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Affordable Housing – Current And Future Prospects

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Housing has been one of the key business drivers for real estate sector.

From renting a property to owning one, homes play an essential role for many. With growing urban population, rising prices and lack of affordable land bank in the city, it has been difficult to address the demand and supply gap of Housing. As a solution, developers are creating budget friendly properties in the suburban areas with self-sustaining townships to ensure that the demands are well addressed. Over the years the Governments have also taken several measures like Indira Awas Yojana (IAY) in 1985 and Pradhan Mantri Awas Yojana (PMAY) in 2015 to boost the public housing programme in India. 

It is one of the key mandates of the Central as well as State Governments in the country. The current government in the center aims to make housing affordable for everyone and aspires to provide a roof to every citizen, irrespective of their socio-economic status by March 2022 with Housing for All initiative. The success factor of this Housing policy lies in providing holistic and all-inclusive accommodation. The affordable housing segment has taken a center stage in the housing markets across the country but there’s still a huge gap in the demand and supply of the affordable units.

There are raft of reasons for this, land acquisition at an affordable price in the urban areas is becoming more and more difficult for the developers. Similarly, the existing infrastructure of these urban areas is inadequate to accommodate the ever-growing urban population and demand for homes. The lengthy and strenuous approval process for projects makes the progress very tardy. Rising construction costs, constantly changing regulations and the dearth of access to home finance for low-income groups is constrained on the demand side.

Current prospect of affordable housing:

The optimism for the affordable housing segment is picking up rapidly due to a large migrant population. The government has announced various stimulus packages to address the issue of stalled projects and liquidity crunch which real estate has been facing at large. These packages are announced to create a positive ecosystem to bridge the demand and supply gap of housing units, especially for middle and lower-income groups.  But the question is despite having all the policies and subsidies in place, how the government will provide homes to the EWS and LIG segment?

The center has granted Rs 1 Lakh per family on an average under the slum rehabilitation program and is flexible in deploying this slum rehabilitation grant to any slum rehabilitation project taken for development using land as a resource to provide to slum dwellers. The SRA has a major role to play in the success of PMAY (Urban) in the state of Maharashtra. The state has already decided to include SRA projects sanctioned post June 2015 under PMAY (U) which will further include almost 2.3 Lakh housing units from SRA projects under the scheme. 

Affordable housing has already been given the vital infrastructure status in the Union Budget 2017-18, which has enabled the developers to have diverse and cheaper sources of funding, including external commercial borrowings (ECBs).

The grant of infrastructure status to the affordable housing sector was a groundbreaking move to lower the borrowing costs of developers, who could, in turn, pass on some of the savings to the buyers, thus spurring demand. This move increased the willingness of banks to lend to projects in this segment.

Future of Affordable Housing

Although, 2019 was a period of ups and downs for the real estate sector due to ongoing liquidity crisis and slow pace of recovery via sales but housing sales saw a modest 4% – 5% annual growth with over 2.58 lakh homes sold during the year. Affordable housing acquired the center stage in 2019 thanks to multiple government sops throughout the year. As of now, more than 9 million houses have been sanctioned under the PMAY scheme out of which almost 30% of houses have been built and more than 60% of sanctioned housing units are underway. More than 90% of the completed projects have been delivered to the end consumers. The rate at which houses are being built may not be enough to meet the target as there are still too many projects stuck on various stages of approvals. Quick approvals along with moderate use of new construction technologies can help in achieving the target of ‘Housing for all’.  

The most essential and fundamental thing to meet the target is easy access to housing loans, especially for LIG (Lower and mid-income group). It will not only stimulate the demand and consumption but also speed – up the overall development of the urban areas across the country.

Recent funding interventions like 2500Cr investment fund for stalled housing projects and Rs102Lakh Crore investment announcement for Infrastructure sector will surely open newer avenues for development. Suburban areas like Kalyan – Ambernath, Badlapur, Mira-Bhayandar, Vasai- Virar have witnessed huge investments in during 2018-2019, with the proposed investment of the government the affordable housing may go beyond Ambernath, Panvel and Virar. These new reforms can be best harnessed if corporate India and the government work more closely together and create more opportunities to develop the country at a higher pace.

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