Definition Affordability in today’s terms is a very generic used word for home buyers who are seeking to purchase a home. Affordable though very universal term it carries different meaning for different people based on individual level. It is also defined varied worldwide i.e it refers to a criterion for housing that meets affordable housing. There is no clear cut definition of the term “affordable” as several meaning is implied to it. Many research reports and sources have defined affordable housing in their own perspective in different context. According to the KPMG Report on “Affordable Housing-Key Growth Driver in the Real Estate Sector “it is defined in terms of three main parameters namely Income Levels, Size of Dwelling Unit and Affordability.
|Income Level||Size of dwelling Unit||Affordability|
|EWS||1.5lakh per annum||Upto 300sqft||Emi to monthly 30%to 40%|
|LIG||1.5-3Lkah per annum||300-600 sqft||House price to annual income|
|MIG||3-10lakh per annum||600-1200sqft|
Source:KMPG Another report of MHUPA affordable housing for various segments is defined by size of the dwelling and housing affordability derived by the household income of the population. The JNNURM Mission Directorate of MHUPA has also defined affordable housing in its amended Guidelines for Affordable Housing in Partnership. While many term affordable housing in calculative way of income, low income, economic section, the basic and key idea is to provide the adequate amenities with proper location, sanitation, water supply, power supply, community spaces, parks, schools, healthcare facilities , connected to the major public transit, located within 20km of the area. In a layman language if we define it could be stated as ‘low cost housing’ but they both have a different meaning altogether and different audience to hit. In India, ‘low-cost housing’ is typically meant for the EWS category and comprises bare minimum housing facilities while ‘affordable housing’ is meant for LIG and MIG segments and includes basic amenities. The parameters for affordable housing and low cost housing in terms of amenities is none to the later and basic start to the previous, size of the low cost houses is shrinked to less than 300sqft which concludes to 1RK whereas affordable houses size goes to 300-1200sqft which at least makes up to 1BHK. Low cost housing can be developed within the city but it can be allotted outskirts of main areas due to the high cost of land for eg the case of Goregaon redevelopment of the famous Hanuman Tedki or the Virwani Industrial Area, the habitat was given a flat in Mankhurd which almost turned into the agitation of the residents while the affordable housing has to be redeveloped there in the city limits for eg the Goregaon major re-developed project Bhimbisar Nagar, Dahisar –Shailendra Nagar redevelopment by MHADA. The responsibility of these both the section of the houses is taken by private developers and government agencies and is finance by traditional bank institutions. Income Levels in Affordable Housing: Affordable Housing is divided into Economic Weaker Section, Low Income Group, Middle Income Group.
- Economic Weaker Section – 1Lakh per annum
- Low Income Group- 1.5Lakh- 3Lakh per annum
- Middle Income Group- 3Lakh – 10Lakh per annum
Issues in the Development of Affordable Housing: Terming the affordable housing and target of Housing for All 2022 a ‘great challenge’ Union Housing and Poverty Alleviation Minister M Venkaiah Naidu said to “achieve this target public and private sector co-operation is much needed. State and Centre must work together as it is the need of the hour. Private sector involvement is very important because government agencies have their own pros and cons.” With a participatory system and public-private participation should be worked in a way to deliver good result. Problem in affordable housing or the demand and supply gap can be clearly explained through an example that long back when Real Estate Developer Xrbia launched the a 170acre housing project in Hinjewadi outskirt of Pune in Maharashtra all the 3,400 apartment units which were biggest to 550sqft and the smallest was close to 250sqft ranging in 22lakh to 9lakh. This depicts a huge shortage in this segment. According to a report presented by Jones Lang LaSalle (JLL) points out those MHUPA stats the shortage of urban housing in India at the end of the 10th Five Year Plan was around 27.1 million dwellings to serve 66.3 million households. 88% of this shortage was estimated to be in the economically weaker section — households with monthly per capita expenditure of up to Rs. 3,300. The income group with monthly per capita expenditure of Rs. 3,301 to Rs. 7,300 accounted for 11% of the shortage.
