Low cost housing in India – Changing trends (Affordable housing)

Housing in India varies greatly and reflects the socio-economic mix of its vast population.

There are certain unique characteristics of Indian culture which drives its housing set-up. The most common structure is for the extended family (usually referred to as joint family) to live in the same house. For instance grandparents, their sons, daughters-in-law and grandchildren live in the same household sharing the same kitchen. Brothers, sisters and cousins grow up together. Each husband-wife combination has their own bedroom. The eldest woman in the house sets the menu and leads the cooking. Women live with their in-laws after marriage.

With modernisation there is a small but growing section of nuclear families in urban areas. It is still extremely rare for senior citizens to live alone. Conservative Indian society frowns upon young couples living together before marriage. Some single young adults live in same-sex dormitories during college or in shared accommodation during the early working years.

Bangalore

Bangalore's mild year-round weather prompted its emergence as a favourite retirement location in the 1950s and 1960s. The quiet town witnessed leafy streets lined with bungalows. The only lively areas were the restaurants which lined Mahatma Gandhi Road. Retirees went on leisurely walks in the gardens around the British-era Army cantonment earning Bangalore the sobriquet "Garden City". A few accomplished academics and researchers worked at the famous Indian Institute of Science and ISRO.

All this changed in the 1990s when the Information Technology boom hit Bangalore. Y2K projects in America's IT industry resulted in shortages for skilled computer scientists and systems programmers. Bangalore was transformed into the Silicon Valley of India as over 500,000 well-paying jobs for young college graduates were created. The demographics of the city changed, new high-rise apartment buildings were built, campus-style office parks sprouted, vast shopping malls started to thrive, streets became crowded with new cars and world-class gated expatriate housing estates emerged.

Roughly 3% of Bangalore's population lives in slums.

Corruption

In general India's crime rate trails those of other developing countries. There is a large developed housing market with major builders and promoters. Some municipal and other government officials, elected politicians, real estate developers and a few law enforcement officials, acquire, develop and sell land in illegal ways.

Sometimes, government land or land ostensibly acquired for some legitimate government purpose is then handed over to real estate developers who build commercial and residential properties and sell them in the open market, with the connivance of a small section of the administrative and police officials.  Corruption is sometimes a reaction to well-meaning social activists' opposition to development. Environmentalists, "not in my backyard" activists and court cases slow down the ability to expand housing. Computerization of records relating to the classification of tracts and land ownership is a key tool in countering the illegal activities of land mafias, since it creates transparency on all information relating to a given parcel of land. This approach has been effective in Bangalore, but efforts to extend it elsewhere have sometimes met with strong resistance by land mafias, manifesting itself as bureaucratic inaction.

Affordable housing

Affordable housing is terms used to describe dwelling units whose total housing costs are deemed "affordable" to those that have a median income.  In India, a commonly accepted guideline for housing affordability is a housing cost that does not exceed 30% of a household's gross income.  When the monthly carrying costs of a home exceed 30–35% of household income, then the housing is considered unaffordable for that household.  In the India many real estate customers think that the key element in determining affordable housing is acceptable commuting time/distance. In Hyderabad or Bangalore, for example, a household's inhabitants may decide whether to pay more for housing to keep commuting time and expense low, or to accept a long and/or expensive commute in order to obtain "better" housing.  The fact is that may median income customers use public transport facility in India where in the cost of commuting becomes very affordable.  A primary factor in housing affordability is household income. The most common approach is to consider the percentage of income that a household is spending on housing costs.  Another method of studying affordability looks at the regular hourly wage of full-time workers who are paid only the minimum wage (as set by their local, regional, or national government). The hope is that a full-time worker will be able to afford at least a small apartment in the area that he or she works in. 

The other major factor is the measurement of housing costs.

Some organization and agencies consider the cost of purchasing a single-family home; others look exclusively at the cost of renting an apartment.

A common measure of community-wide affordability is the number of homes that a household with a certain percentage of median income can afford. For example, in a perfectly balanced housing market, the median household (and the half of the households which are wealthier) could officially afford the median housing option, while those poorer than the median home could not afford the median home. 50% affordability for the median home indicates a balanced market.

It is very important to have a shelter of your own. The housing market in India has undergone constant change over the years. And it has changed for the better. There are innumerable housing projects coming up in different cities of the country, but are they catering to the needs of the people with low income? Several residential projects are undoubtedly coming up but there are very few which help the LIG. So, need of the hour is low cost homes in India.

