AFFORDABLE HOUSING – Making Budget Dreams Real


    A cosy home should be everybody’s birthright. Unfortunately, it is not the case in societies across the globe. Similar is the situation in India. To address this demand-supply mismatch is a slew of policies architected by the current central government in India for 2017 in the shape of ‘Affordable Housing’. The government has formulated both demand and supply reforms through the “Housing for All by 2022” or the “Pradhan Mantri Awas Yojana” scheme which aims to construct two crore houses in India, in three phases, till 2022. To meet this target there is a need to add over 2 million new homes per year to give every citizen a roof over his or her head by 2022.

    Urban India is currently facing a shortage of nearly 19 million houses and around 40 million in rural areas, with 99 percent of this demand coming from the economically weaker sections of the society. A prominent research report, “Indian Affordable Housing Market Analysis – The Changing Paradigm”, cites that the affordable housing demand is expected to rise at a CAGR of around 6.1 per cent during 2015-2022. Such growth is influenced by the expanding middle class, surging disposable incomes and increase of fiscal incentives on home loans; which has boosted affordability of homes in India, the world’s fastest-growing major economy.




    90 percent of the demand for homes in India today is for affordable housing and the major drivers of this surge are:

    Faster Urbanization

    In the India of 1960, the urban population was only 0.10 billion, and by 2020, it is projected to be 0.48 billion. By 2050, 900 million people will be added to Indian cities. Urbanization in India is accelerating at a faster rate than its population. With more and more migrants flocking to cities from villages, an additional pressure has been placed on the government to provide affordable housing to all.

    At present, housing finance companies are majorly focussing on the middle-class and aspiring lower middle class segments with an average annual income of ` 1.5 lakh to ` 10 lakh. This income bracket also includes, small and medium entrepreneurs and self-employed individuals and professionals.

    Government Support

    The current government has provisioned for interest subsidy on housing loans to female and special category beneficiaries falling in the Economically Weaker Section (EWS) and Low Income Group (LIG). Also, there is an added impetus in a tax exemption of an additional ` 50,000 to first-time homebuyers and a 100 per cent tax exemption on profit to undertakings for the construction of houses of up to 30 sq. metres in four metros and 60 sq. metres in other cities. There is also an exemption on service tax for construction of affordable houses up to 60 sq. metres. A drive to digitise and streamline land records is currently underway. In 2012, the Housing and Urban Poverty Alleviation Ministry made an upward revision of the criteria that defines EWS, which meant that families with an annual household income of up to ` 1 lakh make the cut against the previous limit of ` 60,000 annually. Also, families with an annual income of between ` 1-2 lakh came under the LIG category whereas previously, they were in LIG when earning ` 60,000-1,20,000 annually. The EWS and LIG population form the foundation of India’s economy and it is high time they had a decent roof over their head.

    Better Infrastructure and Connectivity

    Budget homes earlier meant living with difficulty as they were situated mostly on the outskirts of the city or in satellite towns, which did not have proper connectivity to the metros and commuting was a hassle for populace travelling to main cities for work. Now both the government and builders have realized this weak spot and are together creating infrastructure like roads and rails to make budget dwellings more accessible. Hence even if houses are on the main city’s periphery, improved connectivity makes distances shorter and these dwellings more desirable. Thus an entire ecosystem catering to this population is being built in the form of physical, social and financial infrastructure.



    Burgeoning Middle Class

    Living standards in India are rising rapidly due to the government’s pro-development policies coupled with its anti-poverty initiatives. Hence the previously underprivileged are swiftly making the transition into the middle-class segment making it much more expansive. With its marked increase in size boosting India’s income pyramid, it is considered to be one of the primary demand drivers of affordable housing.

    Entry of Private Developers

    Many private property developers are shifting priorities from building only luxury or standard houses to that of also constructing affordable houses because of the huge potential. Currently, close to 17 new entrants have jumped on this bandwagon, even as the 14 existing players are significantly expanding their portfolios of low-cost homes and supporting loan schemes needed by the buyers. The Indian home loan market comprises of 76 housing finance companies. Also, both, state-owned and private banks are leveraging technology to reach out to lower income groups.

    The Demonetisation Effect

    November 2016’s demonetisation move architected by Prime Minister Narendra Modi is all set to make houses more affordable through transparent deals. After this revolutionary decision, many major housing builders have set up e-payment and receipt in place, to make transactions more transparent and hassle-free resulting in a reduction in cash dealings. The real estate sector in India is set to be now more organized in its working, and the sales forecast is looking up according to industry insiders.

    The ‘Housing for All by 2022’ is surely not a pipe dream after all.



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