How to make housing more affordable is a question that is being debated worldwide. Unfortunately, there are always more questions than what one could probably answer. In the Indian context, the unsold inventory to the extent of 7.85 lakh units in the top eight cities poses a big question mark since most of these units are in the affordable segment.
What makes the case of affordable housing even more grim is the fact that out of the 7.85 lakh unsold units nearly 20% are in the ready-to-move-in stage.
It is hence believed that there is a problem of affordability with the so-called affordable housing in India. It is a case of demand and supply mismatch. And hence we ask the industry stakeholders certain straight questions like:
How can housing be made more affordable?
With rising input cost will it lead to quality compromise?
How can approval cost & other miscellaneous expenses be reduced to make housing affordable?
Mallanna Sasalu, COO, Provident Housing, points out that while introducing affordable housing projects, it is essential to understand that reduction in provisions and use of inexpensive materials can have adverse effects in the long term. This practice can impact the quality of the offerings and also cause the risk of losing customers. There are other means to keep housing prices affordable.
“I believe that ‘design control is cost control’ i.e. keeping control of all aspects in your design philosophy. For instance, avoid planning expansive basements and opt for a straight wall instead of making several niches. Standardising the design can help control the cost. We work on metric-driven designs. Our cost control starts from the terrain-selection stage, and each metric is evaluated to optimise better. It is vital to compare the built-up and saleable areas while designing the projects,” says Sasalu.
Aditya Kushwaha, CEO & director, Axis Ecorp, believes affordable housing options help prospective buyers to make their dream come true. And hence, various measures are being taken to promote affordable housing in India.
“Providing home loans at lower rates and offering tax subsidies on affordable housing are some of the measures that can be adopted to help more people realise their goal of home ownership. The cost of raw materials has skyrocketed in the past few months. In the wake of rising inflation, there is a provision available for developers to increase their prices even on the pre-sold inventory,” says Kushwaha.
Vinit Dungarwal, director, AMs Project Consultants, suggests when a couple or individual spends more than 30% of their total income on their mortgage, they are considered financially stressed, according to finance and mortgage experts. Affordable housing is essential to the well-being and prosperity of individuals and the smooth working of the economy. According to estimates, 70% of the world’s population will be living in cities by 2050. An increase in the global urban population will push the demand for affordable housing. Therefore, there needs to be a greater push for affordable housing.
“The government has announced various schemes in this regard. One such initiative is Pradhan Mantri Awas Yojana (PMAY). It is a credit-linked subsidy plan and has attracted several public and private investments into the sector. This year, Finance Minister Nirmala Sitharaman allocated Rs 48 trillion to PMAY from the Union budget. In 2022-23, the objective is to finish 80 lakh houses for PMAY beneficiaries, while 60,000 households will be classified as PMAY beneficiaries in rural and urban areas,” says Dungarwal.
No one has got a clear answer to the core of the problems and every industry stakeholder has his own point of view. However, the economy of scale suggests it definitely helps the developers to undertake cost-effective measures since material procurement happens at a group level. This gives large developers an advantage over other smaller developers and projects. Also, the duration of construction has an impact on the cost. The developers must ensure the completion of projects on time, which could help us sell the properties at a faster pace and keep the cost under control.
Read about the cost of prefabricated houses in India and their role in making houses affordable.
Today, an increase in the prices of critical items like cement and steel is likely to increase real estate prices to some extent. Some may resort to cutting corners in order to complete projects within the given budgets. However, having a project consultant on board can help in planning the resources better and offset a percentage of the impact enabling developers to factor in the increasing costs without compromising on the quality.
A section of analysts maintains that without compromise on quality, it is not easy to reduce the cost of affordable housing as most construction elements have standardised rates. For instance, the cost of cement, steel and other items like door frames and windows are uniform, and there is no room for compromising the quality at this level.
Cost control can take place only when selecting the materials like vitrified tiles or other low-priced tiles for the house. However, this practice will have negligible savings. Industry stakeholders are mostly tight-lipped on record when it comes to approval costs that are often shown as miscellaneous costs on the balance sheet. However, a single-window clearance system for affordable housing can also help to speed up the execution of projects.
It is also imperative for the real estate sector to change the way they operate. Real estate accounting software that gives a real-time view of how the finances of the company are looking. This helps them decrease human errors, allowing property managers to allocate work assignments efficiently. Alternatively, project managers can, by virtue of their skill and experience, aid in streamlining the process and effectively managing resources. They can maintain a close eye on the balance sheets and seek cost-effective, long-term solutions to guarantee that projects are finished within budget constraints.
(The writer is CEO, Track2Realty)
Ravi Sinha is a journalist with nearly two decades of cross-discipline media exposure. He is the CEO of real estate think-tank group Track2Realty. He has been writing extensively on the real estate sector for nearly a decade. Evaluation of real estate brand performance is his expertise and he has immense insight into consumers’ psychograph in the property market.
Twitter: https://twitter.com/ravitrack2media
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