Infra: a catalyst for affordable housing?

September 8, 2016 / By  

One of the major initiatives taken by the Modi government is to promote housing for all by 2022. India has a shortage of 18.8 million urban homes for the 12th five-year plan (2012-17) period[1]. This includes housing the economically weaker and lower income groups, an area where developers hardly focus due to low margins. If we were to translate the affordable housing initiative into actionable targets, it would involve the construction of close to 2 million homes every year. Compare this with the actual delivery of 1.2 million homes annually during the 11th five-year plan period (ending March 2012), and one would realise that the target appears formidable.

Raising the targeted delivery of central / state housing boards may not be a clever move given the lack of availability of large land holdings with such agencies and their relatively slack delivery track record. One effective alternative appears to be the expansion of the infrastructure network, thereby opening up new and relatively cheaper land parcels for real estate development that will attract private participation.

Homebuyers, typically, prefer to stay closer to locations near established commercial developments that also have good social infrastructure. An alternative for those who may not have the affordability is to look for locations that have good connectivity to the more established sub-markets. Often, such affordable housing options have skipped established locations and have come up in sub-markets that do not have adequate trunk infrastructure.

In our recently released research report titled “Indian Real Estate: Coming to terms with varying speeds of growth”, we studied 30 infrastructure projects that became operational in recent years across the leading seven cities. Although new airport projects are considered as catalysts for opening up new areas in city peripheries, they may not guarantee the development of affordable housing because their gestation period is huge and connectivity to existing established locations improves only gradually. By that time, speculative activity already makes the location relatively unaffordable. On the other hand, projects such as the metro rail, ring roads & highways, etc. offer improved connectivity to the existing city establishments and are more suitable to the immediate needs of the budget-conscious homebuyer.

In this context, the following table identifies seven ongoing infrastructure projects (one in each of the top seven cities) that have the potential to promote affordable housing –


As per the above table, locations that promise affordability offer prices that are nearly half those of the more established markets in their proximity. Given that prices in these newly connected sub-markets will also rise gradually, it is important that new infrastructure creation must be made a sustained practice by the local authorities.

Both affordable housing and infrastructure development are mandates of the government, although the creation of the latter in a focused, time-bound and consistent manner can spur the former too.

[1] According to the 2012 report of the Technical Group (Ministry of Housing) on the urban housing shortage

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