Background on Affordable Housing in India

The demand for housing in the past decade has increased due to the rapid rise in the urban population. Despite of the several public housing programmes, the shortage remains. According to government estimates, the shortage of housing in 2015 was about 40 million – that includes the homeless, and substandard houses without basic amenities (OECD 2019).

India is projected to have the fastest growing urban population in the coming decades, due to the influx of people migrating from rural to urban areas in search of better life. It is an ever-growing challenge for India to provide adequate and affordable housing. With the constitute of 95 percent of total housing shortage - Economically Weaker Section (EWS) and Low-Income groups (LIG) are prominent across Urban housing shortage. Other 4.38 percent is estimated because the shortage amongst Middle Income Groups (MIG) (Rekhy and Raheja 2012).

EWS and LIG categories drives the primary Housing shortage. Majority of the housing supply that has been built across India fail to supply for this segment. Private and land developers have excessively invested and targeted, High-Income and upper Mid-Income housing segment because of the upper returns which will be gained. Additionally, the high land costs, building bye laws, licensing norms, delay in project approval and unfavorable banking policies made low-cost housing projects uneconomical for developers

Fig.4. Issues in providing Affordable Housing for Urban Poor. (Source - Author)

Unavailability of Urban Land

Demand for urban land is triggered by the high population density in the urban areas. There is a need to reevaluate the conceived government regulations that has created and artificial land shortage to push up land prices in India (Rekhy and Raheja 2012). With the limited availability of land and without any government support, it is inviable for the developers to take up affordable housing projects.

Delay in Approvals from Multiple Local Authorities

For the approval of an affordable housing, developers are required to pass the approvals through 150 tables in about 40 departments of central, state governments and municipal corporations (Rekhy and Raheja 2012). 25 to 30 percent of the project cost is increased by the delays in approval (Rekhy and Raheja 2012). To encourage real estate developers to invest in the affordable housing segment, better co-ordination among the multiple authorities in dealing with various permissions/approvals is crucial. At present, for a developer to commence construction after having entered into an agreement for land purchase is two to three years.

Fig.5. Time Consumed in approvals from multiple Local Authorities. (‘Corruption and Transparency in Realty - The Reality’, infrawindow.com)

Lack of Skilled Manpower

The issue of manpower shortage in real estate sector is something India still struggles with. It can have an adverse impact on the delivery and cost of affordable housing projects.