India’s Affordable Housing Offers US$ 0.62 Trillion of Funding Opportunities

Knight Frank, in its latest report “observes that for private funds in the backdrop of the government’s push for this segment. The affordable housing sector in India has witnessed private equity (PE) investments to the tune of US$ 2,597 mn since 2011[2]. The investment in affordable housing has been 17% of the total PE investment in the residential segment in India in the last 10 years (since 2011), mentioned the report. However, it is yet to become a major theme for the funds in the country with a very few private equity funds dedicated to funding affordable homes. The report was launched during the ongoing APREA - Asia Pacific Real Estate Leaders Congress 2021 currently being held (November 22 - 26, 2021) during the session - Affordable Housing - Long Term investment. Gulam Zia, Senior Executive Director – Research, Advisory, Infrastructure and Valuation, Knight Frank India said, “The PE investments into affordable homes has increased since the introduction of reforms in the sector. The presence of a few large funds dedicated to financing the affordable housing projects signifies the potential of the segment. However, a significant portion of this investment into affordable housing segments is in projects for the mid-income segment and very little has been invested in constructing of the EWS and LIG segments, where the actual housing shortfall is.” As per Knight Frank Research, currently, over 50 per cent of all-India residential launches in the top eight cities in the last five years have been in the Rs 5 million segment. The real estate sector has been suffering from a slowdown for quite some time now. The depressed market condition has impacted property sales and corresponding prices too. Amidst slowdown in the marketplace, affordable housing is one of the segments which are attracting attention of all stakeholders, viz. developers, financing companies, investors, policy makers as well as end customers, primarily due to the opportunity the segment presents on account of large unmet demand. However, give the sheer gap in demand-supply, one would assume that every private player would want to venture into this sector but the high land costs, archaic building bye laws, stringent licensing norms, delay in project approvals and unfavourable banking policies make affordable housing projects uneconomical for the private equity players and developers.