Housing Industry-An Over Look
The year 2017 has been quite stagnant for the housing industry in India. The housing industry in India faced new turns in the respective years. In the very first quarter of the year 2017, the demonetization policy introduced by the government of India caused the prices of houses to decline. Demonetization has resulted in lower housing prices in India. This, however, benefited the buyers willing to invest in this particular industry. Lower prices of houses made houses more affordable for the end users. Thus, the new change brought about by the demonetization policy benefited end buyers by decreasing the prices of the houses. However, this state didn’t continue for a very long time. In April of the same year, the government announced GST and RERA. Due to the introduction of these new taxes, a state of confusion was created among buyers. The buyers thought that the industry had stabilized, yet the introduction of this particular policy created confusion about whether they should invest in the housing industry or wait for better prices (Can Affordable Housing in India Be Really a Game Changer? 2018).
Sales of houses in India declined due to changes in government regulation. The buyers are holding back money to see the effects of new government policies. However, one good piece of news for the housing industry is that the economy is likely to experience triple effects due to the new policy of demonetization. Due to this new policy, the housing industry is expected to recover from downturns and investors and buyers holding back their purchases. It is believed that new policies, including GST and RERA, are likely to make things better for buyers willing to purchase new houses. The affordability, delivery, and accountability of houses are meant to improve with new government regulations. It is expected that sales that have stagnated and slowed down are likely to boost due to the triple effect that is predicted to hit the economy (Pai, 2017).
More Read: Hair Transplant Clinic in Mumbai
The Indian housing sector is a part of the country’s real estate sector. India is experiencing increasing demand from local and foreign investors who are willing to invest in India’s real estate sector. The real estate sector is among the rising sector in India. There has been a huge demand, and to meet this demand, demand for build-up space areas is increasing. The demand is experienced for the commercial and residential segments. The commercial segment includes offices, shopping areas and other such sectors, while the residential sector includes the housing industry. The housing sector of India is expected to grow in the coming years. There are many reasons for this prediction. Urbanization, changing family structure, government policies, loans, rising population, affordability and purchasing power of buyers have contributed towards the huge demand in the housing sector, and this demand is likely to grow at a rapid pace in the coming years (Indian Housing Sector Outlook 2018, 2014).
The housing sector of India provides mainly two types of homes to buyers. They are luxury and affordable homes. Demand for luxury homes is much higher than affordable homes. This is because of the purchasing power and changing lifestyle of consumers. Consumers want to invest in better lifestyles. Thus, the demand for luxury homes is much greater than for affordable homes. Investors are also focusing on luxury homes since profit margins are greater in this sector than in affordable homes (Khan, 2017).
However, it has been seen that the demand for affordable housing is gradually rising. This is due to many factors, such as the rising middle class and low economic group in the country. Urbanization has also contributed towards the rising demand for affordable houses. The government has introduced several initiatives to cope with the rising demand and to fill the demand-supply gap. The government has introduced new housing programs and granted infrastructure status to India’s housing sector. The government has initiated a program that aims to build about twenty million affordable houses in urban areas and about ten million affordable houses in rural areas. This plan is expected to fill the demand-supply gap in the affordable housing sector. However, due to several issues, the government has only been able to build about 0.3 million units so far. Lack of land availability, high costs involved in construction, and delays in the disbursement of subsidies have caused delays in the construction of new affordable units (Money Control.com, n.d.).
However, the government is still making efforts to improve the demand-supply gap and ensure that the people of the country have access to affordable housing. A new plan initiated by the government allows the private sector to step in the plan and help the government meet the expected targets. This contribution is likely to minimize risks that are related to capital investment and land financing (Research and Markets, 2017).
Affordable Houses In India Current Status:
Despite government efforts, there is a huge demand for affordable houses. According to a survey, there has been a huge demand gap for the affordable housing sector. Affordable houses fall short of the current demand. The demand shortage is roughly estimated to be about twenty million housing units. Thus, the government needs to gear up its efforts to meet the increasing demand. Houses that cost around ten to twenty lakhs Indian rupees make up a sizable share of the housing sector. The demand for this sector is again rising, yet the supply has fallen short. The people of the country are facing issues related to unavailable affordable houses and the lack of finances available to middle and lower-income groups to purchase these houses. The problem can only be tackled if more funding is provided both to developers and buyers. With microfinance loans provided to the lower and middle class, the purchasing power of buyers will improve. If government and financial institutions help private developers to invest in affordable housing projects, the demand and supply gap for affordable housing can be shortened (Agarwal, n.d.).
