Centre for Development Economics
Department of Economics, Delhi School of Economics


Understanding the Digital Platform Economy: Effect of Airbnb on Housing in Indian cities


Kala S Sridhar (Institute for Social and Economic Change, Bangalore)

Thursday, 14 January 2021 at 3.00 P.M IST


Given the unaffordability of housing in urban India, limited research on digital platforms like Airbnb in the Indian context, and the potential impact on urban India’s housing, this paper answers the following question: What is the effect of Airbnb on rental housing and housing prices? Based on the theory and empirical evidence, we expect that in cities where Airbnb is active, rental accommodation and housing would be relatively more expensive, as we assume that such units were withdrawn from the housing market and excess capacity of houses can be used.

Putting together an authentic dataset of Airbnb rental properties, making distinction between rents of 1, 2 and 3 bedroom apartments, and house prices in major Indian cities, accounting for the endogeneity of Airbnb density, we find that Airbnb density plays a significant role in raising rents of 2 bedroom apartments, 3 bedroom apartments and house prices. Specifically in addition to Airbnb density, the city per capita income and population size have positive effects on the rent of 3 BHK apartments, with the elasticity of the Airbnb being 0.14, while in the case of 2 BHK apartments, the Airbnb density is the only variable that is significant in raising their rents with an elasticity of 0.08. The Airbnb density and population size of the city have positive and significant effects on the house price. The policy implications of the research and caveats of the data are summarized.

All are cordially invited.
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