Affordable housing projects in India: productivity loss centres?

May 30, 2013 / By  

These days, affordable housing has become a crucial instrument in India’s inclusive development agenda and is adding a new chapter to the country’s real estate story. The growth in affordable housing is attributed mainly to the large population base, the large proportion of middle and lower income population in society and the increasing number of nuclear families.

Developers of the country’s affordable housing sector face significant challenges due to several economic, regulatory and urban issues. The lack of availability of urban land, the rising threshold costs of construction and regulatory issues are supply-side constraints that affect the availability of low-income groups to buy housing in the organised sector.

Although there are many constraints to the development of affordable housing projects, there are many developers, such as TATA Housing, HDIL and Provident Housing, which are active in the segment. As a result many of the end-users have realised their dream of home ownership, but most of the affordable housing projects developed in India are far away from industrial and commercial hubs. Due to high land prices, cities offer land parcels for such developments away from the city. Mumbai and the National Capital Region (NCR) have projects located 65-75 km away from the city centre. In Ahmedabad and Kolkata, projects are located 20-25 km from the city centre. Bangalore, Pune and Chennai have projects 25-35 km from the city centre.

The travel time required to reach places of work from affordable housing projects is getting worse instead of better. In the case of Mumbai, the time required for one-way travel to a place of work from an affordable housing project is three hours, while in the NCR, Bangalore and Chennai it is two hours and in cities like Pune, Hyderabad and Kolkata, one to one and a half hours. As a result of wastage of person-hours during travel to places of work, it is estimated that the country lost employee productivity valued at about USD 7.9 billion in 2012, a figure likely to reach USD 31.0 billion in 2015, as many such projects are likely to be delivered during 2013-15. Mumbai, NCR-Delhi and Bangalore have the greatest market share of the total productivity loss, as the travel time required to reach places of work is greater in these cities, followed by Chennai and Hyderabad.

Productivity loss due to travel time from affordable housing projects to commercial/industrial hubs

Source: Jones Lang LaSalle

City-wise Percentage Share of Productivity Loss during 2012-15

Source: Jones Lang LaSalle
* Loss of person-hours due to travel to places of work from affordable housing projects
** Jones Lang LaSalle Forecast

A concerted effort is required by the government to reduce the productivity loss and to facilitate mass development in this sector. This includes forcing the development of affordable housing by reserving land closer to commercial and industrial hubs exclusively for affordable housing. Bylaws for such projects should be changed in terms of providing higher Floor Space Indexes (FSI)***, subsidies, tax benefits and planning support. On the other hand, the demand-side subsidies include housing loans being made available at low interest rates to the lower income sections of society.

***FSI refers to the total built-up area in proportion to the plot area

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