Affordable Housing in India: Its Impact
Affordable housing is a good strategy to the home-buyers dilemma and it helps to ensure housing across different sections of society. Home buyers face challenges while deciding “when” to purchase houses. While favorable economic conditions lead to higher incomes for home buyers, it also leads to spiraling real estate prices making it difficult for a buyer to purchase homes even given their higher incomes.
On the other hand, during economic downturns while real estate prices decline, people become skeptical about their incomes and adopt a more cautious approach to purchases. The objective of Housing policy thus should be not only to provide Adequate Housing but to provide housing which satisfies minimum adequate norms. One is to define Adequate Housing and then deliberate as to how to make this housing affordable for different income groups.
Estimation of Urban Housing in India
The growing concentration of Indian population in urban India has led to problems of shortage of land, housing shortfall and congested transit and has also severely stressed the existing basic amenities. Urbanization has resulted in squatter settlements and has deteriorated the housing conditions of the economically weaker sections of the society. This is primarily due to skyrocketing prices of land and real estate in urban India.
Considering these factors there seems to be a huge gap between the demand and supply of housing in urban India. According to government estimate, the housing shortage was 18.78 million units in 2012, out of which 95 per cent was in economically weaker Section (EWS) and the Lower Income Group (LIG) category.
Addressing the realtors’ body CREDAI conclave, Minister for Housing and Urban Poverty Alleviation Venkaiah Naidu stated that the Real Estate Development and Regulation Bill would soon come up in the Cabinet for approval and hoped that at least by the Budget session, the proposed law would become a reality. He also said that the government is moving towards reduction in interest rates, which are difficult to manage currently. Asked about timeline, the Minister said when the new housing policy will be launched; the interest subvention scheme will be a part of it.
Impact of the Affordable Housing Scheme on the Real Estate Sector
The real estate business in India underwent considerable changes post the global liquidity crisis. Prior to the crisis, developers bought land with part payment and launched projects; this meant regular cash flows from upfront payments was required to fund chain of projects. With the liquidity crisis, availability of construction finance became a challenge and muted consumer demand meant very little upfront payments due to concerns on timely project completion, thereby affecting regular cash inflows for developers.
Real estate sector is facing a huge slowdown in demand due to high interest rate regime and sky rocketing property rates. Private developers have been aggressively pursuing affordable housing post the economic slump. Developers have realized the opportunity and need of affordable housing and have taken several steps to tap the same. Developers have on an average reduced the prices by a whopping margin in the past year and are willing to operate at lower margins.
The Real Estate regulatory bill, which was introduced in Rajya Sabha in August 2013, seeks to protect home buyers from unscrupulous developers. In February 2014, the Standing Committee submitted its report. The Bill provides for mandatory registration of all projects, besides mandatory disclosure of information like details of promoters, layout plan, land status, schedule of execution, status of various approvals and carpet area. The Bill seeks to enforce the contract between the developer and buyer and provides for quick remedial measures in case of disputes.
Stating that a whopping INR 14000 Billion would be needed annually to achieve Housing for All by 2022, Naidu said Centre will promote public-private partnership in the real estate sector.
