Affordable Housing: India’s Challenge Of Disordered Urbanization

About 377 million people from India’s total population of 1.21 billion are urban dwellers. With more than 10 million people migrating to cities and towns every year, the total urban population is expected to reach about 600 million by 2031. Furthermore, between 2015 and 2031, the pace of urbanisation is likely to increase at a compounded annual growth rate (CAGR) of 2.1%, which is estimated to be almost double that of China.

The problem is further compounded as there are only a few urban centres in India that promise better prospects than rest of the cities and towns – leading to much more pressure on their infrastructure and housing – and resulting in disordered urbanization. Disordered urbanisation is reflected in almost 65.5 million Indians who, according to the country’s 2011 Census, live in urban slums and sprawls.

‘Hidden’ Urbanization

In addition, according to the World Bank’s Agglomeration Index, a globally applicable alternative measure of urban concentration, the share of India’s population living in areas with urban-like features in 2010 was 55.3%. This compares to an official urban share of the population of just over 31%, suggesting the existence of considerable hidden urbanisation. This hidden urbanisation, particularly on the peripheries of major cities, is mostly not captured by official statistics, and is symptomatic of the failure to adequately address congestion constraints that arise from the pressure of urban populations on infrastructure, basic services, land, housing, and the environment.

Given this scenario, it becomes critical to fill the existing gaps in the country’s strained urban infrastructure and in particular, housing. As per Economic Survey of India, EWS (economically weaker sections) and LIG (lower income groups) together account for 95.6% percent of urban housing shortage in the country, and it would be important to address the need of this significant segment of population.

Amid the growth of urbanisation, the housing shortage in India has touched 18.78 million units. Approximately 56% of households in urban India now have four or less members, which is a marked change in Indian housing sector in the past 10 years. This trend has significantly increased the demand for housing in the urban context with the growth of smaller families.

Interestingly, it is to be noted that although India’s number of households increased by 60 million between 2001 and 2011, the number of houses went up by almost 81 million over the same period. Despite this, the latest official Economic Survey states that there is a shortage of nearly 20 million homes in India. One reason for this is that most builders are catering only to the middle income and affluent population in India and home prices have gone beyond the reach of many during past decade.

Challenges Galore

While the supply side constraints for low cost and affordable housing include lack of availability of land and finance at reasonable rates, the demand drivers include the growing middle class and growing urbanisation. Real estate developers, private players in particular, have primarily targeted luxury, high-end and upper-mid housing segment owing to the higher returns that can be gained from such projects. In addition, several structural issues, such as the high gestation period of housing projects, limited and expensive capital, spiralling land and construction costs, high fees and taxes as well as unfavourable development norms are bottlenecks restricting the desired growth in housing stock in India.

The Road Ahead

The government has acknowledged the importance of the housing issues in the country in the current five-year plan. Smart cities programme is another attempt to improve the situation in urban areas. However, the solution to affordable housing crisis would be focussed efforts on land and housing policy reforms, delegation of power to urban local bodies, fostering innovative housing finance and steps for reduction in project costs and schedule overruns.

Additionally, planned urbanisation and other initiatives of government should ensure that towns and cities are free from slums and simultaneously provide for adequate opportunities for gainful employment as also an optimum quality of life to all citizens, including the marginalised sections of society. If, and when, this happens will be important to see.

Contributed by: Manish Kumar, Managing Director - Strategic Consulting, JLL India.

Water purifier industry thrives to the apathy of civic authorities

Thanks to the erratic and poor quality of water supplied to the masses by the civic authorities, water purifier market in India has seen a good growth, which is likely to touch Rs 7,000 crore by 2015 from the current level of about Rs 3,200 crore.

Water purifier segment in India is growing at a compounded annual growth rate (CAGR) of about 25 per cent and is largely driven by rising sales of low-cost variants triggered by extreme shortage of drinking-water and dwindling water table which has created huge gap in demand-supply of clean water jeopardizing the normal life, said The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

Besides, the sales of water purifiers across India are likely to cross 1.5 crore units by 2015 from the current level of over 78 lakh units, according to the ASSOCHAM study titled, “Water-Purifier Industry in India: An Overview”.

Growing at about eight per cent annually, the global water purifier industry is currently poised at about Rs 4.96 lakh crore and is likely to reach Rs 6.25 lakh crore by 2015, according to the ASSOCHAM study.

“Growing awareness amid consumers vis-à-vis health hazards of consuming unsafe and untreated water together with local and international companies jumping on the water-purifier bandwagon, the sector is likely to witness huge surge, more so as an expeditious growth in population is aiding lack of access to safe drinking water together with inadequate sanitation and hygine,” said DS Rawat, secretary general of ASSOCHAM while releasing the findings of the study.

Over 85 per cent of fresh water resources in India are used for irrigation purposes, about 10 per cent is used by the industrial units, municipal use and in construction projects and a meager five per cent is available in terms of drinking water, highlights the ASSOCHAM study.

“Acute shortage, salinity of water, depleting groundwater levels and low market- penetration together have led to an upsurge in demand for water treatment products across India,” said Rawat. According to the ASSOCHAM study, a whopping 70 per cent of maladies in India are waterborne owing to poor water quality in most parts of the country.

Water purifier industry in India is broadly divided into two major categories – low cost water treatment products and high-end water purifiers. Low-cost water purifiers cater to the majority of the market as they do not require electricity and running water and are generally gravity based, chemical based water purifing systems available in the range of Rs 500 to Rs 5,000.

Majority of leading water purifier manufacturers in India have launched high-end water purification devices which use electricity and running water for purification process and are using reverse osmosis (RO) technology, ultraviolet based filters and microbiological treatment. These premium water treatment products are available in the range of over Rs 5,000 and Rs 40,000 and above. Kent RO, Eureka Forbes, LG, Whirlpool, Panasonic, Philips, Usha, Bajaj Electricals, Okaya Power Group (Nasaka brand), Hindustan Unilever amid others are certain leading brands in this category.

Companies in the high-end segment are spending a major chunk of their revenues on marketing their products and providing quality after-sales services to stay ahead of their peers.

Many companies are also conducting surveys to ascertain the quality of drinking water in localities in terms of its taste, odor and hardness to educate the masses and create awareness amid consumers about harmful consequences of consuming contaminated water.

As per an estimate, Gujarat alone accounts for about 32 per cent of the overall water purifier market in India owing to the state government’s emphasis on supply of water via significant investments in industrial estates and special economic zones (SEZs) together with government’s support to set up manufacturing and water treatment plants, designing and engineering units, according to the ASSOCHAM study.

Delhi-NCR alone accounts for sales of about 42,000 units of water purifiers annually with over 130 local companies operating in this domain selling products laden with local and imported components.