Improving the life of

masses: Housing for all

The Amazing Market Makers of
Vibrant India

Group 2 Section A:

Anish Narula B17007 | Arpit Taluka B17011

Pooja Patil B17035 | Shubh Vardhan B17052
Yatin Arora B17061
Improving the life of masses: Housing for all
BACKGROUND
The current pace of development of India has certain challenges associated with it. The rapid growth of
the country has caused urban migration of the population from rural to urban settlements, which is
aggravated by limited resources available to meet this increasing demand for housing. This high
percentage of migration of labour, workers, small business owners and their family members from rural
areas to cities has caused urban congestion leading to a toll on basic civic amenities such as water and
sanitation, etc., and most of all, housing shortages in cities across India.

It is estimated that India, at the national level, has a shortage of more than 18.78 million homes. Of which
95% of the households belong to the the Economically Weaker Sections and Low-Income Groups. The
shortage of urban housing in India is further projected to grow to 30 million by 2022, leading to the ever-
increasing gap between supply and demand of the affordable housing. This forces people to live in slums
and other temporary informal settlements.

The gap between the supply and demand of affordable housing has emerged as one of the biggest
problems of modern India, which, if not dealt with effectively, can have tremendous negative impact on
the country’s economic growth and worsen the condition of the weaker section of the society. Currently
the housing shortage in urban areas is driven by Economically Weaker Sections and Low-Income Groups
segments. The majority of the capacity addition in the housing sector has been beyond the reach of
Economically Weaker Sections and Low-Income Groups customers. The private players are focusing
primarily on Mid Income Groups and High-Income Groups, owing to the higher returns from these real
estate projects. The key problem areas for the private players are increasing raw material costs, low profit
margins, delay in project approvals, and high land costs, making low-cost housing projects less attractive
to the private developers. As Affordable Housing is a state issue, it creates complications in
implementation because of precarious financial condition of development authorities, state/ city-level
agencies and their limited capacities in handling in these projects.

In order to successfully build India’s Affordable Housing, collaboration between the central government
ministries, state governments, urban local bodies, civil society, private sector, and financial institutions is
essential. The collective agenda must advance the efficiency of affordable housing sector at an optimally
low cost, while maintaining safety standards and basic amenities. To mainstream affordable housing, the
government needs to predominantly act as an enabler for development and be involved in facilitating
investments, both public and private, and streamlining processes across the value chain. Stakeholders will
benefit from the availability of suitable land parcels with the requisite trunk infrastructure, expedited
clearances, and an adequate organisation of financing.

Moreover, for the planning and design process to transition smoothly into project execution, it is
important that the development authorities have requisite capacity to handle projects of this type and
scale which seems to be lacking. Lack of availability of suitable financing options for beneficiaries who
predominantly work in informal segments is another bottleneck for mainstreaming of affordable housing
in India. Furthermore, it is equally important that awareness amongst the intended beneficiaries increases

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to bring them into the fold of formal banking sector. Another key aspect that is widely neglected while
planning an Affordable Housing Project is the maintenance post hand over of units to the customers/
beneficiaries.

This eventually creates ‘New Urban Slums’ and defeats the purpose of creating these assets in the first
place. It is of utmost importance to address this aspect to create sustainable benefits of creation of these
assets. The Government of India in its schemes has taken many steps to boost the sector, but challenges
still remain. For instance, while Rajiv Awas Yojana (RAY) envisaged an O&M fund for maintenance of assets
created under the scheme with a onetime contribution from the central government, it could not be
implemented at a wider level. Further, this feature is absent in the PMAY (Pradhan Mantri Awas Yojana)
We need to keep in perspective that Affordable Housing Projects will cater to a much needed highly
productive economic workforce in the country. It is imperative that both public and private sector join
forces and drive innovations for developing sustainable habitats and vibrant communities. This document
highlights some of the key issues and challenges of the sector and measures that can be thought to
address these shortcomings and create an enabling environment to achieve GoI’s goal to achieve housing
for all by 2022.

Definitions of affordable housing in India (as developed by KPMG and CREDAI)

MARKET POTENTIAL
The present status of infrastructure in urban Indian leaves much to be desired. Availability of housing, in
particular, is a key stress point--about 80 million households in India are estimated to be living in slums,
for want of affordable housing. As the Indian middle class expands, the demand for affordable housing is
likely to increase even further. Consequently, the potential market size for affordable housing in urban
India is forecasted to grow about 1.5 times from an estimated 25 million households in 2010 to 38 million
in 2030. Maximum potential is believed to be in the rich Tier 1 cities that have a considerable mass of
urban poor, and in lower-income Tier 4 cities supported by strong demand-supply dynamics.

