Access to affordable housing is a prerequisite for a dignified life, yet it remains out of reach for many middle-class Indians. Discuss the current challenges and also propose policy measures to make housing affordable and accessible for all.

Why?

The finance minister announced two housing schemes in the interim budget – PMAY-Grameen for building additional two crore houses in the next five years, and a scheme to help middle-class individuals buy or build homes.

Approach:

• Introduce your answer by highlighting the importance of housing for dignified living.
• In the main body, first address the challenges in realizing affordable housing – high Price-to-Income Ratio (PTI), structural reasons, semi-transparent real estate sector, limited financing options, rapid urbanization and population growth, etc. Next discuss the policy measures needed to make housing affordable and accessible for all – transparency in land markets, planned land supply, holistic approaches to housing affordability, enhanced public-private partnerships, etc.
• Conclude by reiterating the need for structural reforms and holistic approaches to ensure sustainable affordability and inclusive growth.

Answer:

A dignified life encompasses access to basic necessities, security, and opportunities for personal growth. Housing, a fundamental component, provides shelter, stability, and a sense of belonging essential for dignified living. However data reveals significant challenges, especially in urban areas where a substantial portion of households live in slums.

Challenges In Realizing Affordable Housing:

• High Price-to-Income Ratio (PTI) in India: which indicates the difficulty for the middle class to afford housing. The average PTI in India stands at 11, more than double the affordability benchmark of 5.
  • Mumbai, Kolkata, and Chennai exhibit high rates of slum dwellings due to unaffordable housing.
• Structural Reasons for High House Prices: Primarily due to structural issues within the real estate sector rather than a sudden spike in prices.
  • Lack of transparency in land markets contributes to inflated housing costs.
• Semi-Transparent Real Estate Industry: India’s real estate industry ranks as semi-transparent, hindering competition and exacerbating price disparities.
• Limited land supply due to inadequate planning and implementation adds to the problem.
  • Only 28% of Indian cities have approved master plans, leading to uncertain development trajectories.
• Dominance of Few Developers and Supernormal Profits: these developers maintain high prices, further excluding the middle class from homeownership.
  • 77% of India’s household wealth is tied to real estate, indicating its significance in the economy.
• Limited Financing Options for Middle-Class Homebuyers: like high interest rates and stringent eligibility criteria for loans contribute to the affordability crisis.
• Rapid Urbanization and Population Growth: exert pressure on housing demand, leading to inflated property prices.
  • Increasing migration to metropolitan cities intensifies competition for limited housing stock.

Policy Measures Needed to Make Housing Affordable and Accessible For All:

• Reforming Land Markets for Transparency: Implementing reforms to increase transparency in land markets will encourage competition and reduce prices.
  • Emulate Singapore’s long-term planning approach for sustainable urban development.
• Focus on Planned and Transparent Land Supply: Government intervention should prioritize releasing land supply in a planned and transparent manner. This will not only lower housing prices but also stimulate economic growth and create employment opportunities.
• Holistic Approach to Housing Affordability: Government schemes should address root causes
  • Integrating land-use planning with housing policies to ensure long-term affordability.
• Promotion of Rental Housing: Encouraging the development of rental housing can provide an alternative solution for middle-class individuals unable to afford homeownership.
• Enhanced Role of Public-Private Partnerships (PPP): to develop affordable housing projects can optimize resources and accelerate the pace of construction.
  • Joint ventures between municipal authorities and real estate developers to revitalize underutilized urban land for housing
• Empowerment of Urban Local Bodies (ULBs): to plan, regulate, and monitor housing developments through effective governance and institutional reforms.
• Use of Innovative Construction Technologies: such as prefabrication and modular construction can reduce building costs and construction time.
  • Implementation of 3D printing technology to construct low-cost housing units in a fraction of traditional construction time and cost.

Access to affordable housing is a fundamental right essential for a dignified life. Addressing structural issues within the real estate sector, such as transparency and competition, is key to making housing affordable for all. A holistic approach involving land market reforms and transparent urban planning is necessary to ensure sustainable affordability and foster inclusive growth in India.

‘+1’ value addition:

• Between 2016 and 2020, the demand for housing in India’s eight biggest cities was 1.98 million units, while the supply was only 25,000.
• House prices have appreciated by 9.3 per cent on an annual basis between 1991–2021.
• 77 per cent of India’s household wealth is stored in real estate compared to 62 per cent for China, 44 per cent for the US, and 37 per cent for Germany.
• According to the Census data of 2011, 17 per cent of all urban households in India live in slums.