6 Ways to build Affordable Housing in India

Urban India today houses 377 million people making up 32% of the country’s population. This is expected to increase to 40% with close to 600 mn urban dwellers by 2030.

Ushering in the much-needed change is imperative in bridging the gap between the housing deficit and ongoing supply of housing units across the country.

An array of policies and strategies including facilitating PPP (public-private partnership) in affordable housing have served as catalysts to the growth of the sector.Affordable housing finance is estimated to be a Rs. 6 lakh crore business opportunity by 2022, by when the government seeks to achieve housing for all. It must be borne in mind that planning mechanisms play a major role in ensuring sustained growth of the sector.

Long and short-term measures necessary to produce a comprehensive and effective environment for private sector provision of affordable housing must be made part of the agenda to achieve an upward trajectory in the sector.

The following six key factors of success, if paid heed to and considered while planning affordable and social housing projects on PPP mode, will pave way for a smooth, accessible and efficient market for the sector.

1. Strong partnerships

Government partnering with private players is a key success driver in the development of affordable projects through a commercially viable project structure.

A policy pool that caters to innovative implementation methods that foster healthy competition between strong developers in the market will ensure effective and also sustained growth of the sector. Partnering with a developer with credibility and experience in the market will in the long run translate into accelerated growth of housing units that are of acceptable quality and delivered within the scheduled timelines to end-users.

2. Innovative finance

Innovative PPP models which make room for finance mechanisms and provide relief to private players are important. Effective risk management of unforeseen additional capital expenditure by the public sector, de-leveraged capital structures facilitated by public sector co-investment, mechanisms allowing for long term institutional financing, encouraging alternative financing sources including loan and credit support products provided by commercial banks, etc. will help balance the risk burden on the private player and hence provide a more favourable environment to developers. Apart from this, incentivising the development process via land acquisition, construction technology (adoption of innovative and low cost technology), project timelines and management can offset major losses that cut into the profit of the developer.

3. Demand analysis

Optimised allocation of the planned housing stock to the right section of the population is a key growth retardant to the number of vacant and unsold inventory.

A part-to-whole approach that takes into account the distribution of beneficiary population and the ratio of mix in the areas identified for development of housing units (to understand the actual demand in an area) is imperative to successful implementation of a project from inception to sale / rental.

Location plays a pivotal role in the success of any affordable housing project.

Developing affordable housing units with access to modes of transportation, better connectivity, quality healthcare and education, proximity to community services, etc. is the need of the day. Factoring in location and connectivity will ensure appropriate returns to investors while catering to the basic needs of the target population.

4. Single window clearances

Recent social housing schemes across the globe aim to quicken the pace of development of housing units to bridge and secure the gap between supply and actual housing demand.

A recent trend involves provisions for single window clearances. This measure will stimulate the supply of viable affordable housing by minimising construction cost overruns (owing to delay in approvals) to substantial levels. Policies and schemes facilitating smooth conflict resolution to ease the burden on all stakeholders will have a major positive impact on timely construction and quality of units.

5. Low-cost technology

Leveraging the benefits of new advancements in the construction industry will have long-term implications on cost, quality and safety of the housing units.

Adopting low-cost technology such as pre-fabrication will help developers construct units at lower costs and at a quicker pace.

The higher initial cost of technology is compensated by lower labour costs and higher efficiency in construction.

6. Performance standards

Introducing monitoring mechanisms to ensure delivery of quality homes to the beneficiary population will not only imply enhanced living standards but also strengthen sector values.

Guidelines prescribing standards for construction methods, technology, material as well as execution and implementation will help streamline the project right from activation to the sale / rent of property to the target population. This will also result in the longer life of affordable housing units.

To conclude:

Affordable housing reflected a growth of 27% between January to September, 2017 (y-o-y). Out of the total supply, the share of housing supply in the Housing segment with capital value below INR 4,000 per sq. ft has increased to 28% in 2017 from 23% in 2016.

Needless to say that the segment is on an upward growth trajectory.