Your SlideShare is downloading. ×
Low Cost Housing in Urban India
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×

Introducing the official SlideShare app

Stunning, full-screen experience for iPhone and Android

Text the download link to your phone

Standard text messaging rates apply

Low Cost Housing in Urban India

8,144
views

Published on

With the focus now on to meet the need of the common man, we need to identify who he is and what is his requirement. As per estimates made by Indicus Analytics in its Market Skyline of India 2008-09, …

With the focus now on to meet the need of the common man, we need to identify who he is and what is his requirement. As per estimates made by Indicus Analytics in its Market Skyline of India 2008-09, there are currently 68.2 million households living in urban India.
The estimates from the Housing Skyline of India for the top 112 cities show that almost 65 % of the excess demand in the next five years is for houses with sub 1000 square feet area. This would translate to approximately 6.8 million houses. The same study further estimates that approximately 70% of the demand would be for houses with 2 rooms or less (or 7.4 million new houses).

Published in: Business, Real Estate

0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
8,144
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
305
Comments
0
Likes
1
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Indicus Analytics, An Economics Research Firm http://indicus.net/Products/Home.aspx Low Cost Housing in Urban India Peeyush Bajpai (The author is the chief operating officer at Indicus Analytics- India's leading economics research firm. He can be contacted at peeyush@indicus.net) The recent offer of 5010 flats by the DDA (Delhi Development Authority) had attracted over 7.5 lakh buyers, of which 5.67 lakh applied with deposits (1 flat per 100 subscribers)1. Affordable cost and easy credit led people to apply in hordes. This is just one of the many schemes that are launched around the year by the local development authorities in urban cities. But these are too few to meet the demand of housing in India. Though a small portion of this demand has been addressed by private builders and housing finance institutions, this was restricted mostly to meeting the demand of the MIG (middle income group) and HIG (high income group) sectors. What has remained unattended is the demand for low cost housing, the so called EWS (economically weaker sections) and LIG (low income group) sectors. Paradoxically, the current financial crisis has come as a boon for the Indian economy especially for the requirements of the common man in the real estate sector. This is because it has finally brought back the focus on the market that was in need of housing - “the low cost” or “affordable” segment. During the past decade there was a phenomenal spurt in the private real estate development space. Easy credit availability and general performance in the economy saw the medium income households realizing their dream of owning a house. But soon, high optimism, poor regulation, and poorly implemented land policy brought in speculation and private developers started looking for higher premiums. The ordinarily conservative approach towards servicing the housing requirement was replaced by a more challenging one, with individuals committing to higher price bands than they could afford. A combination of credit facilities (such as housing loan with personal loan) was used to meet the costs. This further boosted the price and within a span of three years the prices had skyrocketed – leading to an asset price bubble in real estate Then came the financial crisis. 1Date: 16-Dec-2008 || Source: Times of India http://indicus.net/Products/Home/Product%20Details/Housing%20Skyline%20of%20India/
  • 2. Indicus Analytics, An Economics Research Firm http://indicus.net/Products/Home.aspx With the crisis spreading its impact on the Indian economy, even though interest rates reduced, credit availability became tough, spending reduced and most real estate developers started having difficulty finding buyers for premium apartments. This has forced developers to go back to examining the low cost housing space. Hence, the argument that the current crisis is a boon which ensured that India did not get into a trap that could lead it to having its own form of a 'subprime'. Housing demand in urban India With the focus now on to meet the need of the common man, we need to identify who he is and what is his requirement. As per estimates made by Indicus Analytics in its Market Skyline of India 2008-09, there are currently 68.2 million households living in urban India. The income distribution of these households is presented in the graph1 . Number of Urban Households by Income (Millions) 30 24.47 25 17 20 15 10.73 9.91 10 3.83 2.28 5 0 k 0k 0k k k 0k 00 00 75 0 00 15 -5 ,0 -3 < 1, -1 k- 0k 0k > 75 0k 15 30 50 (Source: The Market Skyline of India 2008-09, Indicus Analytics, www.indicus.net). The estimates reveal that almost fifteen percent of the urban households have an annual income of less than Rs. 75,000. For an average family of four members this would be a monthly income of just over Rs. 6000. This group accounts for a large amount of the slum formation in the city. People from these households are involved in servicing the needs of the higher income groups and can not afford to travel long distances (poor urban transport systems have not helped either!). Thus they settle in and around the localities giving rise to slums and squatter settlements. http://indicus.net/Products/Home/Product%20Details/Housing%20Skyline%20of%20India/
  • 3. Indicus Analytics, An Economics Research Firm http://indicus.net/Products/Home.aspx The income estimates from the study further show that 25%t of the urban households have annual income between Rs. 75,000 and 1,50,000 and another 36% have annual income between Rs. 1,50,000and 3,00,000.. The remaining 25% have incomes above Rs. 3,00,000. Households having an income of less than Rs. 1,50,000 cannot afford housing in the range of Rs. 5-7 lakhs. Households having an income of less than three lakhs can afford houses under the ten lakh price band. And households having an annual income between three to five lakh can at best afford houses under twenty lakhs. 90% of the urban households have incomes under five lakh. Thus the demand for majority of the urban housing would be in this category. There are clear indications that this demand is not being met through formal housing stock. One of the leading indicators is the rising slum and squatter settlement population. A look at the type of housing demand further gives the idea of how large is the unmet need of the low cost housing in urban India. Excess housing demand by plinth size (millions) 4.0 3.0 Demand (Millions) 2.0 3.7 3.5 3.4 1.0 0.0 <500 500-1000 >1000 Plinth Size (Square Feet) Source: The Housing Skyline of India 2008-09, (112 cities), Indicus Analytics, www.indicus.net http://indicus.net/Products/Home/Product%20Details/Housing%20Skyline%20of%20India/
  • 4. Indicus Analytics, An Economics Research Firm http://indicus.net/Products/Home.aspx The estimates from the Housing Skyline of India for the top 112 cities show that almost 65 % of the excess demand in the next five years is for houses with sub 1000 square feet area. This would translate to approximately 6.8 million houses. The same study further estimates that approximately 70% of the demand would be for houses with 2 rooms or less (or 7.4 million new houses). Excess housing demand by number of rooms (millions) 4.0 3.0 Demand (Millions) 2.0 5.1 3.1 2.3 1.0 0.0 1 room 2 rooms > 2 rooms Number of rooms Source: The Housing Skyline of India 2008-09, (112 cities), Indicus Analytics, www.indicus.net These are fairly large numbers and meeting this demand will not be easy. If we go by the past performance of the various players the real estate sector, both public and private, this target is much beyond their reach. Thus a much more aggressive and forward looking approach is required. Ensuring there is regular availability of land for low cost housing within the city is amongst the first and foremost step. A slew of red tape has long ensured that the real estate sector does not get out of the speculative trap and false pricing mechanism. http://indicus.net/Products/Home/Product%20Details/Housing%20Skyline%20of%20India/
  • 5. Indicus Analytics, An Economics Research Firm http://indicus.net/Products/Home.aspx Most of the large town and cities have government bodies with almost monopolistic control over land, and this is a serious problem Poor management by them ensures that this land is not made available for development, leading to price rise. Yet it is clear that ,by themselves, these local bodies can not meet the demand for low cost housing. So, a form of public-private partnership is required to ensure that development of low cost housing continues unhindered. This should be accompanied by a combination of easy and low cost credit facility for the lower income, especially for those who are still not a part of the formal channels. A set of initiatives have recently been announced that address some of the aspects. However, the builder-politician also goes a long way in making reform a challenge. One can hope that things would move positively, though going by our dismal past record one has serious doubts. http://indicus.net/Products/Home/Product%20Details/Housing%20Skyline%20of%20India/