Affordable Housing an up market in future
India is a rising market and it's been witnessing fast urbanization since last decade and this could be seen within the census information that highlights the very fact about fast urbanization happened within the last decade. With the govt. disposing a significant policy push to its vision of guaranteeing Housing for All by creating cheaper units out there within the market all over the nation and private players rising to the occasion, investors have their hands full with enticing choices to decide from.
Even though affordable housing segment has the potential to the tune of 4- 5 trillion it is a highly untapped segment. To make it more promising and to deal with the above-mentioned issue we need to make a comprehensive framework for the development of affordable housing. These measures can include innovative microfinance schemes for the lower income group at the lower level of interest. In addition to it, effective financing through micro mortgage by utilizing the reach of self-help groups and other innovative financing schemes to reach the larger section of the group such as EWS and lower income group.
Generally affordable housing is seen as a need based acquisition but its investment potential often goes unrecognized. An area that provides cheaper choices currently might doubtless become up market in future and yield a hefty come on investment, say specialists.
If we consider affordable housing as a term, its definition varies from market to market. For instance, a price point that may be deemed high-end in Sonepat would be considered affordable in Gurgaon even though both are located in Haryana. Developers are trying to build smaller and cheaper homes to cater to the potential upside in demand acceleration led by the government's policy push.
Affordability is a measure of one’s purchasing power which is very much dependent on the earning of that individual along with the cost of living which is subject to the region of residence. Cities with higher costs of living generally have higher remuneration for the working class, hence, allowing them a bigger purse. The cost of land in these regions will also have a direct relation with the cost of housing units. Regions with higher land costs will have higher cost of units and that is where strict government intervention is required.
East Delhi is a good example of how an area of a metropolitan city often viewed as down-market before the Commonwealth Games 2010, became a preferred address of the upper middle class in a couple of years. Houses in East Delhi were affordable as the area suffered from relatively poor road connectivity across the Yamuna. With the launch of Metro train services and good amenities, the area has been completely transformed and property prices have appreciated remarkably. In 1996, a 2BHK apartment in a co-operative society in IP Extension used to cost between Rs 2-2.5 lakh but the value of the same apartment now is pegged at Rs 1.2 Crore.
As far as its financial sector implications are concerned, if such a scenario indeed plays out in India, the ramifications for the sector would be severe which could lead to a squeeze in lending activity. That scenario may not be in the consumer’s best interest. The country’s biggest lender State Bank of India's chairperson Arundhati Bhattacharya has warned that the country needs to address the bad loans crisis because a culture of loan waivers has impacted credit discipline and penalized honest loan re-payers.
Therefore, the idea of affordable housing is a welcome but policymakers as much as individual investors need to tread carefully. From an individual’s point of view, it’s indeed a good opportunity because the potential upside is huge.