Affordable housing in India opportunities and

challenges
Abstract
Millions of the Indians want to have roof over their head yet at the same time hundredth and thousands
of housing unit remain unsold throughout the country reason is simple developer are investing in mid
and premium segment but rising material labor and financing segment making affordable housing
segment unaffordable. Perceptional risk keeping buyers away. Approach from 2 angels. First one look at
the need of organized players Tata housing and Mahindra life daces who had brought innovation and
assembly line approach to the sector. Demands are simple have a single-window of simplify approval
process. Digitizes land record to make developing land easier. Enable mass housing within the city and
simplify taxation on affordable homes Vat, the service tax, stamp duty, registration if these elements are
tackle by the government for this segment then that its self has the potential of reducing the cost of
ownership by 15 – 20%.

Other method is to go local affordable housing is highly localized segment. And the smaller developer
understand the value of the land are critical to crack the market. Organization like “Brickeagle” helping
this developer. It is important because bank did not want to leant the developer to buy the land parcel.
And private company did not see affordable housing as a worth bet .

Introduction
The affordable word can be different to different people it is affordable for some body or may
not be affordable to somebody eels. Today there is lot of supply of the property there are
people who want to buy. Affordability can be archive by 2 ways either you bring the cost down
or you enable the byer in buying it both the aspect need to be work together
There is shortage of nearly 2 corer property in urban area and 4 corer in ruler areas but there is
also lot of supply available in urban area but the transaction are not happening because of the
gap between buyer can afford and cost. This cost need to be brought down. In the area of
interest lot of positive steps are taken.

Challenges
These are the points which are the really big challenges for the real-estate sector spicily in
affordable housing sector.

 Ease of approval – it’s a distance dream for the housing sector but unfortunately
government hasn’t realize even for the much needed affordable housing.
  Lack of land for affordable housing with in the city limit – this is probably the single most
challenging factor
 Lack of funding for land cost and also re construction cost as a big chunk of cost of
project is land, zone converging construction approval etc.
 Lack of access to new and efficient technology to cut cost.

Has the government done enough to make the environment bit more conducive for
affordable housing?
Government has definitely show the intend spicily in the two budgets (union budget 2016 and
2017) wither it was interest subsidies government has given weather its 80iba kind of tax
holiday for developers weather it was giving affordable housing as infrastructure status
government is definitely on the right path but lot more on the execution side required like
where land available for the affordable housing where is infrastructure available for affordable
housing weather approvals happening on time. Interest cost still passed on people who wants
to buy these home. Still the government need to do huge amount of opportunity
This sector need a certain level of mind set. Even after 70 years of independence we are still
struggling with getting proper codes in terms of our land title. Approval process takes so many
time complier to any such kind of sector. REARA is turning out to be another problem for the
developers. As we look up for REARA which is for helping customer and kind of regulating the
sector is very much silent on various approval authority and there is no supervision or
regulation of the authority on the work that is done by RARA. RARA is also come up in the
multiple part of approval.

How it is better for developer and the people who show interest to
get in this sector?
Only consumers ware focused by the government side like in REARA, subsidy housing loan but
the supply side is also needed to give some importance. Land rate with in the municipality is
still very high and it is the main component in the affordable housing. Government has
addressed the supply side in the union budget of 2017 otherwise it was always been focused to
the consumers. Government starting giving tax rebate to the developer banks started to take it
as a priority sector and providing long term loans.
Need of a single window clearance system. So many approval have to be taken by state and
central. Center has come up with computerizes clearance system and decreased the manual
interference like height clearance can be achieve by the central government in 15 day. Similarly
the environment is the biggest issue now the charge to supervise with byelaws is given to the
development authority. These kind of things will ease the approval system.

 Delays in approval is the biggest challenges to build affordable housing.

 Bringing down the leading rates for affordable housing.
 Approvals problems

Funding challenges for affordable housing

Classifying affordable housing as infrastructure will help bringing down cost of borrowing and
the cost of construction will come down and the benefit of that reduction will be passed on to
the ultimate buyer. Delays in approval is the biggest challenges to build affordable housing.
Bringing down the leading rates for affordable housing, Approvals problems. Land it is big cost
component. This need to be address because more than 90% affordable housing requirement is
in LIG and EWS segment where affordability is a very big challenge so the cost need to be come
down

Why do developer hesitant to get into in the affordable housing?

