Growth curve is serious this 2017 for middle and lower income group affordable housing schemes. The demands for these segments are ever increasing and so is the supply. It is weird that in spite lot of unsold units, the demand is there in abundance for the affordable housing. Houses in the range of 15 lakh to 60 lakhs that fall under affordable segment continue to be of good demand in India, as always. It is also to be told that most of ready to move in projects in Mumbai are priced more than 1 Cr, which does not fall under this criteria.
It is stalemate situation for the builders who have invested in good location and have provided luxury amenities and features. They obviously cannot bring down the cost of their units into affordable range. The developments that are made as premium will be retained majorly as premium residences and only little price revisions may be possible, that too only in cases where builder can afford to take up the loss. Those who cannot take up the losses should wait for the market conditions to recover, this has steadily started happening.
Indian Government policy of Housing for all by 2022 is welcome news for affordable housing segment in India. Even when this sounds extraordinary at the begging, lot of actions are being taken in the ground level to achieve this. Government is collaborating in PPP Model (public-private partnership model) with developers to make this dream of “housing for all” a reality by year 2022. It is not a surprise that builders are also cooperating in a healthy manner to support government. Recent days it is evident that there is growth factor for all related people in affordable housing, but the set back here is low profit margin. Earlier, government has not taken any step to provide incentives for the developers to take this hit. But currently the government has initiated their incentives for affordable housing. For financial year 2016-17 under Pradhan Mantri Awas Yogaja the governments has increased the allocation for affordable housing development by 39%. The credit linked subsidy schemes for loans also has been extended upto Rs. 1.2 million. To meet the existing demand in affordable segment with required supply, government has initiated quite a few schemes. This includes granting of infrastructure status of affordable housing. This shall provide easy financial credit for the developers and builders, making middle income housing project segment worthy for them to put in their money. In recent reports of one of the most reliable domestic rating agency, The Investment Information & Credit Rating Agency (ICRA), it got published that India’s affordable housing projects are set to grow better than rest of the areas of real estate. The growth rate of affordable project will be over a 30% in medium term and this will be the prime factor for driving the Indian mortgage finance market also.
Major Driving factors for Affordable Housing
1. Inward migration towards Urban Areas
The demand for luxury housing is persistent as always in its own pace, whereas the developers are leaning towards producing affordable budget projects. The reason is not only that these projects are selling fast but also these segment projects gets some substantial incentives both for developers and end-users. Availability of job opportunities attracts many people towards tier-1 and tier 2 cities. Hence migration of people towards urban areas is increasing the affordable housing demand exponentially. Also, in parallel, introduction of new policies like RERA has increased the confidence of buyer to invest their money in real estate market. Buyers are making up their mind to buy properties that will fit in their budget without hesitation.
2. Attractive Investment Schemes
With the assistance of new rules and regulations that government has laid to make the real estate market more realistic and logic-driven, the investors are clearly focusing in lower and middle income group budget housing projects. This is currently considered as smart investment option. Budget housing apartments are now a long term plan of realty investors, the developers understanding the same are keen to develop affordable properties with amenities to cash in good returns.
3. Supply of Affordable housing in right cities
Recently there is a notable increase in nuclear families that move towards metropolitan cities where there are presences of Multi-national Companies and IT companies. Cities like New Delhi, Noida, Gurgaon, Navi Mumbai, Bangalore, Pune, Hyderabad and Chennai are the places that young professionals aspire to have their residences and get settled with their small family. This is the main reason that affordable housing is a huge success in such cities.
This is really a good time for investing in affordable housing in India’s top cities. "Down Market" label fitted in this segment has vanished and currently affordable housing is highly regarded as best segment by real estate developers in existing scenario. There is a huge demand-supply gap still in affordable housing segment, but in several decades for the first time this gap is also narrowing. In another five years, i.e. till year 2022 at least; affordable housing is set to witness a rapid growth. Many of average income people who are dreaming of having their own house will be benefiting by the affordable housing projects.