The Rush to create affordable Housing

India, post 1991 has undergone a metamorphosis and transformed itself into an economic powerhouse which cannot be ignored. Today India is the twelfth largest economy in the world fourth largest economy purchasing power adjusting exchange rates. In addition it is one of the fastest growing economies in the world in spite of Global Recession.

What has changed since 1991 is the rejection of extensive regulation and protectionism which was symbolized by corruption and slow growth and unshackling the spirit of entrepreneurship, competition and increased efficiencies thus delivering quality. The world suddenly woke up to Indian products, manufacturing expertise, service delivery capabilities and above all the largest English language speaking population in the world outside Great Britain.

While in school and college between the 70’s and 80’s we were given to understand that India’s huge population was its Achilles heel, however today the same population (only second to China) with its demographics displaying more than 54% being in the age group of 15-45 and educated is India’s biggest asset thus transforming the country into a Global Back Office for Services, the best destination to develop software and a Manufacturing Hub for multinationals. This development has resulted in the rise of the Great Indian Middle Class. A class that is upwardly mobile economically and consumerist in approach, thus fuelling demand in all sectors of the economy.

The rise of the middle class has fueled demand for urban and semi urban housing at affordable prices. According to the Tenth Five-Year-Plan, there is a shortage of 22.4 million dwelling units. Thus, over the next 10 to 15 years, 80 to 90 million housing dwelling units will have to be constructed with a majority of them catering to middle- and lower-income groups. The top seven cities of India continue to have considerable latent demand for housing and at the right price, which is why the buyers are rushing to the market. During the boom period of the stock market and real estate market which lasted 2003-2008 this segment of the population was completely ignored as investors and speculators entered and beat up prices to unrealistic levels.

It was not until the markets began to tank in the first quarter of FY 2008 that developers realized the potential of the demand for affordable housing with reasonable pricing and resorted to developing such properties to keep them afloat. Having said this, the need of the hour is to develop real estate for this section of the population which will ensure that the wheels of the Real Estate Industry, the second largest employment generator of the economy after agriculture keep chugging. With the right kind of incentives from the Government and availability of land at affordable prices (land can comprise 30-35% of project cost in urban India) and intelligent urban planning by way of increasing FSI (the ratio of land to constructed area) it is possible to achieve this objective.

The various players viz. Developers, Land Owners, Urban planners and other Government Agencies will need to come together and work in tandem to achieve this objective. This is very important from the point of view of developing infrastructure required to sustain a high growth rate of GDP over a long period of time. Housing Infrastructure is as important as other infrastructure projects like roads, ports, power, water supply etc and hence cannot be undermined.