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Affordable Housing Concept in India

New Era of Affordable Housing

The Definition:affordable housing

The simple meaning for affordable housing is a house that a person can afford. There is no as such tool to measure affordability. The price or the cost of real estate cannot be fixed or standardize. Most of the people have a misconception that an AH is a cheap or low cost housing. The affordability is different for every person. In Indian market, the term “affordability” varies with different demographics, socio-economic structure, income and spending capacity etc. For every section in the society, the median household income is different, so the affordability is different. Keeping this in mind, the cost of the AH is kept under the median household income of every section in the society.

Why is it important?

Affordable housing concept especially designed for the economical weaker section (EWS) and low income group (LIG) who always want to own their own house with security and comfort. The criteria for these categories are, if the annual household income is up to Rs. 1 Lakh comes under EWS and if the annual household income is Rs. 1-2 Lakhs comes under LIG category. Earlier, these categories did not have much attention to their needs while talking about real estate development in the country. Government of India have thought this seriously and understood that these two categories hold a thickest part in the economy; therefore, a low cost housing which these two sections can afford can make a difference in the economy. Also, it can be a boost to the real estate sector. AH concept is going to be the next big thing in India in coming years.

Initiative by Government of India

The Prime Minister of India Shri Narendra Modi has announced “Housing for all by 2022” mission. Every section of the society will get benefits under this mission. There are lots of schemes which have been announced. Government grant of Rs. 1 Lakh on average for slum rehabilitation program. Besides this, an interest subsidy of upto Rs. 6.5 percent has been granted for availing a housing loan under credit link subsidy scheme (CLSS).

The snapshot of eligibility criteria for the CLSS

Income Group
Family Income
Interest Subsidy
Carpet Area Max
Loan Tenure
Max Subsidy
EWS
Upto Rs. 3 Lakhs
6.5%
30 sq. m.
20 years
Rs. 2.67 Lakhs
LIG
Rs. 3 – 6 Lakhs
6.5%
60 sq. m.
20 years
Rs. 2.67 Lakhs
MIG I
Rs. 6 – 12 Lakhs
4%
90 sq. m.
20 years
Rs. 2.35 Lakhs
MIG II
Rs. 12 – 18 Lakhs
3%
110 sq. m.
20 years
Rs. 2.30 Lakhs

Affordable Housing for Middle Class

Measuring affordability for EWS and LIG is easy; but, measuring affordability for middle class is quiet challenging. This section of people is more in number and a vast range of their household income. The definition is very much confusing for middle class. The average budget for buying home in this section is Rupees 30 to 50 lakhs. The problem arises here. This budget is decent for owning a home in the outskirts of the city and people can have a decently sized home in this budget; however, this section does not want to go to outskirts and they want to live within the city. The budget becomes low for owning a home inside the city boundary. Only AH concept can make this possible that middle class can own their home in the city and within budget. CLSS scheme also applied to MIG segment, so a discount of interests also makes it easier to get a home within the budget.

Is affordable housing really cheaper?

This is a misconception that an affordable house is very cheap in price. There are some basic difference between a normal housing and AH. Firstly we have to understand that a developer cannot offer housing to customer with a loss. There are certain calculations by which the pricing are prepared with some compromise in size and other amenities but not compromising the quality of materials. The question is, then how the AH is priced lower than a normal housing? The AH gets sold out within a short time due to pricing whereas it gets long time for a normal housing and sometimes, in the current real estate scenario, the units remain unsold after completion. To cut cost, the unit size (flats) is also made smaller for making it affordable.

To conclude, it is to understand that one cannot expect a big home with modern facilities and amenities within budget in the centrally located place. Everyone wants these criteria. Buying an affordable house can get you all this with little compromise like a relatively smaller unit but decent size and unavailability of some of the amenities.

Written by: Arnab Ray

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