Affordable housing for the middle class

Affordable housing, though a widely-used term in India, actually means different things to different sets of demographics. The definition of ‘affordable’ is heavily influenced by the socio-economic variables that drive a certain city or location. For the Indian market, affordable housing would usually refer to residences which are designed for the economically weaker section (EWS) of society, so that they can enjoy the comfort and security of self-owned homes as much as the middle class. There is no doubt that economically weaker section in India did not get the required impetus in earlier years. However, with the current government coming into power, it has been made clear that a significant change is being aimed at. The EWS is also India’s thickest part of the income pyramid and being the base of our economy, their requirements and living standards need to be taken seriously. We are now seeing visible progress on this front. The BJP government has undertaken several initiatives to boost re-development of older buildings while supporting high-grade infrastructure for the peri-urban locations. The objective is that the working population should not have to move out of their city to go to work every day. Commute time and accessibility has been a key factor behind the development of low cost housing in the land parcels located on the periphery of cities. But affordable housing also has a larger ‘local’ meaning – namely, housing which is affordable to the largest segment of potential home buyers in a city. The target buyer base for affordable housing in a city can be that section of the local population which, though not economically challenged, is nevertheless sensitive to high budget overruns. Such buyers have sufficient budgets not to have to live on the extreme outskirts, but are still challenged to find homes that are affordable to them. In other words, if there is a deficiency of new properties in city locations for buyers whose budgets do not exceed Rs. 30-40 lakh, a city is suffering from an affordable housing deficit even if it has a massive supply of homes priced within Rs. 20 lakh on the extreme outskirts. Buyers who can afford to spend more than this will not consider moving their families to the peripheries, yet the available options in better locations exceed their budgets. If a large part of a city's working and earning middle class cannot afford to buy good homes, there is a dearth of affordable housing. Projects like AEHL's Colori, which offers fully-loaded 1 BHK flats for an all-inclusive price of Rs. 28.9 lakh in Pune’s Undri are aimed squarely at meeting this demand. However, more developers must step in to provide such budget housing where it is needed the most in India’s larger cities. There is sufficient business rationale for affordable housing projects, which have consistently seen high rates of absorption. Affordable housing is indeed a positive solution not only for the socio-economic growth but the real estate business too. The demand is exceptionally high, and developers who have stepped into this realm of real estate development will be able to sell their projects for years to come. While a lot of work and policy-driven growth is still needed in the affordable housing segment, it is nevertheless proving to be the most sustainable business model for the industry. Developers of such residential projects will never face the impacts of inflation or other economic setbacks. The demand for affordable housing has been constantly growing irrespective of the economic conditions. Another direct implication of the growing demand of affordable housing is the rising interest from real estate investors. More and more investors are now putting in their money into budget homes, attracted by the healthy demand. These factors clearly indicate that affordable housing as a business vertical has stood the test of time, even as costlier luxury homes segment are facing a hard time in the current scenario. Builders who have tasted success by proving much-needed affordable housing are therefore encouraged to cater even more to this segment. In short, affordable housing is both an excellent way of leveraging brand value but also a means of ensuring immunity to market slowdowns.