‘Roti, Kapda aur Makaan’ has been an age-old adage that many Indian households swear by. The dream of having a home of one’s own has further been realised by the Government’s push to develop affordable homes by 2022.
It has been reported that between January 2015 and September 2017, cities such as Ghaziabad, Gurgaon and Greater Noida have registered substantial growth in terms of supply of residential properties in NCR. There is a noticeable surge in the launch of affordable properties in all the NCR locations.
In the past three years, around 73 per cent of affordable homes in NCR have been in the price bracket of Rs 20-40 lakh. Although the sales figures for homes below 20 lakh haven’t been promising because of unfavourable economic conditions, the sales figures for homes in the budget range of Rs 20-40 lakh have shown tremendous potential. Not just the government authorities, private real estate developers have also started focussing on affordable housing given the push from the Central Government.
Since 2012, 2.24 lakh units of affordable homes have been launched in the region, and the residential properties in NCR priced in the budget range of Rs 20-40 lakh have seen the biggest buyouts during the January 2015 – September 2017 period.
At the same time, there are some challenges that may limit the supply of affordable homes in NCR and there is no second thought that the government, given the undeterred focus on affordable housing, will figure out ways to overcome the pitfalls.
Increase in costs of construction
While land costs determine the cost of homes, the price of affordable homes is determined on the basis of construction materials. That includes the cost of brick, sand, cement, steel and other such building materials.
In the recent times, these materials have witnessed a price escalation of 20-50 percent. Added to it are the rising labour costs owing to the implementation of National Rural Employment Guarantee Act (NREGA) in the Indian labour market. The gradual rise in wage levels of migrant workers under the Act has further impacted the cost of construction. Out of the total selling price of an affordable home, the cost of construction itself accounts for 50 to 60 percent.
While the costs of land declines when it moves from city to peripheral areas, the construction costs only fall at a gradual level from premium or luxury housing to affordable housing. Therefore, keeping a tab on the construction cost would eventually make housing more affordable.
The cost and delivery of affordable housing projects in NCR or any location for that matter depends on the availability of manpower. If there is a shortage, the project would be impacted adversely. If the training and education capacity of unskilled workers is taken care of through various Government schemes, the manpower shortage can be minimised.
A smoother supply of manpower will ensure faster delivery of homes that cost less and can be sold at affordable prices.
Difficulty in raising housing finance
Securing formal housing finance for affordable properties in NCR has become an issue for low-income groups including LIG and EWS category as MIG and other segments get more preference. The rule that applies when it comes to lending money is: ‘more the income/collateral, more the loan’.
In this scenario, the low-income groups are hardly encouraged by the housing finance companies or commercial banks owing to their lack of collateral, marred with low and unstable incomes. Further, lack of documentation on the part of low-income homebuyers ails the process. Despite the mighty worth of the loan market of Rs 3-10 lakh crore, only Rs 55,200 crore loans were disbursed in financial year 2011 by housing finance companies towards affordable housing.
While there has been a considerable focus on affordable housing in NCR and the rest of the country, solutions to the above challenges will further boost the market in a big way.