At present, it is not possible to buy a decent house in Mumbai with less than Rs 1 crore. However, affordable housing projects can change the situation in the near future.
Like most major emerging economies in the world, India has been witnessing an accelerating shift in population from rural to urban areas. According to the 2011 census, for the first time since India’s independence in 1947, the absolute increase in population was more in urban areas than in rural areas. This shift is creating a larger requirement for housing and is increasing the pressure on the existing infrastructure in urban areas. If this is not addressed immediately, it will further aggravate the situation, leading to explosion of unplanned and unsustainable cities.
Looking at the massive demand for budget housing in the last one year, Real Estate developers in Mumbai have modified their projects into affordable housing. With the implementation of Real Estate (Regulation and Development) Act (RERA), real estate industry is moving in the right direction. However, land acquisition remains the main challenging component in realty development, and bodies like NAREDCO and MCHI are working towards simplifying the process along with the government.
To further support the affordable housing segment, the Finance Minister recently accorded it infrastructure status, which is likely to result in increased participation from private players. This step is expected to act as a catalyst in meeting the objectives of ‘Housing for All’ by 2022.
The government has increased the allocation under the Pradhan Mantri Awas Yojana (PMAY) which will encourage home buyers to purchase affordable houses. To make affordable housing more attractive, instead of built up area, the carpet area of 30 and 60 sq m will be counted. This could be a game-changing step for developers who already have a good presence in the affordable segment. The relaxation on timelines from five years to two years for long term capital gains, joint development agreements, and tax rebates for builders will help reduce their tax liability. This might help spur consumption and will also have a positive impact on housing demand.
There is huge demand for this segment and supply is comparatively less, especially in the city of Mumbai. The supply situation is likely to improve since the government has now made land acquisition easier by providing offers to avail their own land at cheaper rates for affordable housing projects.
However, even with the substantial demand, there are many factors which are slowing down the growth of affordable housing in the city. Land and construction price is high, and there is a premium on stamp duty and Transfer of Development Rights (TDR). Further, until the ready reckoner rate does not decrease, housing prices will continue to be on the higher side. Thus, affordable housing is only possible on the outskirts of any metropolitan city at present. Many lenders do not want to fund affordable housing projects due to associated social infrastructure (like hospital, education, roads, etc) cost involved in such areas. The lack of affordable and adequately sized land parcels in inner urban localities has further driven affordable housing to urban peripheries. This often poses a challenge to end users who require efficient connectivity to areas of work in the city.
Globally, countries like Hong Kong and Singapore have made provisions for affordable housing and it has been a huge success. Small and crowded localities have been strategically improved and aided by efficient public transport service. We, too, need to create a well-planned and sustainable Mumbai while empowering our ecosystem which will sufficiently meet housing needs of the urban poor and middle class population.
Publication / Source: 99acres.com