The other Issue in affordable housing are:
- Un-planned growth of settlements – a number of housing clusters have mushroomed (slums) in and around the metropolitan centres in a very haphazard and unplanned manner without a proper layout. These unauthorized developments are encroachments get developed on land of government bodies, public private institutions. To clear these slums is a serious challenge for planned growth cities.
- Non availability of developed land and ineffective and unfavorable land management –there is a dearth of land which is developed at reasonable rates. For eg the slum cluster are encroached are generally built on the high cost land near central business districts of the metropolitan centres. These shanties are a big eye sores and gross under utilization of precious land banks. The land rules, FSI rules utilization, the fees registration of property of deeds is also unreasonably high and needs urgent rationalized. Brotin Banerjee, Managing Director & CEO of Tata Housing said, ‘’right now we don’t have enough serviced land around our cities for affordable housing to pick up. The increase in cost of construction also impacts this segment the most. According to industry estimates construction costs account for more than 50% of the total price of affordable units while in the case of luxury projects it is only around 20%.
- Lack of Financial Resources– the assessment of housing shortage and requirement of funds for the same as per the National Housing Bank is in the following chart
Source NHB It is estimated by the National Housing Bank (NHB) the market size of the undeserved segment at over a 100 million households. Most of these populations have limited or no access to the affordable housing despite being affords simple habitable units.
- Inadequate Fiscal (monetary) Incentives – there is lot of lack of monetary incentives that encourage housing in general; it does not proper funding treatment. The mortgage rates for the buyers are still high also there are limited taxation incentives.
- Manpower shortage –India though being a manpower country it has always been under powered in terms of labour and skilled manpower. Construction sector still faces acute shortage of skilled labour. The construction industry is the employs about 31 million people, second only to the agriculture sector the workforce requirement is about 5 million people every year over the next seven years to eight years to sustain the current 8 percent growth rate. With only 10 million work forces available in the country every year, the construction industry will face a daunting task in future in terms of recruiting and retaining skilled manpower.
- Lengthy Approvals and Land Use – the major problems in India real estate sector is the lengthy approval process which automatically delays the projects. It is a known fact that to develop a project or sanction a developer need to go atleast 40 approvals through number of departments for e.g environment , airport authority , high-rise, fire, local bodies consumes ample of time. Jaykumar, Managing Director, VBHC says ‘’this ordinate delays adds to the cost and can make the project unviable”
- Building By-Laws and Guidelines– the bylaws and rules which are related to FSI (Floor Space Index) and Urban Development Bodies (UDDs) lack clarity and overlapping guidelines.
Policy Frameworks & Regulations in Affordable Housing: Looking at the need of the hour for affordable housing Central and State government has framed lot of policies to deliver affordable housing. A variety of housing policies make considerable planning on the housing sector. Such policies should keep in mind the local plans local needs and should include a policy that encompass low budget homes with basic amenities. Pradhan Mantri Awas Yojana Housing for All 2022 Scheme The much awaited Pradhan Mantri Awas Yojana has been launched by the Prime Minister Narendra Modi that envisages the vision of Housing for All by the year 2022.The government of India had earlier launched ‘Housing for All’ scheme, which has now been reformed as Pradhan Mantri Awas Yojana. The Scheme has been launched by the Prime Minister of India, Narendra Modi on 25th June 2015. The scheme comes with an aim of constructing more than two crore houses across the length and breadth of the nation within a span of next seven years. This means the scheme which is started in year 2015 would conclude successfully in the year 2022. The target beneficiaries of the scheme would be poor and people living under EWS and LIG categories in urban establishments of the country. The PM Awas Yojana would start in the year 2015 and would be spread for implementation till the year 2022 and would be carried out in three sustainable phases: Pradhan Mantri Awas Yojana Phase 1: The Phase 1 of PM Awas Yojana would span from April 2015 to March 2017 and a total of 100 cities would see the developmental work started and completed during this phase. Pradhan Mantri Awas Yojana Phase 2: The Phase 2 of Pradhan Mantri Awas Yojana would span from April 2017 to March 2019 and during this phase, a total of 200 more cities would be covered and developed. Pradhan Mantri Awas Yojana Phase 3: The Phase 3 of PMAY would span from April 2019 to March 2022 and during this phase the left over cities would be covered and developed. The Beneficiaries of Pradhan Mantri Awas Yojana Pradhan Mantri Awas Yojana would target specific groups from the society, which are:
