Is Affordable Housing the Best Bet for Revival of Real Estate in India?

The government for the past 2 years has been giving stress on the construction of affordable housing and the concept has also been picked up by almost all states. The main feeder for this push has been the government scheme of housing for all by 2022. Number of amendments have been initiated by state governments, relaxing the rules for construction and bringing up townships in lesser land areas, with reduced facilities and amenities, aimed at reducing the final cost of the apartment within the reach of common man. For example, Haryana now allows township projects with just 25 acres of land, with a maximum cap of BSP kept at INR 3000/-, there is no compulsion of having community centre and the FAR has been increased. These steps have substantially lowered the overall project costs and have come as a boon to the real estate industry in India at a time when it was reeling under a severe slow down.

 

The figures in the first and second quarter of 2016 are reflective of this change. There has been an increase of 14% in new launches in the 2nd quarter and 50% of the new launches are in the affordable segment. The top nine cities in India saw a upward trend in sales of property by 8% during the same period after 6 quarters, highlighting a clear relationship between the launch of affordable housing projects and increase in sales. Bengaluru, Pune and Mumbai led the sales segment with 61% contribution, Gurgaon which has been the worst hit was also the biggest surprise, the market saw an upward trend after 7 quarters. Noida also experienced increased sales in the last quarter. Affordable housing schemes seem to be acting as the right tonic for the recovery of the real estate industry in India. This has also reduced the surplus inventory from 1 to 3% in various cities. In the tier 2 cities Ahmedabad has shown a steady growth over the last 2 quarters.

 

A more than normal monsoon, high probability of passage of the GST and a robust economic boost are factors which should have a positive impact on the real estate in India in the balance of the 2 quarters of 2016.

However, we also need to guard this over enthusiasm being shown by the real estate sector towards affordable housing. The industry has experienced a similar concept of EWS failing in the past.  EWS as a scheme has failed to achieve its aim. It was meant to provide roof and shelter to the economically weaker classes, however these being part of bigger townships at premium locations, with the ever increasing land prices, remained out of reach of the required gentry. Instead this scheme became a lucrative mechanism for ill practises, with the flats being purchased in the name pseudo EWSs leading to ‘banami transactions’.

 

Market pundits are also doubting the affordable housing concept in a similar manner. These schemes should not churn out metropolis slums and become a spoiler to the metropolis skylines, is the general fear being raised. However, at this time the Indian real estate sector has very few options and has to go with the flow of things. But it must carry out an introspection in the next 6 months on the viability, affordability and sustenance of affordable housing, else it would be hit harder than before and maybe to a point of no recovery.

 Is Affordable HousingIs Affordable Housing

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