Challenges And Opportunities In Affordable Housing In India - Magnolia Realty
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Challenges And Opportunities In Affordable Housing In India

22 Jun 2020

Witnessing the coronavirus pandemic in India, many sectors such as hospitality, real estate, auto industry and others bear the brunt of slacked growth in the last two months. If we talk about real estate, the hardest hit is the luxury segment where the experts’ prediction is to suffer a dip by 15-20 per cent. The pandemic can cause steep job losses and pay cuts, subsequently leads to a demand crunch for luxury properties. However, the affordable section is still in the demand because people are looking for houses even in the cash crisis because many of the rented householders have realized the value of owned homes during the crisis. People have faced the problems of unwarranted restrictions imposed by tenants, an urge for asset creation, low return in conventional investment tools such as equity market, interest cuts in government savings etc. and thinking of a long-term secured investment.

The affordable housing sector has witnessed significant growth in the last two years because of continuous demand as well as the government’s initiative like Pradhan Mantri Awas Yojana (PMAY). Covid-19 crisis has changed the dynamics of the affordable housing segment and new challenges have emerged. On the other hand, there are many opportunities for the growth of the sector and industry should be optimistic about those aspects.

Challenges for Affordable Housing


Pressure on Existing Infrastructure

According to studies, urban India will witness a huge surge of people and demand for homes will exponentially rise by 2031, a whopping 59% growth over 2011. An increasing number of urban people are looking for homes, which will bring pressure on the existing infrastructure.

The lack of housing options for LIG section, coupled with limited income and minimal access to home finance for income borrowers lead to a cramped and poor living. If the problem is not addressed properly and quickly, it will aggravate the proliferation of unplanned and unsustainable urbanization.

Ease of Land Availability

It is important to regularly release land parcels from the government to promote affordable housing projects. It can be identified within blocks and municipal limits and bring more peripheral lands into developable limits of the city authorities.

Being Innovative yet Mass Production Difficult

To minimize construction costs, many developers use creative engineering design and incorporate innovation into the engineering process. It is quite effective but it is very much applicable to a single home or at least a small residential community. It is far more challenging to implement innovation on the scale of hundreds and thousands of homes.

Investment in Ancillary Infrastructure

The government emphasizes on land parcels but this cannot be the only thing that would facilitate affordable housing. There is an equal need to focus on providing the necessary connectivity and social infrastructure. This will allow these affordable housing projects to develop as habitable and vibrant communities.

Strengthen Micro Finance

The financial help is needed and promulgated to improve the institutional environment for the lower-income categories to access housing microfinance and other financial tools. Mostly low-income buyers seek credit to buy homes, and these microfinance institutions will help them in their loan approval processes.

Opportunities for Affordable Housing Sector


Government Support for Affordable Housing

The Government of India has proposed an objective of achieving 2 crores affordable houses over a period of 7 years. These houses are targeted for lower-income group and for this effort they have come up with PMAY (Pradhan Mantri Awas Yojana) scheme. This support is crucial for developers who are focused on affordable housing projects.

PPP in Affordable Housing Sector

Public-Private Partnership (PPP) is crucial for the progress of affordable housing projects. The stakeholders are diverse including central government, state government, private developers, financial institutions, urban planners and urban dwellers. Thus, there is a vast opportunity for the expansion and subsequently, gain for private as well as the public sector. Private sectors play a significant role in producing planning and design, project development, technology, human resources and sales and marketing. On the other hand, the public sector looks into time-bound clearance, taxes, and different perspective to minimize the cost of homeownership.

Enabling Ecosystem & Optimal FSI

The government has already implemented strategies and policies to increase urbanization and rising income and aspiration in the rural areas. There should be a balanced approach to accelerate momentum without disturbing the rural indigenous ecosystem. This is regard; an enabling ecosystem can facilitate sustainable urbanization and meet the requirement of the poor.

An optimal FSI also is known as FAR (Floor Area Ratio) can minimize cost per unit and increase the economic viability of affordable housing. Many experts also suggest cashless subsidy as FSI so that the benefits can then passed to end-users. There are other charges be reduced such as sales tax, reduction or waiver in registration charges, and others.


Home for everyone is a basic necessity but without proper planning and strong initiative by both public and private enterprises, it is nearly impossible to make it a widespread reality in India.


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