- Women, irrespective of caste and religion
- Economically Weaker Section of Society (EWS)
- Scheduled Tribes (ST)
- Scheduled Casts (SC)
The Government of India would be granting a subsidy to people from these categories so that they buy a home for themselves and their families. The subsidy amount may range from Rs 1 lakh to Rs 2.30 lakh. Features of Pradhan Mantri Awas Yojana aka Housing for All 2022 The features of Pradhan Mantri Awas Yojana are as following: 1. The government would provide an interest subsidy of 6.5% on housing loans availed by the beneficiaries for a period of 15 years from the start of loan. 2. The houses under Pradhan Mantri Awas Yojana would be allotted to preferably the female member of the family. Along with this, preference would be given to the female applicants, in general. This scheme could well be termed as a pro-women scheme. 3. While allotting ground floors in any housing scheme under the PMAY, preference would be given to differently-baled and older people. 4. The construction of houses under PMAY would be carried out through technology that is eco-friendly. Interest Rates, EMI Calculation and Subsidy in PM Awas Yojana The niche of the scheme lies in the fact that the EMI paid by the home owners under the scheme would be reduced significantly. The current rate of housing loan in India is at 10.50 per cent. If someone buys a property currently on a loan of Rs 6lakh for tenure of 15 years today, he/she would have to pay an EMI of Rs 6,632 per month currently. However, with 6.5 per cent subsidy under the scheme, the beneficiary would have to pay just Rs 4,050 per month as EMI. Thus, there is a significant reduction of Rs 2,000 in the EMI itself. As a matter of information following are the states where Pradhan Mantri Awas Yojana which is carried out:
Minister of State for Housing and Urban Poverty Alleviation Shri Babul Supriyo said, 10,17,423 houses have so far been built for urban poor under different housing schemes like the 2005-06 Jawaharlal Nehru Urban Renewal Mission (JNNURM) and Rajiv Awas Yojana (RAY) launched in 2013-14, as against total 13,92,589 houses sanctioned. 2, 10,438 houses were constructed since 2014-15.
- Role of banks and housing finance institutions
1. Reassess their strategies with a view to make them more inclusive in terms of EWS and LIG segments 2. Promote innovative financial instruments like development of Mortgage Backed Securitization Market (MBSM), and Secondary Mortgage Market. 3. Enhance/ strengthen the income spread of housing loans portfolio to increasingly cover BPL and EWS beneficiaries. 4. Adopt a more flexible and innovative approach in relation to credit appraisal norms. 5. Develop financial products which encourage EWS and LIG beneficiaries to take insurance cover. 6. Ploughing part of their resources towards financing slum improvement and up gradation programmes. 7. Devise innovative housing finance schemes for targeting the EWS and LIG segments, with suitable subsidy support from the government. 8. Promote MFIs and SHGs for mobilizing savings and playing a significant role in housing finance sector. RBI governor Shri Raghuram Rajan said, ‘’we need action on real side also as transparency on land acquisitions, on construction and on sales. More transparency in such matters would enable the track flow of funds better” Shri Venkaiah Naidu said, ‘’All these schemes which were under the flagship of the previous government will be renamed under the Modi government. The government is also pushing 100 smart cities creation. My priority will be to ensure housing for all by 2020 and to reduce interest rate on home loans. People should be in a position to have ‘pucca’ houses,”
- State Sponsored Affordable Housing :
