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Affordable housing in India

No Comments Sub Category:Real Estate,Real Estate Trend Posted On: Dec 05, 2012

Scarcity of affordable housing

India is a country with a fast growing economy and a constantly increasing urban population driven by the economic factors. As urbanisation increases, so does housing scarcity for the large population. Affordable housing has not only become the high point of discussion among the policy makers, but also it has become the need of the hour, a challenge to the real estate sector as well as the government to address.

As per 2011 census, India’s population stands at 1,210.98 million, out of which, 377.10 million (31.16%) live in urban areas. During 2001-2011, the urban population of India grew at a compound annual growth rate (CAGR) of 2.8%. The level of urbanisation has increased form 27.81% to 31.16%.

As per census, there are 78.48 million affordable homes for 78.86 million urban households. Although the gap between the affordable housing stock and required number is diminishing, it has to be kept in mind that lot of these houses are in dilapidated condition and the real gap is much wider than it looks on paper.

Affordable housing defined

Affordable housing is defined based on three factors - income level of individual, affordability of the house and size of  the house. US Department of Housing and Urban Development defines affordable housing as ‘for a household to pay no more than 30% of its annual income on housing’. This is taken as the standard definition for affordable housing in developing countries like India, too. Jawaharlal Nehru National Urban Renewable Mission (JNNURM) estimates that a household needs to retain more than 60-70% of its gross income to meet necessities other than housing, i.e. food, medical care, education, clothing, etc.

Considering the fact that a family would be occupying the affordable dwelling units, emphasis has to be paid into basic amenities such as sanitation, adequate water supply and power supply. It has to be taken care by the agencies that besides low purchasing cost, operating and maintenance cost also should be lower for these affordable houses. Other factors also come in such as the proximity to workplace from these dwellings so that burden of commuting cost can be minimized.

Gap between demand and supply of affordable homes

The astronomical prices of land plots and real estate properties in urban areas have come down heavily upon the economically weaker section and it has resulted in a large number of population living in slums or in squattered conditions. Ministry of Housing and Urban Poverty Alleviation (MHUPA) estimates the urban housing shortage in the country to be 24.71 million at the end of the 10th Five-Year Plan.

An 88% percent of the total shortage accounts for the economically weaker section, i.e. households with monthly per capita expenditure of up to Rs. 3,300. The income group with monthly per capita expenditure of Rs. 3,301 to Rs. 7,300 accounted for 11% of the shortage. It means that there exists a big gap between the demand and supply of affordable housing in the country.

Usually the private developers are coming up with innumerable projects for the high income and mid income group across the country as they fetch premium over housing for economically weaker section (EWS) and low income groups (LIG) in the society. EWS and LIG homes are usually constructed by the government through their agencies for welfare purposes. However, there is serious dearth in the number of affordable homes.

Obstacles in way of affordable housing

The attention of big developers was veered to the affordable housing during the economic crisis of 2008-2009, as the market for high-priced homes contracted and many companies saw an opportunity in lower-income segments. Many big developers like DLF, Xrbia, Omaxe, Mahindra Lifespace, Purvankara, Unitech, Tata Housing, etc have entered the section now. They are looking at Rs 20 lakhs per unit category as a profitable option now. Xrbia recently launched a 170-acre housing project in Hinjewadi, a suburb of Pune, which saw an instant sale of 3,400 units.

Problems related to affordable housing are manifold. The first issue is that there is a scarcity of available land in urban areas of most of the cities in India. Poorly conceived central, state and municipal regulations make the matter worse and push the land prices up.

An ambiance of benevolence has to be created for the affordable housing to grow. The government has to ensure that approval process is smooth and speedier in case of these projects. Steps such as granting additional floor space index (FSI) have to be taken by the government.

Developers do not see enough profit margin in the affordable section. Usually, developers buy land in the outskirts of a city and wait till the price per sq feet doubles up. The whole mind set of looking at land as an asset should be changed and shifted to regard it as an inventory. The whole mind set has to undergo swift transformation. Cycle time has to be reduced and small units should be built and constructed at one go.

If the real estate fraternity along with government can take steps toward bridging the gap between the demand and supply of this sector, then there awaits a huge unmet demand emanating from the large urban poor section of society.

Read more real estate articles:

Emerging real estate trends In India 2012

Seven new real estate destinations in India

Union Budget 2012 Impact on Real Estate in India

 

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