Affordable housing never got favorable environment earlier and there was never an interest
among the developers to get into the segment.
For developer no motivation is available for affordable housing motivation is more for doing
luxury and mid segment demand because that’s where better reliability investor driven market
It’s only in union budget of 2017 first time government has taken an account on it and they
remove the additional incentive investor use to have. So earlier people use to buy flat for
investment and income tax exemption for investor. if they do the set of rental income the
whole interest amount use to get exempted and that was the additional 7% benefit for the
investor that’s why more and more investor are participating in real estate sector and they are
using the need rather than full filing the need.
India is facing problem of housing shortage and rising inventory prices went up so much which
has created economic imbalance India is having huge demand of affordable housing but can’t
fulfill the demand because cost is very high and the biggest problem is land cost. Affordable
housing For LIG and EWS can’t be done in metros where it interact with the lively hood of the
people because for affordable housing someone has to go so far away where there is no
desirability for people to go and live because there is no social fabric infrastructure no
connectivity. we are the country having infrastructure shortage all around. In this perspective
there is a need of affordable housing but supply can come only to the places which are so far
away and the land cost near by the location is very high it doesn’t allow affordable housing to
exist over there. Unless we see a Moderation in land prices where we ensure there is land is
available which is interactive to the consumer lively hood and closer to city

Do federal structure actually works to undermine the growth of

affordable housing?
In some state acquiring land giving land there are some incentives bean given
As land is considered the federal structure of our country sometimes there no alignment in
affordable housing policy of state and central. There is lot of disconnect between state and
central government when it comes to land as a topic or even affordable housing. If we even
look at the tax structure when a person buy a home close to 30-35% whatever he pays goes for
different types of taxes for central and state whether it’s a developer paying or buyer paying.
Delay aspect, whatever central government says delay happens at the local level. Just a land 2
years delayed for a good developer its cost of capital is 20%. So the 40% of the land prices
increasing just because the delay of 2 year.

Positives
Enough infrastructure schema happening today which are better than before. There is enough
land bank for the developer which is not the case 12 year ago. Enough construction
technologies where developer can do construction faster. If we look at all these aspect we have
good foundation for the country to go to the next level government can fix 3 4 points wither its
better infrastructure, land at lower cost, reducing the tax rate, faster approval. Land, taxation,
stamp duty, and the technology if we combine these 4 things so affordable housing in can be
achieve in India.

How superior technology help in bringing down the cost in much

efficient manner?
Mass housing can only be done in our country is by the use of technology we are having
continues shortfall of skilled labor. Form technology is been brought it is slightly expansive in
the initial year but over a period of time it will really help delivering housing at different phase.
There are technology which may help to build a large scale township. With the help of
technology a project can be completed within the 12 months which would have taken 24 to 30
months in the conversional conditions. If we have to do mass affordable housing there has to
be some shift in the way we construct and the way we approach this.

Land productivity
Every developed country wither its South Korea, U.S, U.K, Singapore, have solve their problem
because of very high vacant land tax. India today need vacant land tax land is been consider so
far where people have parked their black money. There is enough vacant land available in
Indian cities which remain undeveloped people don’t really produce it has been a case the
more the people hold these land more money they make.
Last 12 years land cost gone up by 5x that means raw material cost gone way much higher than
people affordability. Lot of commitment of developer could not produce the good because the
prices went high and the rise in the price is driven by generally the land cost. We have done lot
of correction in terms of bringing the efficiency providing tax incentives industry status every
other thing but nothing happened with the terms of land.

Inter subsidies
Buyer is getting CLSS (Credit link Subsidy Scheme, of PMAY) it is 6.5 % for EWS, LIG and up to 4%
for MIG it is a huge relief but going forward first buyer has to buy the property. Today it’s a cost
v/s income which person is having income did not permit the buyer to meet the cost so the cost
has to come down in the area like taxes, land cost , stamp duty, sector rate. Sector rates are
generally for increased the income of state government income some state increased it up to
500 times because of that actual transition are not happening or land owner decide the price of
his land according to sector rates. Custom duties on the technology, size of the unit most of the
bye laws don’t allow to make small units

Is there enough communication sent out to the benefices?

This need to be more pro-actively communicate to the right target audience weather it’s in
term of income, size. Presently it is quite limited number of people government need to do
more communication like swachh bahrat communication, save the tiger which has a mass reach
we need to probably make sure government does something on similar line to be able to for
the larger section of people saying there is large subside available or even one step further and
start educating the customer.
Amount of communication is need to be improved for example SBI is promoting separate home
loan for affordable segment but people are not aware of it so there is a need for this
communication to be done in large scale. Government is doing his part but everybody in this
sector has to play his role in communication.

Challenges

4 components which really contribute as far as housing is concerned.

 Land and it got 2 parts in it a) FSI component, we definitely need to raise FSI component
on a particular piece of land b) Reckoner value which government declare every year
and bulk of the cost weather it is stamp duty premium to be paid are linked to this
Reckoner value. Somewhere government need to reanalyze it. And cut the tendency of
continually increasing Reckoner value.
 Construction cost – here we can have lot of advantages if the government standardize
our product so government should encourage both standardized the input process
(manufacturing process) and standardized the raw material.
 Finance cost – different agency to give different approval and have different definition
while IT department has particular definition for affordable housing, revenue
department has different definition the finance the banking norms have different
definition.
 Taxation – If the land is available cheap, finance is available cheap, if we are able to
rationalize the cost of construction why government shouldn’t chip in weather it is local
state or central government, no tax in stamp duty.