1) The very recent state to achieve the goal of affordability Harayana has notified “Affordable Plotted Housing Policy 2016 for low and medium potential towns under Deen Dayal Jan Awas Yojana. The Deen Dayal Jan Awas Yojna aims at developing ‘high density plotted colonies’ in low and medium potential towns where small plots are made available through a liberal policy framework. All projects are being required to be completed within seven years from the date of granting license. 2) The urban development department invested Rs 9,005crore in Maharashtra, Jammu & Kashmir and Punjab. construction of 73,205 more houses for Economically Weaker Sections in urban under Prime Minister’s Awas Yojana Maharashtra has been sanctioned a total of 71,701 houses in 10 cities at a total project cost of Rs.8, 932 cr with Central Assistance of Rs.1, 064 cr. Houses sanctioned include -61,946 under Affordable Housing in Partnership (AHP), 7,399 for Beneficiary Led Construction (BLC) and 2,356 for In-situ Slum Redevelopment. Houses sanctioned city-wise in Maharashtra are: Virar-61,946, Kalyan-30,378, Thane-8,184, Gothegar-3,822 and the rest in Mumbai Metropolitan Region areas of Wave, Palghar, Pen, Nilaje Pada, Raygad and Kelawali. For Punjab, construction of 1,280 houses for In-Situ Slum Redevelopment in Bhatinda was approved with a total investment of Rs.57 cr for which central assistance of Rs.12.80 cr was sanctioned. For Jammu & Kashmir, construction of 224 houses under Beneficiary Led Construction component of PMAY (Urban) has been approved with a total investment of Rs.16.07 cr with central assistance of Rs.3.36 cr. This includes construction of 141 houses in Udhampur and 83 in Baramullah. 3) HUPA secretary Dr. Nandita Chatterjee said, ‘’HUPA has approved the proposals received from the 7 states after detailed discussions with the respective states and after satisfying itself with availability of land for the proposed projects, the share of states and the beneficiaries. The sanctioned will be built in 163 cities in these 7 states. For our detailed coverage please visit our website http://accommodationtimes.com/govt-sanctions-81757-houses-for-urban-poor-in-7-states/ 4) Government main agencies in building affordable housing are MHADA (Maharashtra Housing and Development Authority) has almost lakhs of affordable homes and is also a major institute in redevelopment. CIDCO (City & Industrial Development Authority Corporation) is a mass housing developer in Central as well as Harbour region of Mumbai. Schemes like Unnati Gruhanirman Yojana or Gharonda Housing have received a positive approach from the end users. SRA (Slum Rehabilitation Authority) is majorly into redevelopment projects. MMRDA has also come up with FSI to increase the rental housing. Players in Affordable Housing: As we have written above the concept of affordable housing conventionally goes down to government agencies but looking at the scope and need of an hour many private players have interestingly begun cashing this opportunity. The concept of affordable housing to diversify their risks, land availability has made gone far flung and built low cost house, several good frameworks from government and schemes have pushed the private entry in this sector, International Investment from World Bank, Asian Development Bank, International Finance Corporation.
- Bangalore based Value and Budget Housing Corporation (VBHC) are into affordable homes. Mr. Jaithirth Rao and P S Jaykumar said, we do have some units within 6lkah to 15lakh.
- Leading names in real estate sector like DLF build 100,000 flats in under Rs.20lakh per unit category in major cities. Rajeev Talwar, executive director at DLF, notes that “such projects are not viable anymore. In 2009 there was a downturn in the global economy … but now prices have gone up and it does not make much business sense to launch such projects.”Unitech, Omaxe, Mahindra group who have their projects within 20 lakhs.
- Recent added name is Essel Group launched its first real estate development project under the brand name ASHA 2022 for tri-city Chandigrah in Panchkula, Haryana.
- Shapoorji Pallonji enter into affordable housing segment under brand name Joyville across six cities Mumbai, NCR, Ahemdabad, Kolkatta, Pune and Chennai plans to build 20 million sqft.
- Tata Housing who was only into premium segment has tied up with central government for affordable housing.
- Azure Capital has invested in Dahej in Gujarat.
- HDIL and Usha Breco Realty
- TVS Housing
- S Raheja
- Nirman Group
- Samrin Group
- Shubh Group
- Neptune Group
- Haware Builders
In addition there a host of developers of smaller and regional players including Foliage in Surat, Galaxy Developers in Ahemdabad, Trishul Builders , Dreams Group in Pune, Avalon Group in Delhi , Pushpak Infrasturcutre in Kolkatta, TVS housing in Chennai, Jaanadhar in Bangalore. Demand for Affordable Housing is the greatest necessity of urban India today. Large scale developments become difficult when problems such as land parcels, transit routes, lack of finance and regulatory authority occurs. Hence it is very vital that these issues get address urgently so that a comprehensive framework can be established in the development of affordable housing.