4. Sprinkle in some Back of House. Back
of house facilities are just as important as
the front of house, if the operator is to
deliver an efficient service. These require
the right amount of delivery storage and
refuse chutes; as well as loading bays to
the back of walk-through lifts for smooth
moving in/out days, which will occur
more frequently than in a market sale
scheme.
5. Prepare in one batch. Design for a
single phase. Residential Rental
development has a much faster
absorbency rate than market sale
housing. This is great for place-making
and to kick starting a wider regeneration,
but is also vital to get the community
going within the development.
Place making in a single phase should
focus around a single core to promote
social interaction and so that all residents
have similar access to amenities. The
design should encourage residents to feel
they are renting the whole building, not
just their apartment. The operational
efficiency of the building is incredibly
important to the internal layouts, such as
having a large central space for residents
and the wider community.
Residential Rental development is
particularly suited for modern methods of
construction, such as volumetric modular.
This has a range of benefits, including
faster build rates so investors can open
up rental income streams sooner, a higher
quality finish that reduces snag costs and
maintenance costs and a more
sustainable, less carbon-intensive build
method.
22
 6. Blend. Design a mix of apartment
layouts: small, medium and large to suit
different budgets. Multifamily operators
needs to appeal to sharers, young families
and downsizers.
Housing standards today are not
compatible with the perfect ingredients
for Residential Rental developments such
as the number of apartments per core, as
they don’t account for the professional
full time operator on site 24/7.
7. Don’t overcook it. Specifications
should be simple, to optimize
maintenance, durability and replacement
strategies. It’s not a hotel, so it is of vital
importance that residents can customise,
paint, fix items to the walls and
personalize the space. The more they can
make it feel like their home the longer
they are likely to stay.
Generally, there is a shift of developer
spend from the apartments to the
amenity areas.
As Residential Rental development has to
perform for both investors and residents,
the design and layout need to be
operationally efficient. This means that
designers have to consider running costs,
the quality of the building and how both
residents and the onsite management
Build-To-Rent (“BTR”)
team will use the spaces. For instance, it’s
important to use durable finishes in
rooms with high usage, such as the postal
room, to minimize ongoing maintenance
costs and replacement rates.
8. Season with amenities that cater to
your target audience. Shift some the
amenity space from private to shared use.
There are primary shared amenities that
every residential rental project should
have (mail delivery, lounge area, back of
house for storage, loading bay for move
in and move out, refuse collection
facilities) and there are secondary
amenities to reflect the brand. These can
be refreshed as needed, as building usage
data is generated and analyzed.
The building has to perform as an asset
for both the investors and residents. This
means that facilities such as gyms and
swimming pools must be continuously
assessed both in terms of what they add
to the community and their operational
costs.
Fostering a sense of community within a
residential rental development is
essential, as it leads to higher retention
rates that contribute positively to the
financial performance of the development.
When people love where and who they
live next to, they stick around
23
5 Conclusion/
Way Forward
 The residential sector has been
languishing since 2015 on account of
over-supply and reduced availability of
equity. The residential rental housing
market is in our view a yet untapped
market.
The opportunity lies across all price
segments, from premium, mid segment
and through to affordable housing.
Government has already announced an
incentive scheme for the affordable
segment (AHRC 2020). However,
private participation is yet to be seen
for this initiative.
We expect premium and mid segments
will enjoy interest from developers
knowing investors’ interest.
MTA 2019 will pave the path for
institutional investment in this
segment.
Only after the segment’s rise to
maturity can we expect to see REITs to
invest in this segment.

Meraqi’s Solution for Private Residential Rental Development

Meraqi can assist you in entire development cycles of the project. We offer following
advisory and transaction solutions for private residential rental development:

A. Advisory Services
1. Project Feasibility
2. Location Analysis
3. Investor’s pitch
4. Product Development
5. Business Plan
6. SOPs for the project & Scope documentation

B. Capital Market
C. Land Advisory: Deal Structuring with land owner
D. Sales of units to retail investors
E. Operator connection for managing the facility
F. Asset Management

Build-To-Rent (“BTR”) 25
 References

Matt Frankel, Motley Fool.com, July 2019

NAREIT, Aug 2020

Lloyd Anderson, “A place for residential REIT in the RSA REIT market”, Nov 9
2015

C. Jones, “Private Investment in Rented Housing and the Role of REITS,

European Journal of Housing Policy, 2009

Kingsley Napley, “The basics of Build to Rent”, published in Lexology (July 16,
2018)

Angelica Krystle Donati, “The 8 Ingredients For A Perfect Build To Rent Recipe”,
published in Forbes, (October 30, 2018)

Glossary

AHRC Affordable Housing Residential Complex

BHK Bedroom Hall Kitchen
BTR Built-To-Rent
CAM Common Area Maintenance
GDP Gross Domestic Product
IBEF India Brand Equity Foundation
IMF International Monetary Fund
IT Information Technology
MTA Model Tenancy ACT
PMAY Pradhan Mantri Awas Yojana
REITs Real Estate Investment Trusts
RoI Return on Investment
RSA Republic of South Africa
RWA Resident Welfare Association
SBA Super Built-up Area
SOP Standard Operating Procedure
UK United Kingdom
USA United States of America
USD United States Dollar

Build-To-Rent (“BTR”) 26
 Authors Gorakh Jhunjhunwala, MRICS Jonathan Yach, MRICS
gorakh@meraqiadvisors.com jonathan@meraqiadvisors.com

About Us
Meraqi is a strategic real estate solutions firm. We enable property owners & investors to enhance the value of
their real estate assets. We apply extensive expertise and deep understanding of real estate and allied business
enablers. Our expert team develops appropriate strategies, arranges resources for implementation and tracks
the implementation process across the lifecycle of the assignment.

For investors, owners and developers alike, we offer end to end real estate solutions in the
following areas:

Advisory & Valuation Services

Building Audit & Technical Due Diligence Services
Capital Markets
Private Real Estate Investment Platform (Yield Space)
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Our expertise extends across real estate asset classes including Residential, Commercial, Hospitality, Warehous-
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offces, developers and landowners. We cherish this reputation built on the basis of shared commitment to
business outcomes, understanding our responsibilities as an advisor for key decisions and proven results.

Core Team
Abilash Sudharsanan Dhara Shah G. Ezhilarasi (Geetha)
Head - Transaction Services Head - Capital Head- Advisory & Valuation
Markets & Land Advisory

Gagandeep Chhabra Gorakh Jhunjhunwala Jonathan Yach

Head - Business Strategy & Technology
Shreya Joshi
Head - Private Real Estate
Investment Platform (Yield Space)
Managing Director Head - Asset Management,
Building Audit Services &
Property Development Services
For business information:
Hima C Menon
hima@meraqiadvsiors.com
+91 80957 00070

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Build-To-Rent (“BTR”) 27
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