Home ownership out of reach for most Indians

Gufran Shefi, 38, a bar supervisor in Mumbai, believes he is unlikely to ever own a home.

“As per my salary, it’s not possible for a person like me to buy a house in Mumbai,” he says.

He earns about 20,000 rupees (Dh1,179) a month. He rents a 225 square feet one-room apartment for 8,000 rupees a month in the suburbs, where he lives with his wife and baby.


“It’s difficult for me to manage with all the daily expenses,” he says. “By the end of the month your pocket is completely exhausted. There’s not a single rupee left.”

If there were more affordable homes on the market he could stand a chance of buying, he says.

There are millions of Indians who earn far less than Mr Shefi. For them buying a home is an even more distant dream.

With a population of more than 1.2 billion and amid rapid urbanisation, the demand for affordable housing is growing – yet there is a severe shortage of such homes. This forces many in cities including Mumbai, New Delhi and Bangalore into slums, onto the streets, into heavily overcrowded developments or into poor quality and makeshift homes.

“Several structural issues such as high gestation period of housing projects, limited and expensive capital, spiralling land and construction costs, high fees and taxes, unfavourable development norms and low affordability by the economically weaker section and lower income group households are bottlenecks restricting desired growth in housing stock in India,” according to a recent report by the consultancy KPMG.

India’s urban population is expected to grow by 10 million a year until 2050, KPMG says. Narendra Modi, the prime minister, has made an ambitious promise to achieve “housing for all by 2022”. It could require US$2 trillion of investment to achieve this goal and 110 million new homes to be built, KPMG forecasts. Seventy per cent of the urban housing need is in the affordable segment, it adds.

In Mumbai, low-income workers and even middle-income professionals struggle to buy homes in the city, as prices have skyrocketed in recent years.

Many of the large developers in Mumbai have focused on upmarket residential projects to secure better returns amid high land and construction costs.

But HDIL, a major developer based in Mumbai, is aiming to build realistically priced properties. It is planning to build what it describes as “the largest affordable township the Mumbai metropolitan region has ever witnessed”.

Called Planet HDIL, the project is expected to be spread across 550 acres in Virar, in the northern part of the city. It will be launched in May and is expected to be completed by 2023. These homes will be priced at about 4,000 rupees per sq ft and target professionals.

The developer says that the average monthly family salary of the targeted households would be between 40,000 and 50,000 rupees a month. The average monthly salary for a software engineer in Mumbai is about 26,000 rupees a month, according to payscale.com.

“Every year Mumbai has an inflow of educated professionals and skilled workers who dream of making the city their home,” says Hariprakash Pandey, the senior vice president of finance and investor relations at HDIL. “Today, it has become tough for the professionals to buy houses in Mumbai.”

A number of factors are holding back builders from constructing lower-cost homes, he says.

“A lack of clear focus by the planning authorities is the key reason for the shortage of affordable housing for weaker sections of the economy,” he says. “The government should encourage more participation from the private sector in affordable housing through better incentives. For example, in a city such as Mumbai, apart from slum rehabilitation projects, the government is not encouraging much of the private sector to build affordable houses for the economically weaker sections of the society.”

One of the biggest challenges for developers is long delays in getting approvals from authorities for projects, resulting in rising construction costs, which are then passed on to the homebuyer, Mr Pandey adds.

“Some of the laws and by-laws that govern the approval process are archaic and need to be updated.”

Other obstacles include a “lack of effective programmes for the economically disadvantaged and surplus non-marketable land held by government institutions such as the railways and ports, which restricts the availability of land for development”, he says.

Tata Housing, which is part of the conglomerate Tata Group, claims it is ploughing ahead with developing affordable homes “despite the numerous challenges facing the affordable housing segment”, amid “latent demand” for budget homes, says Brotin Banerjee, the managing director and chief executive of Tata Housing.

It is developing four townships under its Tata Value Homes brand in Boisar, Vasind, Ahmedabad and Bangalore.

However, prices for its apartments are anything but affordable for people such as Mr Shefi, starting from almost 1.3 million rupees in Ahmedabad for a studio apartment – more than five-and-a-half times his yearly income. To put that into perspective, the average home price-to-income ratio in the United States is 3.0.

Despite his company’s prices, Mr Banerjee is optimistic for the industry’s future. “The government’s plan of providing housing to all is a great opportunity for the developers to tap the market potential of providing affordable homes to the aspirational middle-income group buyers through a public-private partnership mode,” says Mr Banerjee.

Value Budget Housing Corporation (VBHC), based in Bangalore, is also building what it terms affordable housing projects in Bangalore, Mumbai, the Delhi region and Chennai. These are priced between 1 million and 2.5m rupees.

The company has planned the homes with Indian expatriates working in the UAE – who earn higher salaries than those who work in India – in mind.

“We get about 8 per cent of customers from the UAE,” says PS Jayakumar, the managing director and co-founder of VBHC,.

“But this can easily go up to 25 per cent to 30 per cent – there’s a lot of headroom here. We want to now reverse engineer the process by looking at residents in Dubai and trying to work out what locations would suit them more and then try to build developments in those areas, so that our projects have a high degree of relevance to our customers.”

Analysts explain that the government’s target of housing for all by 2022 would require a great deal more clarity of execution and planning to be achieved.

“To state that this is an ambitious objective is perhaps an understatement,” says Anuj Puri, the chairman and country head of JLL India. “Without a clear road map in place, it is likely to remain unachievable.”

Adding more homes on a large scale “will require not only sustained government interest and investment but also substantial private sector investment and involvement”, he adds.

“The slogan has to move from the drawing board to an actionable plan in which stakeholders at each level are clearly identified and made accountable for facilitating real, ground level development of low-cost housing.”

But there are a number of issues that need to be resolved “before the private sector will be a willing partner in this initiative”, Mr Puri says.

“The problem is not merely a function of making land available and increasing the floorspace index to incentivise developers undertaking low-cost housing projects,” he explains.

“There is a need for systemic change in how the government perceives the entire issue of housing for the urban poor. Regulatory changes, faster approvals, removal of red tape and resolution of land litigation issues need to be adequately addressed to improve stakeholder participation. Suitable fiscal incentives to the private industry as well as financial support through cheaper industry loans will also be required to ensure healthy participation.”

Robert Gomes, 44, a bar and restaurant manager from Mumbai who earns about 40,000 rupees a month, managed to buy a property in a government housing development in 2001 for 400,000 rupees. It is a cheaply constructed 300 sq ft house with an asbestos sheet roof in an overcrowded area. But it is now worth more than 10 times what he paid for, he says. He lives there with his wife, three children and his mother.

“I wouldn’t be able to afford to buy the same property today,” he says. “The banks won’t give me any loans because I’m paid in cash and don’t have any records of my salary.”

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