Housing shortage, an evergreen problem of India

With economic condition continues to haunt India’s middle and lower-middle income group, finding an ideal home becomes a distant dream for these section of the society. On one side, luxury homes are selling like a hot cake, while on the other side, thousands of flats made for lower and middle income people, are lying unsold/unoccupied across the nation.

But when one sees around us, the once luxury items such as LED TVs, Cameras, smart phones, home theater, designer furniture etc, have become a necessity and inherent parts of Indian homes.

According to Sachin Agarwal, Chief Managing Director of Maple Shelter, “Majority of Indians still find it difficult to buy a home. But surprisingly, luxury items like LED TVs, home theatre, etc have become affordable and housing is becoming more and more expensive.” 

Though average household income keeps increasing across various states in India, the phase at which housing prices are going up is alarmingly high and beyond anybody’s imagination. The gap between supply and demand is also growing steadily and people have no option but to settle for low standard of living in India’s ‘so-called’ modern cities. 

Making homes affordable is not an easy task. Concerted efforts should be made by government and other stakeholders of the society. With interest rates still high, those who can afford are only buying homes. Since India has no law that prevents people from buying multiple homes, several such homes are lying vacant without being occupied in major cities in Mumbai, Delhi, Bangalore, Chennai and Pune. In China and Singapore, people who buy second home will have to forgo certain privileges. Interest rate for second is very high and no subsidy will be available for people who have more than one home. 

If the government comes forward to formulate such law in India, there will be a huge change in the real estate sector and price rise will be largely arrested. There will be a economic balance will be maintained.

The government also should facilitate to build quality homes for the economically weaker section and middle income group. There is a huge potential to fill the gap for EWS as according to a rough estimate of the total short supply of homes this sector constitute more than 80 per cent. If the current backlog is maintained, then by 2020 the country will be facing an extra demand for more than 30 million additional homes. 

According to the 12th 5-year plan (2012 – 2017), the housing shortage in India has reduced to 18.78 million. However, the data collection is questionable and government departments continue to argue on the exact figure Also, it is not just the income of the EWS that seems to be a deterrent factor here. Land prices, financial and regulatory concerns and other factors also play a big role in the problem.

Today, land is not an easily available asset in India. In most cases, acquisition of a plot for housing development is a cumbersome, time-consuming and highly expensive process. With increasing population and rising urban density, the demand for land has also seen an exponential rise. The shortage has also been contributed to by poor municipal, state and central regulations. 

Land prices are higher than the rate which is compatible with the development of mass real estate development – read affordable housing. There also has been an increase in the cost of construction, directly reflecting in the housing prices. Another problem is the lack of infrastructure. Developers are bringing out projects in peri-urban locations to keep the housing cost down, but these locations are generally unattractive based on lack of public transportation and increasing pollution in these areas.

The majority of Indian home seekers are workers moving into cities and looking for housing that would be compatible with their starting incomes. The ones from the economically weaker sections look for properties that provide access to public transport, water and power supply systems, sewage treatment lines and other conveniences. 

No matter what measures are proposed by the government of self-governing bodies of real estate developers, they will not be able to reduce the figure of housing deficit if they do not start catering to the EWS-generated demand. The bulk of the existing shortage of homes remains squarely in the genuinely affordable housing sector. No amount of supply in housing units costing above Rs. 20 lakh is going to make any difference – in fact, supply priced above this will just add to the oversupply that we are seeing in most cities.