Talk about housing or property to anyone in India and the first thing that comes to their mind is affordability. Millions of homebuyers want to buy affordable homes but there is hardly anything out there. There is such a tremendous demand the supply is short.Though the government is doing great in the field of affordable housing for common man, are these projects viable for the developers?
The reason is simple for the above query, developers prefer to invest in mid-section and premium housing as rising material cost, labor and financing cost make affordable housing unaffordable. Making matters worse is that developers build affordable housing but the homebuyers shy away from investing.
If you are getting a house say for 10-20 lacs, everybody is concerned if it will start cracking and falling, and second there is a creditability problem. Half the people cannot deliver on time and the customer base cannot let this happen. The most important part is that the developer has to cater to the aspirational need. You can’t sell your project by saying this is a cheap home, but you have to drill it in the mind of the buyer that this is a great home, a smart home you got to make it aspirational.
The developer can make the project viable. Some big players like Tata Housing and Mahindra Lifespaces are doing it. They have bought innovation and assembly line approach to this sector.
Their demands are simple-
1] Have one window clearance to simplify approval process.
2] Digitize land records.
3] Build trunk infrastructure to Peri-urban areas.
4] Enable mass housing zones within city.
5] Simplify taxation.
The way the cost can be brought is by looking at all the indirect taxes- like the vat, service tax, registration, stamp duty if these are taken care of by the government then that in itself has a potential for reducing the cost of ownership by 15-20%.
The other alternative for affordable housing projects to materialize is to go local, as the local builder knows the land better and is an integral part of the market, but his problem is finance. The best way is to bring the corporates and small developers together incentivize them and then the affordable housing segment will soon turn into reality.
Developing affordable housing in Indian cities faces many challenges due to several economic, regulatory and urban issues. Whilst lack of availability or urban land, rising threshold cost of construction and regulatory issues are supply side constraints, lack of finance is a serious demand-side constraint, which impacts the ability of low-income groups to buy housing in the organized sector.
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