Rapid urbanization in India has not only boosted the country’s housing sector but also presented complex affordability challenges that need to be resolved to harness economic, social and environmental opportunities associated with urbanization. Broadly speaking, “affordable housing refers to any housing that meets some form of affordability criterion, which could be income level of the family, size of the dwelling unit or affordability in terms of EMI size or ratio of house price to annual income.”
What is India’s affordability challenge?
India’s affordable housing customers comprise a huge mass of the bottom of the pyramid living in cramped, poorly constructed homes in squatter settlements, located in and around the city with lack of available housing options and minimal access to home finance. The current housing deficit has been assessed to be more than 19 million units in urban areas, and 95% i.e., 18 million units of the same fit the economically weaker sections and low-income groups of the society. When we talk about aggregate annual demand, our country requires more than five million units in the affordable segment. To plug the gap in the supply chain, which is merely 10% of the total demand, we as developers need to bolster our execution capabilities to tackle not just the challenge of access to affordable housing, but also delve to improve living conditions on a macro scale.
Factors like identification of the right target group, micro financing mechanisms and self help groups for scalability with flexible paying mechanisms to cater to variable income flows need immediate focus on the demand side. Whereas on the supply side, incentivizing on the two policy initiatives such as ‘Housing for All (Pradhan Mantri Awas Yojana)’ and ‘Smart Cities Mission’ is not only necessary to address issues of funding and incentives for developers and buyers, but also to tackle issues of land availability, poor infrastructure facilities and the overall informal housing scenario. There has been a slow but promising shift from marketability of premier development projects to developers diving into projects having small formats with reduced down payments. Parallel to the emerging private sector investment, the state must step in and arrive at clear guidelines as to what affordable housing should be and provide approvals without any constraints, then the onus is on us developers to apply ideas and deliver truly affordable houses to customers.
It is safe to say that in the existing political landscape, PPP is the way forward to bridge the affordable housing deficit. For affordable housing to flourish, three critical factors need to come together. First is capital in real estate, second is ability to deal with the local reality in India (land approvals, sand mafias and so on varying in each state) and third is mindset for affordable housing, where low cost and high volume production is vital.
Home ownership in India comes with an aspirational value attached to it and planned, sustainable and inclusive urbanization is not a choice but the need of the hour for India’s growth story. Affordable housing thus calls for collaborative, multi pronged and concerted effort from all stakeholders, which include long- standing dialogues with urban dwellers.