Affordable housing!

As per recent findings, a population of around 19 million have been left homeless within Indian cities due to the rapid urbanization along with the ever increasing migration of people from rural to urban areas.

The Government is providing encouragement to the development of affordable housing projects by taking steps such as allowing the RBI to open the External Commercial Borrowings (ECB) window for housing finance companies and developers to raise up to $1 billion.

However, with the exception of a few pockets located within Bangalore, Chennai, Delhi, Hyderabad and Mumbai, where the majority of migration has taken place over the past decade; much of the effort still remains only on paper. Notwithstanding, the speculations of a housing bubble, prices have not crashed and remain stubbornly high. As per reports, within major property markets like Mumbai, an inventory of more than six months lies unoccupied.

Developers too have been cautiously maintaining a distance from the segment of affordable housing. This is mainly due to the fact that the profit margins realized per unit of a high end residential unit far outweighs that of an affordable segment. Furthermore, the seller has to spend very little effort in marketing and disposing the property as the number of units are few when compared to the multitude of units which generally are the basic characteristics of residential houses belonging to either the low or medium segments.

Maximum shortage:

As per a report of the Technical Group on Urban Housing Shortage (2012-17) prepared and constituted by the Ministry of Housing and Urban Poverty Alleviation (MHOUPA), the Indian realty market has been serving the housing needs of only those falling under the categories of either High Income Group or Middle Income Groups, while the needs of the lower strata of society are being ignored. Due to this the maximum shortage persists within the affordable segment specifically for Economically Weaker Section (EWS) as well as the Lower Income Group (LIG) categories. 

Presently, the consolidated shortage of dwelling units in India is estimated to be at 18.78 million units. Of this approximately 96% of the shortage exists within the segments of LIG and EWS.

Definition of Affordable Housing:

Affordable Housing is defined by the MHOUPA as the following:

“Generally affordability is taken as 3-4 times the annual income. However in all schemes and projects where subsidy is offered by the State / Central Govts for individual dwelling units with a carpet area of not more than 60 square meter, then the price range of a maximum of 5 times the annual income of the household, either as a single unit or part of a building complex with multiple dwelling units will be taken as affordability entitlement. ” 

Definition of Affordable Housing Project:

Affordable Housing Project is defined by the MHOUPA as the following:

“For the purpose of this policy an affordable housing project is defined as a Housing project wherein at least 60% of the Floor Area Ratio (FAR)/Floor Space Index (FSI) consists of dwelling units with a carpet area of not more than 60 square meters and 15% of the total project FAR/FSI or 35% of the total number of dwelling units, whichever is higher, is reserved for EWS category.”

Need of the hour:

Some schemes which were previously on the anvil to coax developers into constructing affordable houses failed to be constituted. For example, a proposal if accepted would exempt the profits realized from constructing and selling affordable housing units for a period of ten years from the tax net has still not be implemented.

Affordable housing should not be the focus of the Centre just because shelter is among the bare basic necessity but also because construction makes for good economics. As per estimates made by the MHOUPA, 250 ancillary industries are supported by the housing sector. Further, the sector is also a good employment multiplier. Around sixteen per cent of the Indian workforce is engaged within construction or the transportation sector. 

Housing has become a costly proposition for all stakeholders, also because of the high land prices. Without any clear guidelines or formula for calculating land prices, a lot of arbitrariness exists and persists. Hence, it is required to be fixed on a priority basis.