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 per cent, which is estimated to be almost double of China’s growth rate.
The problem is further compounded as there are only a few urban centres in India that promise better prospects than most cities and towns — leading to much more pressure on their infrastructure and housing — and resulting in disordered urbanisation. This is reflected in almost 65.5 million Indians who, according to the country’s 2011 Census, live in urban slums and sprawls.
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 per cent. This compares to an official urban share of the population of just over 31 per cent, suggesting the existence of considerable hidden urbanisation.
This is particularly seen on the peripheries of major cities, and is mostly not captured by official statistics. This hidden urbanisation 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 the Economic Survey of India, EWS (economically weaker sections) and LIG (lower income groups) together account for 95.6 per cent of the 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 per cent of households in urban India now have four or less members, which is a marked change in the 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, 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.
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. The smart city programme is another attempt to improve the situation in urban areas.
The solution, however, to the 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 the reduction in project costs and schedule overruns.
Additionally, planned urbanisation and other initiatives of the government should ensure that towns and cities are free from slums and also 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.
The writer is Managing Director - Strategic Consulting, JLL India