Infrastructure development proven to boost affordable housing

One of the major initiatives taken by the Modi government, is to promote the policy of ‘Housing for All by 2022’. India has a shortage of 18.8 million urban homes for the 12th five-year plan (2012-17) period. This includes housing the economically weaker and lower income groups – an area where developers hardly focus, due to low margins.

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Translating the affordable housing initiative into actionable targets, would involve the construction of close to two million homes every year. Compare this, with the actual delivery of 1.2 million homes annually during the 11th five-year plan period (ending March 2012), and the target clearly appears formidable.

Raising the delivery targets of central/state housing boards may not be the way to go, given the lack of availability of large land holdings within city centres with such agencies and their slack delivery track records. One effective alternative, appears to be the expansion of the infrastructure network, thereby, opening up new and relatively cheaper land parcels for real estate development that will attract private participation.

What home buyers prefer

Home buyers typically prefer to stay closer to locations near established commercial developments that also have good social infrastructure. An alternative for those who cannot afford homes in such areas, is to look for locations that have good connectivity to the more established sub-markets. Often, such affordable housing options have skipped established locations and have come up in sub-markets that do not have adequate trunk infrastructure.

JLL’s recent research report ‘Indian Real Estate: Coming to terms with varying speeds of growth’, studied 30 infrastructure projects that became operational in recent years, across the leading seven cities. Although new airport projects are considered catalysts for opening up new areas in city peripheries, they may not guarantee the development of affordable housing, as their gestation period is huge and connectivity to existing established locations improves only gradually. By that time, speculative activity makes the location relatively unaffordable.

Impact of infrastructure projects

On the other hand, projects such as the metro rail, ring roads and highways, etc., offer improved connectivity to the existing city establishments and are more suitable to the immediate needs of budget-conscious home buyers.

The following table identifies seven ongoing infrastructure projects, in each of the top seven cities that have the potential to promote affordable housing:

	MMR*	Delhi-NCR*	Bengaluru	Chennai	Pune	Hyderabad	Kolkata
Infrastructure project	Metro line (CBD Belapur-Kharghar-Taloja)	Metro line extension (Noida to Greater Noida)	Metro line (Nagasandra-Puttenahalli)	Metro line (Alandur to Meenambakkam)	Ring Road Phase-1 (Theurphata-Wagholi-NH50)	Metro line (Miyapur to SR Nagar)	Metro line (Joka to Esplanade)
Location for affordable housing	Taloja and adjacent areas	Noida Extension, Greater Noida	Huskur and adjacent areas	Alandur and Arumbakkam	Wagholi, Bhavdi, Tulapur, Alandi	Miyapur-Chandanagar belt	New Town Action Area III
Prices applicable currently	INR 4,000-5,500 psft BUA	INR 3,100-3,500 psft BUA	INR 3,500-5,000 psft BUA	INR 4,000-7,000 psft BUA	INR 3,000-4,500 psft BUA	INR 2,500-3,200 psft BUA	INR 3,600-5,500 psft BUA
Prices in more established locations in close proximity	INR 7,500-9,000 psft BUA	INR 5,200-5,800 psft BUA	INR 7,000-8,000 psft BUA	INR 7,500-10,000 psft BUA	INR 6,000-7,500 psft BUA	INR 4,500-5,200 psft BUA	INR 6,000-9,000 psft BUA
Targeted completion year	2017	2017	2017	2017	2019	End-2016	2019

Source: JLL Research; Note: psft BUA = per sq ft on built-up (or saleable) area; * MMR = Mumbai Metropolitan Region and NCR = National Capital Region

The table above clearly shows that new residential corridors, emerging from the construction of a metro line or ring road, are almost half as expensive as the more established residential corridors in the vicinity. They offer a good opportunity, not only for people seeking a house at affordable prices, but also investors and developers who seek new avenues for growth. Thus, with minimal interference from the central and state housing promotion boards, affordable housing gets created naturally and profitably. Both, affordable housing and infrastructure development are mandates of the government, although the creation of the latter in a focused, time-bound and consistent manner can spur the former too.

(The writer is AVP – research and real estate intelligence service, JLL India)

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