The growth potential is further fortified with the favourable demand-supply dynamics that are playing out
in the market. While demand is strong, and slated to grow, supply has historically been low, creating

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substantial opportunities to bridge the gap. Key factors bolstering growth in demand for affordable
housing include:

1. Rapid urbanisation: India's urban population is forecasted to grow to 590 million by 2030, at a
compounded annual growth rate (CAGR) of 2.4% between 2010 and 2030. The percentage of
urban-to-total population is forecasted to increase from 30% in 2010 to 40% by 2030.
2. Rising demand for affordable homes: With home prices far outpacing general inflation and wage
growth, premium homes in Tier 1 cities have become largely unaffordable, increasing demand for
affordable homes.
3. A culture of home ownership: The local Indian culture has an inclination for home ownership.
Even people in lower income groups are determined to purchase a home, rather than rent one.
On the other hand, supply of affordable housing has hitherto remained inadequate, primarily
owing to the following causes: Robust demand, coupled with inadequate supply, is shaping an
environment full of opportunities.
4. Availability of land at reasonable costs: The availability of land at reasonable costs is an important
determinant of affordable home supply. Currently, there is a shortage of affordable homes, as
policy measures in the past have failed to address the concern of affordable housing.
5. Economic growth: The Indian economy is forecasted to register robust growth rates over the next
few years, on a sustained basis. Higher levels of economic activity will likely translate into higher
personal disposable incomes. Moreover, well-timed monetary policy measures, coupled with an
anticipated softening of international commodity prices, could lower India's inflation rates
significantly between 2010 and 2015. Consequently, the real purchasing power of an average
Indian is likely to get a boost, in an environment of high economic activity and low inflation. This,
in turn, could trigger a growth in the demand for affordable housing, especially from an expanding
urban middle class. Additionally, lower inflation expectations are likely to check interest rate
hikes, thereby accelerating the demand for real estate.

The potential market size for affordable housing in India - India Urbanization Affordable Housing Model,
McKinsey Global Institute Analysis

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FUTURE CHALLENGES AND GROWTH
Deregulation: Deregulation will be the key to the success of various government initiatives in the future.
A major impediment to real estate development in India remains the approval process. The government
has rightfully laid great emphasis on improving India's ranking in the World Bank Global Ease of Doing
Business Index and continuously monitors the same looking at improvements in ranking as a success. The
same World Bank released an Ease of Obtaining Construction Permits Index. Here India ranks a shocking
185 out of 187 countries. We are in the same club as war torn countries where institutions have collapsed
and offices which accord approval have been bombed to rubble.

Scarcity of land: Urban land mass is under severe constraint to meet the housing necessity of the country’s
population which is expanding rapidly. This is amongst the foremost reasons for slow progress of this
initiative. Land is a precious commodity and its unavailability in metropolitan cities in India has affected
development of affordable housing in areas where it is actually required. The administration must address
this issue if it intends to realize its dream of building millions of new homes by 2022.

Massive capital expenditure at every stage: A project of such magnitude requires huge investments and
a large skill development program for timely completion. As of now large-scale discrepancies are present
in acquisition, design and planning, implementation of innovative technologies which have a direct impact
on execution. So, better focus is needed on all parameters if the government is keen to see this project
through successfully. Not only does the supply side need intervention, the government needs to improve
the institutional environment for the lower income categories to access housing microfinance and other
financial tools. Housing micro-finance gives these borrowers access to credit and the opportunity to
develop a credit history, which can assist them in their loan approval processes, going forward.

Lack of incentive to private players: While thrust on encouraging private sector participation can provide
the answer to India’s urban housing predicament, there are multiple concerns owing to which developers
are hesitant to enter into this segment. Although, tax benefits have been announced to encourage more
builders to take up construction of affordable homes, its turnaround will be difficult without access to
cheaper capital as the margins are very thin in this space. Additionally, lack of proper infrastructure and
the cumbersome approval process delay the commencement of work which impacts the overall
profitability. Therefore, the government should address these issues to make the space more attractive
for private players.

No property records: To avail interest subsidy on a home loan, proper title documents play a key role.
However, land and property records are currently not digitized and remain in poor condition. This
continues to be a major hindrance in the execution of the scheme laid out by PMAY. With most of the
people dwelling in ancestral homes and the ownership in the name of their deceased parents or the slum
dwellers with no property rights, such subsidies could not be availed.

Clear communication & Co-ordination: In a project of this magnitude it is important for all the parties
concerned to communicate effectively so that there is no confusion. This is lacking here as at times experts
from various fields do not interact with each other. For instance, it is not possible to conceive a project or
plan transportation without understanding the commute patterns in a city. So, co-ordination amongst the
implementing agencies will be extremely important for a project of this magnitude.

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Illegal settlements- The underlying problem of the inability to achieve housing for all not only lies in lack
of resources from the Government but also participation of people. A large segment of the population
that this scheme will eventually cater to prefer residing in slums located in the heart of cities to meet their
day to day economic, commutation and security needs. This is the foremost reason why houses
constructed by the government remain unoccupied. Hence, significant chunk of problems shrouding the
Indian housing system are not really due to absolute homelessness, but due to illegal settlements that are
not fit for human habitation, bereft of basic amenities needed for sustenance.

It is important to remove these bottlenecks so that the dream of “Housing for All” can be fulfilled by 2022.
Else, the problems associated with the ever-burgeoning population and rapid urbanization will accelerate
exponentially in the coming years and may take a toll on the economic development of our country. States
need to push through the much-needed rental reforms that balance the interests of tenants with the
protection of property owners’ rights, and don’t distort rental markets by artificially controlling rents. This
has the potential to bring vacant housing stock into the rental market and alleviate the housing shortage.
It is imperative that both public and private sector come together and drive innovations for developing
liveable habitats and vibrant communities.

REFERENCES
1. http://www.foliage.in/pdf/Affordable-Housing-in-India-2407201-IBEF.pdf
2. https://www2.deloitte.com/content/dam/Deloitte/in/Documents/public-sector/in-ps-
affordable-housing-noexp.pdf
3. http://naredco.in/pdfs/recommendations-conference.pdf
4.