Most of the housing projects are inaccessible for the common man unless you have a good pay check. Reports furnished by Ernst & Young, reveal that approximately 75% of the real estate market in India is made up of the housing market.

Studies also reveal that scarcity of housing units in the country as of 2007 was about 24.7 million. Surprisingly, the shortage is mainly for the people belonging to the moderate income group and the lower income group, people who cannot afford a home of their own.

Low cost housing in India – Changing trends

The demand for low cost homes in India has set the stage for the housing projects meant for the ones who have limited earnings. So, real estate builders and developers in the country are wooing these people. There is another advantage that helps builders and developers in this sector, and that is the ease with which home loans are being extended to the people.

If you have a good repayment capacity, you can own a house or an apartment of your own in the next couple of years. This is because more and more lending institutions are extending home loans to the people at affordable rates. And this is essentially one of the aspects the builders and developers are banking on.

Low cost housing in India offer housing options

Since real estate builders and developers in India are building housing projects in different cities and of different categories, you can choose your option depending on your requirement and budget.

Constructing low cost housing in India

There are 2 ways in which low cost homes and middle income group can be helped out. It has been observed that builders and developers either undertake housing projects that are entirely meant for the LIG or MIG or undertake housing projects which cater to all income groups. For instance, if a real estate builder constructs apartments and independent villas in a particular area, he can build housing units of different budget.

It is like having HIG, MIG, and LIG dwelling units under one banner or under one flagship company. So, the builder may have housing units ranging from 1 BHK to 4BHK etc. Majority of the residential projects have a market place, small hospital, health check-up clinics etc. In this way, these facilities can be availed by all and sundry.

A latest trend that is being observed in the housing market is that more and more realtors are trying to use energy efficient materials in their projects. Prior to buying low cost homes in India, it is important to find out whether they abide by the construction guidelines and safety requirements.

India has 46.7 million high income households as compared to 41 million in the low income category, the National Council of Applied Economic Research (NCAER) estimates on Earnings and Spending have revealed.

"For the first time, the number of high income households is set to exceed the number of poor households in 2009-10," the NCAER said, adding that the middle income class continued to grow.

Households earning less than Rs 40,000 per annum (at 2001-02 prices) are dubbed as low income, whereas those with earnings over Rs 1.80 lakh fall in the high income category.

Those earning between Rs 45,000-Rs 1.80 lakh per annum are considered middle income households, whose number surged to 140.7 million out of the total of 228.4 Indian million families at the end of 2009-10.

Thus, the NCAER survey confirms that 62 per cent of Indian households belong to the middle class, which is the target of most consumer goods firms.

"The wheel of fortune continues to spin in India, with each level of household income set to move a notch higher by the end of the decade," the survey on spending and earning patterns since 1985-86 said.

The Indian economy grew at above 9 per cent between 2005-06 and 2007-08. After slowing down in 2008-09 and 2009-10, it is projected to expand at 8.5 per cent in the current fiscal.

The data shows how the country has come a long way in the last 10 years in raising the income standards. In 2001-02, out of the total of 188.2 million households, the number of high income families was only 13.8 million, whereas those in the low income category stood at 65.2 million.

Referring to the middle class, the study said, "Their growing clout becomes even more apparent when one looks at the ownership patterns of households goods. Nearly 49 per cent of all cars are owned by the middle class, compared to just 7 per cent by the rich."

Similarly, 53 per cent of all air conditioners are owned by middle class homes and nearly 46 per cent of all credit cards are to be found in these households.

Indian Budget 2011: Raising the priority home loan limit from Rs 20 lakh to Rs 25 lakh is good news for the low-income group segment.  This will boost the affordable housing segment. However, this will not benefit the home buyers in metropolitan cities.

The interest subsidy of one per cent on housing loans of up to Rs 15 lakh will boost low-cost housing.  The subsidy is for homes worth not more than Rs 25 lakh. Earlier, the interest subsidy was for loans up to Rs 10 lakh for houses costing not more than Rs 20 lakh. However, this will not benefit the home buyers in metropolitan cities.

However, this will not benefit the home buyers in metropolitan cities like Mumbai and Delhi as there are hardly any properties available for Rs 25 lakh. But in small cities, this will boost the affordable housing segment.

‘‘Raising the priority home loan limit from Rs 20 lakh to Rs 25 lakh is good news for the low-income group segment, but will do nothing to ease the pain in metropolitan cities where realty prices are high, and therefore demand for affordable housing is the highest. Companies rolling out budget housing will be benefited.