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The luxury segment of the Indian Real Estate sector, recorded a healthy growth in the first three months of 2013. Of late, the affordable housing segment has reported some increased investment activities following the entry of corporate houses into this segment. In March 2013, Mahindra Lifespace Developers announced an affordable housing project in Tamil Nadu. A similar scheme has been undertaken by the Wave group at Ghaziabad in Uttar Pradesh.
Rapid urbanisation in India has led to an increase in demand for affordable as well as luxury residential apartments. The luxury segment has been preferred more by the corporate builders due to low availability of land in urban areas and perpetual cost escalation. However, there lies a huge untapped market in the affordable housing segment, in tier II cities as well as in distant suburbs of large cities.
According to a report submitted by a technical committee to the Ministry of Housing and Urban Poverty Alleviation (MHUPA), India’s urban housing shortage is estimated at around 18.78 million households in 2012.
Traditionally, the onus of supplying affordable housing has been with public sector entities such as State Housing Boards and Development Authorities. To rope in private developers to meet the increasing demand for housing a few state governments have formulated separate policies for urban as well as affordable housing projects.
Rajasthan Government’s Affordable Housing Policy, 2009 focuses on economically weaker sections (EWS) / low income groups (LIG) / middle Income group (MIG) through PPP model. The objective of the policy is to promote investments in housing in urban areas on PPP model.
The new development plan of Ahmedabad Urban Development Authority (AUDA), formulated in February 2013, proposes to create an “affordable housing zone” for the city and has raised the Floor Space Index (FSI) across different pockets of city.
Affordable housing development continues to be an unviable proposition for the developers as of now. If India is to achieve the goal of ‘Affordable Housing for All’, there is a need to realistically address the constraints faced by private developers and formulate policies that encourage their participation.
A recent joint study by KPMG in India and NAREDCO has highlighted the following challenges which are the main impediments for private participation in affordable housing development.
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Unavailability of urban land
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Delay in project approvals from multiple authorities
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Rising construction cost
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Financing constraints of low income group
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Limited financing avenues for developers
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Need to relook at laws and building guidelines
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Lack of skilled manpower
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Disputable taxation regime
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PPP projects can play a pivotal role in bridging the gap between demand and supply of urban housing as they can be instrumental in attracting private capital for financially viable affordable housing projects. To ensure this, the need of the hour is formulating investor friendly policies and instituting mechanism for fast project approvals.
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