There has been a positive response from financial institutions to meet the challenges of affordable housing, such as lack of funds, lower purchasing power in the lower and middle classes, and reduced affordability from the buyers’ sides. Affordable homes built in major cities of India, such as Mumbai, have experienced a positive response from the financial sector. These financial institutions provide funds to buyers to make purchases. Funding in affordable housing projects is likely to yield a huge internal rate of return of about twenty-five per cent. This IRR is likely to be even higher for well-located affordable homes than other affordable homes. Thus, with the intervention of financial institutions, the issues are likely to be resolved (ETMarkets.com, 2014).
Analysis:
Affordable housing in India is defined as the provision of adequate shelter to people. The shelter must provide security to common urban households along with the assurance of security of the tenure for households.
Following are the categories of affordable housing in India
EWS with a minimum of three hundred square feet of buildup area
LIG with a minimum of five hundred square feet of buildup area
MIG with a minimum of six hundred to twelve hundred square feet of build-up area
India’s housing industry is among the fastest-growing sectors. It has been estimated that this sector is likely to make a huge share of the GDP of the country. About 11 % of the share of the GDP is expected by the year 2020. This projected share in the GDP reflects the promising growth in the respective sector. Also, the sector is likely to grow by a compound annual growth rate of 11.2%. Thus, India’s housing industry represents promising growth (IBEF, 2018).
Private equity investment in the housing sector has a promising future, too, and is likely to grow at a fast pace. It has been estimated that by the year 2026, private equity investment in the housing sector is likely to grow by a hundred billion United States dollars (Singh, 2017).
Government Regulations:
Issues in the affordable housing sector of India are summarized as:
Huge demand for affordable housing due to rapid urbanization and the rise in lower and middle-class groups moving to emerge in major cities of the country.
High construction cost.
The last funding available to help buyers purchase and for government and private companies to contrast affordable homes.
Land availability issues (Kalpana Gopalan & MadalasaVenkataraman, 2015).
Following is the list of initiatives introduced by the government of India to meet the challenges of the country’s housing sector.
Narendra Modi announced a scheme under which two crores of homes will be built by the year 2022. The scheme is known as ‘’housing for all.’’
Infrastructure status to be granted to affordable housing schemes. Developers will be provided access to funds to invest in the scheme for affordable homes.
Developers will be allowed to pay their taxes in a year’s time.
Deadlines for the affordable housing scheme have been extended to five years.
Refinancing of loans by the National Housing Bank will help buyers to invest in affordable homes.
Real estate regulatory authorities ensure the availability of funds to first-time buyers in the housing sector of India (The Hindu .com, 2016).
References
Agarwal, S. (n.d.). Affordable Housing In India – Current Status, Future Prospects. Retrieved from IIFL Website: https://www.indiainfoline.com/article/news-sector-others/affordable-housing-in-india-current-status-future-prospects-114070300083_1.html
Can Affordable Housing in India Be Really a Game Changer? (2018, January 18). Retrieved from https://www.nkrealtors.com/blog/affordable-housing-in-india-game-changer/
ETMarkets.com. (2014, December 14). Affordable Housing: An attractive trigger for all-round growth. Retrieved from https://economictimes.indiatimes.com/markets/stocks/news/affordable-housing-an-attractive-trigger-for-all-round-growth/articleshow/62066464.cms
IBEF. (2018, March). Indian Real Estate Industry. Retrieved from https://www.ibef.org/industry/real-estate-india.aspx
Indian Housing Sector Outlook 2018. (2014, October). Retrieved from https://www.rncos.com/Market-Analysis-Reports/Indian-Housing-Sector-Outlook-2018-IM716.htm
KalpanaGopalan, & MadalasaVenkataraman. (2015). Affordable housing: Policy and practice in India. IIMB Management Review, 129-140.
Khan, P. (2017, Janurary 4). What does affordable housing refer to in India? Retrieved from https://www.quora.com/What-does-affordable-housing-refers-to-in-India
Money Control.com. (n.d.). Affordable housing in India: Where is the supply? Retrieved from https://www.moneycontrol.com/news/business/personal-finance/-1880965.html
Pai, R. (2017, December 29). Indian Real Estate Industry in 2017 and predictions for 2018. Retrieved from https://www.businesstoday.in/buzztop/buzztop-feature/indian-real-estate-industry-in-2017-and-predictions-for-2018/story/267018.html
Research and Markets. (2017, December 12). Affordable Housing Market in India 2017 – Research and Markets. Retrieved from https://www.businesswire.com/news/home/20171212006209/en/Affordable-Housing-Market-India-2017—Research
Singh, A. R. (2017, July 11). Affordable housing set for growth in 2017. Retrieved from https://www.indiainfoline.com/article/article-latest/affordable-housing-set-for-growth-in-2017-117071100396_1.html
The Hindu .com . (2016, August 2). Affordable housing: a game changer. Retrieved from http://www.thehindu.com/real-estate/affordable-housing-a-game-changer/article19401953.ece
