Realty Check | Day 11 | Rahul Nahar: Smart Cum Affordable Housing is Need Of The Hour

21 Aug,2014

By Rahul Nahar
Managing Director, XRBIA Developers Ltd


The global real estate sector has changed significantly and India is no exception and the real estate market witnessed a contraction in both volume and value.


Real Estate developers were gripped with the liquidity crisis and were forced to change the ways of doing business. This familiarized the developers to focus on the Affordable Housing segment, which has become the buzzword in the real estate market for the last few years. Also, the urban population will diversify in the years to come. This creates a concern for need of affordable housing in the urban areas including Mumbai.


The significant demand in Affordable Housing would be a key growth driver for the real estate sector. Affordable Housing defines itself in three key parameters viz. income level, size of dwelling unit and affordability.


Prior to the crisis, developers bought land with part-payment and launched projects; this meant regular cash flows from upfront payments was required to fund chain of projects. The developers continued with this practice and acquired huge land parcels by leveraging their balance sheets.


As per the reports shared by United Nations Department of Economic and Social Affairs, it states that there will be rapid growth in India, China and Nigeria for Smart cum Affordable Housing.


Mumbai being the sixth most populated city with a population of more than 21 million, Affordable Housing concept applies more for them as presently, 54% of global population resides in urban areas, which is expected to increase to 66% by the year 2050.


The Reserve Bank of India’s recent policy announcements on affordable housing are an excellent fillip to the housing sector. But by giving such benefits to any house priced under Rs 50 lakh, they have ensured that the Middle Income Group homes will be as protected as Low / Economically Weaker Section homes, as a result of this, it gives no incentive to builders to build affordable housing.


There is huge demand for more affordable housing projects all over India with each unit priced less than Rs 20 lakh. This is especially true in the Mumbai Metropolitan Region in the far northern edges of Mumbai such as Boisar, or the eastern suburbs like Thane, Kasara, Shahapur and the eastern Mumbai district areas of Khopoli, Karjat, Vangani, Neral and Shelu.


Despite a setback in figures, Mumbai has led the affordable segment. Karjat, Palghar and Boisar in Mumbai have multiple on-going projects catering to low income groups. In Karjat of Eastern Mumbai District alone there are around 80 such projects.


The real estate companies are now uniquely designing to optimize living spaces and offer a solution that addresses the needs of an ever-growing population.


The contemporary design adopted in the affordable housing, features solutions to two of today’s most challenging problems: how to conserve space and help save the environment.


Issues of Concern

The key supply constraints for affordable housing are as follows:


:: Availability of Land price at which its available

India needs to answer going forward is with respect to adequate supply of land for housing purposes. The Government’s vision of “Affordable Housing for All” will require acquisition / supply of large land parcels on a regular basis.


Given limited availability of land in urban areas, it becomes unviable for developers to provide affordable housing without Government support.


:: Financial and Regulatory Support:

Financial and regulatory constraints have plagued/ inundated the housing sector in India. Commercial banks and traditional means of housing finance typically do not serve low-income groups, whose income may be vary with crop seasons, or is below the ‘viable’ threshold to ensure repayment, or who cannot 6 provide collateral for loans . Microfinance institutions are considered to be the next best alternative to for financing the Low / Economically Weaker Section category. However, there are challenges faced by microfinance institutions which prevent them from extending housing loans. According to CREDAI, real estate also faces multiplicity of taxes at different points of housing transactions and average to a little over 25 percent of the property rates.


:: Easy financing and subsidised interest rates

:: Also increase of FSI for projects falling in this category gives the economies to reduce the cost.



Affordable Housing is expected to have a positive by improving basic quality of life. Problems like traffic congestion, air quality, commute times, etc. can be resolved by providing proper housing facilities to the weaker sections of the society. While the concept of affordable housing seems to be a simple solution to current housing woes, its execution remains complicated due to the unclear policy framework. To make affordable housing work in India, it would require “will” from all the stakeholders by slightly adjusting their interests towards a wider social cause.



Media Reports, KPMG report On Affordable Housing


Coordinated by Shobhana Nair


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