Affordable housing is predicted to play a big part in the expansion of the Indian real estate market this year. Meeting the need for 40 million urban homes at one point appeared like a pipe dream due to our population’s 2.1% average annual growth rate and the poor purchasing power of a large section of people.
However, things have changed post-pandemic. Affordable housing has become one of the most vibrant segments of the Indian real estate market. The arrival of numerous real estate developers interested in exploring this lucrative market, the availability of financing alternatives for home buyers, fast urbanisation, the expanding emergence of nuclear families, and rising income levels are contributing to this change.
Employment generation
The housing industry, per se, can give a big push to the economy through its strong ‘backward’ and ‘forward’ linkages. Housing investment has inter-industry linkages with nearly 250 ancillary industries. Investment in housing/ construction sector has strong multiplier effects on generation of income and employment.
Research indicates that every additional rupee invested in the housing sector in India has the potential to contribute ₹1.54 to the country’s Gross Domestic Product (GDP). When household expenditure is also taken into account, this figure rises to ₹2.8. This highlights the crucial role that the real estate sector, particularly affordable housing, can play in boosting the country’s economy. A unit increase in the final expenditure on the construction sector would generate additional income to the economy as a whole — close to five times the direct income generated within the construction sector itself.
About 1.25% of the economy’s overall production is contributed by the construction industry, which accounts for 11.39% of the whole sector.
The construction sector is also one of the largest employment generating industries. Every lakh invested in the housing sector creates 2.69 lakh new jobs, both formal and informal.
Further, any expenditure in the sector creates eight times the number of jobs in ancillary industries. Clearly, the housing sector does more than just building houses. Given India’s enormous housing challenge, the real estate industry has an opportunity to shoot many targets with one stone through affordable housing.
Meeting challenges
Urban areas today face multi-faceted challenges, including population growth, changes in family patterns, growing numbers of residents in slums and informal settlements, constrained urban services, emerging concerns of climate change and upsurge in migration. Moreover, urban mobility is constantly challenged to limits.
It has resulted in excessive strain on infrastructure leading to informal settlements, woefully incapable of providing people with a basic standard of living. If one clubs the slum dwelling population of roughly 65 million, or 17% of urban India, it presents a stark picture of India’s housing challenges.
Often real estate entities tend to focus on the upwardly mobile middle class and high income segments due to higher profitability.
However, as mobility increases and more people move places in search of work and a better lifestyle, the pressure on basic amenities like water and sanitation will only loom large. Affordable housing can prove to be the answer to India’s housing woes and boost the housing sector. More than a choice, it has become an imperative, as highlighted by the COVID-19 pandemic.
The pandemic turned attention on having a secure and safe place to live in during a crisis. Resultantly, it has given a behavioural push for house ownership. Infrastructure has also had an impact on affordable housing. More availability of public transport from affordable/ suburban hubs to business districts/ centres or employment hubs has made this segment even more attractive.
A couple of years ago, there were not many financiers willing to support customers looking for affordable housing. Today most of the big names of the industry are entering affordable housing to make it a viable business model.
The supply side
A conducive demand environment has naturally seen the supply of affordable housing units increase in recent years. Nearly 1.95 lakh and 2.36 lakh affordable housing units were launched in 2018 and 2019, respectively. After a massive dip in 2020 due to the pandemic and lockdown, 2021 saw the launch of nearly 2.37 lakh units.
To make the vision of ‘Housing for All’ a success, India has to take affordable housing to the next level. It needs promotion and development in underserved regions of the nation. The next decade would hopefully be a glorious chapter in India’s real estate history as it drives the country’s economic growth through affordable housing.
The writer is Executive Chairperson, Religare Enterprises Ltd.
