High Demand for Affordable Housing
India’s urban housing shortage is primarily driven by people requiring affordable housing. Commonfloor.com recently conducted a customer survey to identify the most preferred budget for purchasing a house in 2014. Almost 80% of the respondents have a budget of less than Rs. 70 lakhs for buying a house in India. While cities such as Mumbai and Delhi are not in a position to cater for affordable housing, there are few other cities one can look towards for buying houses within a limited budget.
Affordable housing
According to a study by the Ministry of Housing and Poverty Alleviation (MHUPA), India has an urban housing shortage of about 19 million units. While there are several housing projects available, they are beyond the reach of the common man. A wide gap exists between the demand and supply for housing.
According a customer survey conducted by Commonfloor, about 48% participants have a budget less than Rs.40 lakhs for buying a property. Another 32% of the participants can invest within the range of Rs.40 – Rs.70 lakhs and about 11% can invest more than Rs.70 lakhs but less than Rs.1 crore. Only 9% are capable of investing more than Rs.1 crore in the real estate market in 2014. This explains that there is still a huge demand for affordable housing in the country.
Metros offer affordable housing
In a study conducted by Knight Frank during the second half of 2013 for the tier-I cities, it was found that there are certain cities that still offer affordable housing. The study found that Bangalore was the most affordable residential market with about 77% under-construction projects falling below the price tag of Rs. 50 lakhs. Chennai was the second most affordable city in the country with about 75% projects falling below this price tag. Interestingly, though one may feel that Bangalore residential real estate is more expensive than few other markets, Chennai was found more expensive on the basis of weighted average prices. Hyderabad too came close to Bangalore and Chennai in affordability.
The weighted average prices of Bangalore, Hyderabad and Pune were found to be far less than that of Mumbai and NCR. Mumbai, despite small price corrections in newly launched projects, still falls beyond the affordability range, with almost 29% of its under-construction projects costing more than Rs. 1 crore. Pune is another city that has emerged as one of the most sought after real estate destination with decent affordability. This is primarily due to its proximity to Mumbai and the demand spillover to nearby cities. The weighted average price in the city is higher than that of Bangalore and Hyderabad, but still lower than that of Chennai.
Apart from tier-I cities, several tier-II cities such as Coimbatore, Kochi, Indore and Lucknow are slowly emerging as investment destinations. While these are definitely more affordable than the tier-I cities, they still need sufficient infrastructure growth to start competing with tier-I cities as real estate hot spots.
