According to the 2011 Census, over 27.5% of the urban population lives in rented accommodation. Think about it. How many people do you know, who have moved to a big city in search of better prospects and live on rent? Despite other sectors of the real estate market slowing down, the one aspect that has consistently been on the rise is the affordable housing sector. We at The Scapers understand why.
Why Affordable Housing is The Need of the Hour
Studies estimate that by the year 2030 more than 40% of the Indian population will be living in the urban sections of the country. This is estimated to create a demand for at least 25million affordable housing units. Currently there is an estimated shortage of around 10 million units.
Since, majority of the Indian population falls in the economically lower middle class section of society it is the sheer numbers in this section that drives the demand for affordable housing. Additionally, the government in the last few years has given both developers and home buyers incentives in this sector.
But how did we get here in the first place? Why is it that even though there’s a demand for affordable housing, there are many unsold inventories as well? To understand this, we need to look back at the last few years. Initially there was a boom in the property market. Due to this builders started making bigger homes, not realising that the demand for smaller homes was also on the rise. This led to a situation where there was inventory, but it catered to the wrong market.
Who’s Buying Affordable Housing?
As mentioned above, affordable housing is in demand due to a large migrant population. Are these the people who are buying or do they prefer to live on rent? Studies show that most buyers of affordable housing are salaried individuals. These people buy for their own use and may choose to rent out their flat at a later stage. There are also those who choose to buy affordable housing for investment purposes. And with the enforcement of RERA, there is an assurance of a basic level of quality of the project.
Government Schemes that Encourage Affordable Housing
In the last few years, the government has made a number of policy changes that have encouraged the growth of the affordable housing sector.
Under the Pradhan Mantri Awas Yojana (Urban) or PMAY (U) scheme of 2015, the government has proposed to build two crore houses by the year 2022.
The amount of subsidy one is eligible for under this scheme is calculated on the basis of the annual income of the household. The maximum loan tenure one can avail under this scheme is 20 years.
Essentially the PMAY lowers the cost of a home by up to 2.67lakhs for those in the lower & middle income groups (i.e. where the annual household income is between 3 to 18lakhs). Additionally, the loan amount has been increased to Rs.12lakhs. This makes more homes attainable for the urban poor.
Under the PMAY, the Government has also introduced the Credit Link Subsidy Scheme (CLSS). This offers an interest subsidy that brings down EMIs by over 2000/- rupees per month.
But perhaps the biggest legislation in recent times for the real estate sector has been the introduction of RERA. Before the RERA era, there were cases of investors who hadn’t received possession of their property for over 10 years. Now however, things are changing. With stricter norms, the act not only keeps developers in check but also re-establishes confidence in homebuyers.
It is predicted that other aspects of the real estate market will not be impacted. Every price point will have a different demand. Just as the need of food or clothing don’t diminish with its supply.
Given that affordable housing is the need of the hour, both the government and developers like The Scapers need to work together to create a system where demand and supply are met. Some suggest simplifying the approval process, while others feel there should be a system of transitional housing. No matter what is eventually decided, one thing is clear. We at The Scapers will continue to provide affordable, quality housing options to our customers, as long as we can.