By Mr.
Sachin Agarwal, CMD - Maple Shelters
Affordable
housing is not only essential to the well-being and health of the people but
also for the smooth running of economies. Yet all over the globe, in advanced
and developing economies alike, a majority of the cities are struggling to give
their citizens decent, affordable housing.
Given
the rapid rate of urbanization being witnessed all over the world, coupled with
the far less impressive rate of income growth at the lower levels of the social
pyramid, we are presented with a rather gloomy picture.
Over
the next ten years, the number of people who are seriously challenged by urban
housing costs and will continue to inhabit substandard housing is going to rise
exponentially. Throughout, India will continue to figure among the most
housing-challenged nations unless the new government delivers on its electoral
promise to make housing for all a reality.
The
difference between what most households can afford to pay for a home without
spending more than 30% of their income and cost of an acceptable normal housing
unit is called the affordability gap.
 |
| Sachin Agarwal, Maple Shelters. |
Needless
to say, the affordable urban housing gap will only increase as urban
populations grow. Currently, trends indicate that the next 10-12 years will see
the arrival of over 106 million more low-income urban dwellers globally.
This
trend gives rise to a serious question - how can the affordable housing gap be
bridged? What are the means available to governments to achieve faster delivery
of such homes? There are four primary approaches to handle this problem, all
centered on lowering the cost of construction, land, financing, operations and
maintenance.
Implemented
individually, each of these approaches can significantly decrease the
affordable housing gap in a country like India. However, if implemented
simultaneously and in tandem, they can reduce the cost of affordable housing in
the country's urban areas by 35% to 50% and substantially decrease India's
affordable urban housing gap over the next ten years.
·
Unlocking Land Supply..!
Unlocking
land supply is the primary and most vital aspect, because land is the largest
expense in real estate. Making existing land in strategic urban locations
available for development of affordable housing is not as complicated as it may
seem. In fact, it is not a question of availability at all but merely one of
greater will at a government policy level.
In
India's primary cities, as in many of the largest cities anywhere in the world,
many significantly large parcels of land actually usually remain underused or
unoccupied. Most of such land belongs to the government or the local
authorities and could be sold to purchase other lands for affordable housing,
or released for development of such housing.
In
cases where such land parcels belong to the private sector, it can be brought
forward for affordable housing development through various incentives such as
density bonuses (increasing the allowed floor space on a particular plot of
land and therefore increasing its value, in return for which the owners must
provide the land for affordable housing projects.)
·
Reducing The Cost Of Construction..!
While
the manufacturing and other related industries have increased productivity
consistently in the past few years, output in the construction sector in India
and also most other countries has gone down or stagnated. Also, residential
projects are still built using the same techniques that were used five decades
ago.
The
costs of housing projects development could be reduced by over 30% and the
completion time shortened by over 40% if more developers start using the latest
construction methods and standardized project designs (for instance, assembling
housing structures from prefabricated components manufactured off-site).
Process improvements such as efficient procurement methods would help, as well.
·
Improved Maintenance & Operations..!
Upto
20-30% of housing costs go into maintenance and operations. Energy-efficient
retrofits such as new windows and insulation can cut down these costs.
Maintenance expenses can also be reduced if more developers tie up with
qualified suppliers (through licensing and registration) and through
consolidated purchasing.
·
Lowering Financing Costs..!
Lowering
the financing costs for real estate developers and buyers can go a long way in
helping banks and financial institutions to safely make and sell more home
loans to lower-income earners.
Programs
such as contractual saving schemes aimed at helping people with lower levels of
financial discipline towards saving would assist low-income housing buyers to
accumulate the corpus needed to make down payments on a home, making it possible
for them to service smaller home loans. Such programs can also be used to
provide capital with low-interest mortgages to most savers.
The
Indian governments also needs to step in to cut down the financing costs for
developers of affordable housing by reducing the risks associated with housing
projects and making them more affordable — for example, by guaranteeing tenants
or buyers of completed units.
It
is certainly true that the policy aspects of this four-pronged approach towards
taking affordable housing from the level of electoral mandate to ground reality
is already being seriously examined by the new BJP government.
However,
only an approach that assimilates all four solutions into unified
implementation will be able to make a visible dent in India's affordable
housing shortfall.
About
The Author:
Sachin
Agarwal is CMD of Maple Group (founded in 1997 as Goyal Constructions) whose
mission is to provide genuinely affordable housing to the common man without
compromising on quality and amenities. Maple Group’s ‘Aapla Ghar’ initiative
has seen unprecedented success.
The
Group now has unique welfare housing projects, other residential projects and
commercial projects in 30+ key locations in and around the city of Pune
Maharashtra, India. With the 'smart plotting' offering Aapli Zameen, Maple
Shelters has enabled real estate investors to acquire developed plots near Pune
at attractively affordable rates.
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