According to a survey by real estate services company ANAROCK, India’s affordable housing market is in critical condition as a result of high land costs, purchasers’ financial situations, and a lack of financing choices. Homes in this price range start at less than Rs 40 lakh.
According to ANAROCK, the proportion of affordable housing units decreased by a record 20% in 2022.
What Caused The Drop, You Ask?
The primary problem of this group is land costs. In larger cities, developers may recoup their land expenses by selling mid-range and luxury housing units, which are out of the reach of the poor. Yet, there are significant infrastructural problems in inexpensive neighbourhoods where property is easily accessible, including inadequate road connection, a lack of water, a scarcity of power, etc.
Moreover, there are just a few financing choices accessible for inexpensive homes. Smaller businesses with little to no collateral for loan financing, which is very costly, make up the majority of affordable home developers. Big developers are preferred by private equity investors. In addition, there are low returns on investments in affordable housing, which makes them riskier.
According to ANAROCK research, sales of affordable housing fell from 40% of all units sold in 2019 to 20% in 2022 in the top seven cities. Moreover, fewer affordable housing units were sold overall. The supply percentage of affordable housing decreased during the previous five years, reaching its lowest point in 2022.
Around 27% of the more than 6.30 lakh units overall in the top seven cities as of the end of 2022, according to ANAROCK, were in the inexpensive category.
It implies that despite increased demand for affordable housing, homes are still within reach of most people. Junior-level software employees and blue-collar workers in manufacturing and services make up the majority of the target market since they are the ones most impacted by the Covid-19 pandemic’s effects on the economy. People are postponing purchases and turning to rental accommodations.
The epidemic had less of an impact on affluent and luxurious consumers. Also, since the profit margins for developers of cheap housing were already slim, it has become more difficult for them to provide inexpensive dwellings due to the growing inflationary trend of basic material prices (cement, steel, labour, etc.).
Another factor in the lack of interest in affordable housing is the Central Government’s approval of 122.69 lakh dwellings under PMAY (Urban). 109.23 lakh units have been begun, while 72.56 lakh dwellings have been finished.
How Can Affordable Housing Be Revivified?
ANAROCK advises the government to release the land it owns in metropolitan areas where affordable housing is most required in order to strengthen India’s affordable housing industry.
Revising the price range for properties that are eligible for the government’s different incentives for purchasers of affordable housing is another recommendation made in the study. The document said, “The existing INR 45 lakh restriction implies that purchasers cannot seek anywhere inside the city boundaries but must resort to the outlying suburbs, which have inadequate infrastructure.
The real estate services firm recommended that the government speed up the approval procedure for affordable housing, provide private investors additional tax breaks, and enhance support for affordable housing via P3s.
The government may promote the development of inexpensive housing in non-metropolitan locations while simultaneously ensuring that these places are initially outfitted with the necessary support infrastructure by offering tax exemptions and other incentives.
