The housing shortage in India is enormous. 26 million homes are projected to be required by 2012 to meet existing housing need, and 99% of these homes are needed by households in the economically weaker section (EWS) and lower income group (LIG).

Reforms needed in Indian housing
The RICS India report ‘Making affordable housing work in India’ highlights need for various forms of government intervention based on international frameworks, to speed-up delivery of affordable housing in India

Key Points
*Cites India as having strong vision but a weak implementation strategy for affordable housing

*Suggests stronger national guidance to steer state governments in key implementation areas

*Highlights the need to encourage intermediate housing market and incentivize more players to focus on low cost housing, to create a competitive market and increase supply

30 million additional Indian homes needed
If the current increase in backlog of housing is maintained, a minimum of 30 million additional homes will be required by 2020. While some housing demand will be taken up within the existing housing stock, many millions of homes will need to be built across India to fulfil the vision of becoming slum free.

Location and price important
Not only is the challenge to build many homes, but also to ensure that they are built at the right location, available at an affordable price to households that are in most need and of adequate quality to endure in the longer term.

40% India’s population in urban areas by 2020
Nearly 28% of India’s population lives in cities and urban areas – double the level of urbanization at the time of Independence in 1947 – a figure that is expected to rise to 40% by 2020. The growing housing shortage is a culmination of the high rate of urbanization with a majority of housing stock catering to the premium segment, thereby incapacitating a large section of society from owning homes.

The high cost of real estate, limited resources and inaccurate product offerings targeted at consumer groups have collectively contributed to the economically weaker sections and low-income groups being severely underserved.

Kumari Selja, Honorable Minister of Housing & Urban Poverty Alleviation and Minister of Tourism, Government of India said:

Housing deficit cannot be addressed by budgetary support alone; we have to rope in the private sector to mobilize private investments in affordable housing. I invite all the stakeholders, particularly the banks, financial institutions and the real estate sector to come forward to make use of the opportunities provided by our schemes and work hand-in-hand to make a lasting impact in solving India’s housing challenge.

The stampede for affordable housing by Indian developers may coming to an end. Indian property developer DLF has said they may withdraw from the much-hyped affordable houses, stating low margins under the scheme are unattractive. Is this the start of a new trend now that property in India has recovered?

Rise in debt is hurting
DLF is grappling with 25 per cent rise in net debt to Rs 18,463 crore so low margin housing does not cut the mustard.Talking to analysts, DLF executive director Saurabh Chawla said that along with other realty firms and associations, the company has approached the government for possible tax incentives to develop affordable houses, but have not got any.

“We are very focused on margins… If it doesn’t make sense, we will not be launching the projects,” he added.

Entering the race for low-cost housing, the company had planned to build 1,00,000 affordable homes at a price below Rs 20 lakh at major cities across India and the first such project was to come up in Gurgaon.

According to a report prepared by property consultant Knight Frank on Public-Private-Partnership model on housing in India, an estimated 11.84 million dwelling units are required to be built in India by the end of 2013-14 across all income segments in 37 Indian cities.

The need from the economically weaker section (EWS, lower income group (LIG) and lower mid income group (MIG) is nearly 90 per cent of the total housing requirement, it said.

“The cumulative task of delivering over 10 million units in affordable housing category in top 37 cities of India quantifies to a business opportunity in excess of Rs 5,00,000 crore,” the report, prepared for realty body NAREDCO, said.

Commenting on the potential of the segment, the report said though the margins realised from affordable Indian homes are comparatively lesser, the segment offers an opportunity to exploit volume of transactions to derive higher profits.

Knight Frank has released a research paper on ‘Affordable Housing’ in India, saying that this segment has a potential market size of Rs300,000 crores in India by 2011. The affordable housing segment of the Indian real estate industry is expected to see requirement of over two million units by 2011.

While the Rs3-10 lakh income group would drive this demand, the research findings further indicate that the largest contributor to this market size is expected to be the group earning Rs3-6 lakh income annually. Pranab Datta, Vice Chairman and MD, Knight Frank India said, “We have witnessed a tumultuous situation in the Indian real estate sector and the shift today is clearly towards Affordable Housing. The findings of this report clearly indicate a huge demand in a segment that should encourage developers to take increased notice.”

Although a number of affordable projects have been announced, the locations do not have adequate social infrastructure which is of utmost importance for the proper development and successful implementation of affordable housing, says the Knight Frank report. The report reveals that good connectivity to work places is the most important factor influencing the buyers decision in selecting the location of their residence. The Knight Frank survey took a sample size of 1,400 households across the seven cities. The respondents were mostly tenants, without tenancy rights under the rent control act, and had a strong intention to buy a house within the next two years, the report said.

The Indian Government has offered 1% subsidy on loans up to Rs 10 lakh & doled out tax benfits for developers which is set to increase growth of affordable houing projects in India.

But this will mainly boost affordable housing projects in Indian Tier II & III cities. Metros will be missing from the list. At a time when low cost is the clearly the buzzword in the Indian real estate sector, Union finance minister Pranab Mukherjee’s move to offer 1% interest subsidy on Indian housing loans up to Rs 10 lakh can be seen as a positive development for the middle income group.

The chairman and MD of a leading Indian domestic developer has blamed foreign direct investment (FDI) as the reason for land prices accelerating.

Rohtash Goel, chairman and managing director of Omaxe said
“The foreign investments have done no good to the sector. At the most, they are responsible for the sky high land prices,”

“India has enough domestic fund and demand to support the industry. Therefore I feel that FDI (foreign direct investment) in the realty sector should be discouraged,” he added.

According to him, foreign funds posed a “serious challenge” to affordable housing. “FDIs in real estate do not increase supply and demand for affordable housing. Their entry into this segment will enhance price of land and should be discouraged.”

While this is a valid point to some degree it should also be pointed out that some of the major Indian developers such as DLF and Unitech, have also played a major role.

They have speculated to varying degress and are hence in so much trouble now. It should also be noted that without the FDI inflows India’s growth story may not be the talking point it is today.

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