India's housing market lacks affordable housing options, claims BCD Group's Vice-Chairman Ashwinder R. Singh.
Affordable Housing in India: A Critical Challenge and Proposed Solutions
In a recent address, Ashwinder R. Singh, Vice-Chairman & CEO of BCD Group and Chairman of the CII Real Estate Committee, highlighted the challenges and proposed solutions to address the shrinking supply of affordable housing in India.
Challenges:
- Shrinking Affordable Housing Supply: Despite a significant housing shortfall, developers are moving away from homes priced below Rs. 50 lakh due to tighter margins, heavier regulations, and a stigma within the industry. This has led to a decline in affordable housing launches and a decrease in sub-Rs. 50 lakh unit sales.
- Cost and Economic Feasibility: Rising costs of land, construction materials, labor, and compliance make affordable housing projects economically challenging. Developers struggle to achieve viable margins, causing a structural shortfall in supply rather than a cyclical one.
- Policy and Regulatory Delays: Lengthy approval processes delay affordable housing projects, increasing costs and reducing incentives for developers to pursue them.
- Stigma and Perception Issues: Affordable housing is often seen as less prestigious within the sector, discouraging developers from investing in this segment.
- Limited Reach of Housing Subsidy Schemes: Programs like the Credit Linked Subsidy Scheme (CLSS) do not fully reach the Extremely Weak Section (EWS) due to issues like lack of documentation and credit visibility, reducing their impact on affordable housing demand.
Proposed Solutions:
- Policy Reforms with Clear Timelines: Singh advocates for a "Taxpayer Bill of Rights" for real estate developers that includes clear timelines for approvals and penalties for delays, aiming to streamline regulatory processes and reduce project time and costs.
- Financial Support & Ring-Fencing Debt: Lenders and investment funds should allocate a portion of their real estate financing towards the affordable housing segment, specifically targeting homes priced between Rs. 15-50 lakh, to improve capital flow to developers.
- Reframing Affordable Housing as a High-Impact Sector: Emphasizing its social mobility benefits, job creation, and community upliftment could help improve industry perception and public policy focus.
- Enhancing Project Innovation and Quality: Developing affordable housing as modern, sustainable communities that are electric vehicle (EV)-ready, climate-resilient, and digitally connected could attract demand.
- Supporting Land Access and Pricing Controls: Stronger government support through subsidized land provision, capped sale prices, and mechanisms to prevent speculation on affordable housing units is necessary to improve project feasibility and curb costs.
- Fiscal Incentives and Tax Rationalization: Provision of subsidies, reduced stamp duties, lower land costs, and reinstating input tax credits could enhance project viability and reduce overall housing costs.
- Promotion of Innovative Construction Technologies: Using technologies like Mivan (pre-engineered structures and prefabrication) to improve construction efficiency and reduce timelines and costs.
Singh emphasizes that affordable housing is critical to urban productivity and social equity, warning that neglecting the "bottom rungs" of India’s housing ladder traps families in rental stress and exacerbates urban sprawl. Structural reforms in cost management, financing, policy, and perception are imperative to restore profitability and dignity to affordable housing development in India.
The market continues to signal strong demand for affordability, with 73% of incremental urban housing demand sitting below the Rs. 50-lakh mark. The share of homes priced under Rs. 50 lakh fell from 63% of new launches in 2019 to just 47% in 2023, before plateauing. Developers are urged to rethink affordable projects as modern communities, EV-ready, climate-resilient, and digitally connected. Even in seven major metros, sales of units priced below Rs. 50 lakh declined by 14% in 2024.
- The shrinking supply of affordable housing in India is a result of developers moving away from homes priced below Rs. 50 lakh due to tighter margins and a stigma within the industry, as highlighted by Ashwinder R. Singh, Vice-Chairman & CEO of BCD Group.
- Financial support and ring-fencing debt, specifically targeting homes priced between Rs. 15-50 lakh, are proposed solutions to improve capital flow to developers and address the economic feasibility challenges in affordable housing projects.
- Rising awards and recognition for real estate developers who focus on affordable housing could help reframe the sector as a high-impact industry, improving the industry's perception and public policy focus on affordable housing.
- To enhance project viability, the government could provide fiscal incentives like subsidies, reduced stamp duties, lower land costs, and reinstating input tax credits for developers working on affordable housing projects.
