Bridging the affordable housing gap in India
Affordable housing is needed for the health and well-being of people along with smooth functioning of economies. In the coming 10 years, there will be an exponential rise in urban housing cost and population dwelling in substandard housing. Through this period, India shall feature among the top housing challenged countries till the government starts working on providing housing for all.
Affordability gap is one which measures the difference between the cost of a regular housing unit and what households can pay without spending 30 percent of their income on housing. As urban population grows, affordable urban housing gap shall increase. It has been estimated that in the coming 10 to 12 years more than 106 million low income urban residents shall arrive. This estimate gives rise to a serious question- how should the affordable housing gap be bridged?
There are four ways of tackling the problem- lowered construction cost, land, financing, maintenance and operations. If all of these are implemented then it would be easier to reduce the affordable housing gap in India.
Increasing Land Supply: Land is the biggest expense of real estate and hence unlocking supply is of utmost importance. Making land available in strategic urban locations is actually simpler than it appears. As a matter of fact, it is actually a question of government will. Most lands belong to the local authorities or the government which could be traded for lands for affordable housing. Density bonuses should be offered in areas where land is held privately.
Lowering construction cost: The construction sector’s output has stagnated or gone down in most countries even though the output of manufacturing industries has gone up consistently in the past. If the latest construction methods are adopted along with standardized project designs such as assembling buildings from pre-made components. This can lower construction costs by 30 percent and reduce construction time by around 40 percent. Process improvement shall also be helpful.
Improved operations and maintenance: Roughly 20 to 30 percent costs of housing goes into operations and maintenance. Energy efficient retrofit insulation and windows should lower these costs.
Lowered financing costs: Lowered finance costs for realty developers can aid financial institutions and banks in a big way for selling more housing loans to low income earners. Programs like contractual saving schemes meant for helping people who have low financial discipline towards savings would help these people accumulate the amount required to release down payments on homes, there by making it feasible or them to get small home loans.
Source: Moneycontrol
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