Affordable Housing: Need of Policy

Keep one safe is a basic human need next only to food and clothing. At the end of 10th five year plan, the shelter is still a major concern. The total crunch for houses is estimated to be around 2 million in India. The urban area of the society is severely damaged as there shortage of basic services like potable water, well laid out drainage system, sewerage network, sanitation facilities, electricity, roads and appropriate solid waste disposal. These kinds of causes force us to think about the problems and challenges constitute the rationale for policy focus on housing and basic services in urban areas.

Low income Housing Policy

The policy helps to promote sustainable development of habitat in the country with a vision of ensuring equitable supply of land, shelter and services at affordable and right prices to all sections of society and benefiting many. The major cause of high shortage of housing is budgetary constraints of both the Central and State Governments. According to the trend, we are looking into as of today it is clear that Public Sector efforts will not suffice in fulfilling the housing demand for many as the need is growing and still we are about to work in that matter.

A dream of your own house which is can be bought in your salary. An Affordable Housing is a part of society and covers the major requirement of Houses. There are many people in our country who cannot buy houses due to smaller budgets. A house which cost not more than 5 to 7 lakhs . A concept of Affordable housing has cropped in India. A profitable venture of real estate companies with public sector working in tandem with them.

There is a need of affordable housing policy as the demand for housing is high.

In this manner, the Policy will seek to promote various types of public-private partnerships for realizing the goal of Affordable Housing For All.  An Affordable Housing for many.  For dream lived for many since many years.

Requirement of Cost Effective Low Income Housing

The concept of Affordable housing has cropped up in India. As such, low-income housing is an area of interest for NGOs and financial institutions that serve the poor given the dire need to fill the national housing shortage.

 

Requirement of Cost Effective Low Income Housing

In India, the right to housing and adequate shelter is a constitutional law and it is guaranteed in the Directive Principles of State Policy.  Consequently, both central and state governments have an obligation to keep this provision in mind while framing laws and policies.  Until recently, the government had the tendency to view housing as a social problem, rather than as a developmental activity which could have tremendous trickle down effects for the economy. Affordable Housing is the feasible, viable answer to the housing shortage issue and fulfills the major requirement of housing.

Research shows that there is a strong possibility for much lucrative activity, as the consumer demand for housing is very high in the low income housing segment.  India’s housing shortage is estimated to be high and demand from the low income segment constitutes a large proportion of this shortage. Other studies say that there are many million people living in acutely poor housing conditions or on the streets.

So supply mechanisms are now being aimed for low-income groups which were excluded from the housing market due to land problems and a high amount of investment requirements.

In the past, several institutional efforts have been made to improve access to loan financing for these low-income households.

Shelter finance and community finance mechanisms have expanded considerably in the recent decades; examples of housing microfinance include the National Slum Dwellers Federation in Mumbai, amongst others.  These micro finance initiatives, typically comprised of small loans for housing improvements, are catalyzed through close relationships with the community to encourage savings.

Is Affordability of the Affordable Houses for Real?

There are many people in the country who cannot buy houses due to smaller budgets?  The count of the people is 21 million people which mean that 21% of the total population in India cannot afford to buy a home due to smaller budgets.

Technically, affordable housing is defined as houses targeted to population with Income level < INR 1.5 to 3 Lakhs with demand of around 300 to 600sq ft as dwelling area.

Housing affordability can be measured by the changing relationships between house prices and rents, and between house prices and incomes.

But when we talk about affordable homes, we must ask — Affordable for Whom? ? Is it affordable for those earning Rs 8,500 to Rs 40,000 per month?

There has been an increase among policy makers in affordable housing as the price of housing has increased dramatically creating a crisis in affordable housing. Yes, prices are so high and the market is restricted. And so there is crisis of confidence. The EMI to monthly income is generally 30 to 40% and House price to annual income ratio should be less than 5.1 percent.

Is affordable housing for all?

So there is always a question that affordability of the affordable houses is real or it is just the part of the books?

It is not hidden that there is huge unmet demand for affordable housing in India. Though, government had already allowed external commercial borrowing (ECB) for low cost houses in India in the annual Budget. But the real estate companies are not too keen on this segment because of the low margins.

To improve the situation, India should have a sound affordable housing policy, an effort to give some boost to a real estate sector.

Government should try to make affordable housing attractive for the developers and it will be good if they persist with the policy of offering  land to developers at cheaper rates, interest rates subsidy, tax benefits etc;

Instead of providing low-income households with government housing, government should also adopt an approach that combines government subsidies and private sector lending. Besides a once-off government subsidy to households meeting certain income requirements, low-income households should be having an option of obtaining a loan from private financial institutions to finance their housing needs.

Such viable environment will certainly help affordable housing sector in India.

Approach should be to bring up the option for low income classes to avail private loans along with government back financing.  Also what government can do is that instead of forcing banks into areas where they are not comfortable with like in high risk lending as it is in such cases, they can be asked to support non-traditional non-bank lenders which specialize in the micro finance segment. This will make proposition comfortable for big commercial banks which don’t want to get involved in the high-risk low income lending market but will be more than willing to provide liquidity to these lenders. This will certainly help in meeting the housing needs of low-income households leading to realize the concept of affordable housing for all.

Special efforts and big steps are needed to mitigate the housing crisis and increase homeownership among low-income households .