Affordable Housing

  • The Defintion
  • The Demand
  • The Challenges
The Definition

"Affordability" concept is very generic and could have different meanings for different people based on differences in income levels. Affordable housing can be defined using the following 3 key parameters. First two parameters are independent of each other, the third parameter is correlated to income and property price, and hence can be termed a dependent parameter.

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A further distinction between low-cost housing and affordable housing is necessary since there is a tendency to often confuse the same.

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Affordable housing is not about budget or substandard homes in isolated areas with compromise on connectivity, surrounding infrastructure or on space space, quality or facilities as required by the family. Affordable housing is in fact offering all basic amenities and facilities with quality, lasting construction but at a price point that is affordable by aspiring customers. Affordable Housing thus cuts across all income segments of the society and makes good economic sense.

The Demand

There is a huge demand for affordable & low cost housing in India owing to demographical and economic conditions prevailing in India. There have been many estimates which suggest that the shortage of affordable housing is reaching critical proportions.

  • Kumari Shelja, the Hon'able Minister of Housing & Urban Poverty Alleviation (MoHUPA), quoted a housing deficit of about 2.5 crore for the economically weaker & LIGs in India with a growth rate of about 3.6 lakh units p.a.
  • Report of Technical Group constituted by the MoHUPA, in 2010 reported the total urban housing shortage including backlog & additional requirement to be 26.53 million dwelling units by the end of the 11th FYP period of which 99% shortfall was estimated for EWS & LIG segment.
  • A report for NAREDCO by property consultant Knight Frank, 2010, estimated 11.84 million dwelling units required to be built by the end of 2013-14 across all income segments, in 37 cities. Of this, nearly 90% will be needed for EWS, LIG & MIG. Delivering >10 million units in affordable housing category in top 37 cities quantifies to a business opportunity in excess of Rs.5,00,000 crore.

The Challenges

The major challenge for implementing affordable housing projects from the developer's perspective is the availability of land and the cost factor. Easy availability of cheap land in urban areas is a big challenge. With rapid urbanisation there is a huge pressure on limited land resources driving up costs. Adding to the worry is also the construction and labour costs which add up to the overall costs of the project pushing up the cost for the consumer. Good policy environment and assistance from government in promoting and enabling affordable housing sector to progress is desired and some positive actions is visible, albeit slowly.

The major challenge in determining the sale of affordable housing projects from the customer's perspective is the availability of adequate financing sources. Here, traditional banking channels are not of much help as most of the customers are from the informal sector and do not have adequate documentation or any form of guarantee. Here the role of micro-finance institutions in enabling the low income consumers purchase these "Affordable houses" is of much importance.