- Shortage of 31 million homes
- CII-Night Frank report reveals
A huge demand for affordable homes is expected in India, with the sector projected to reach Rs 67 lakh crore by 2030, as per the CII-Night Frank report. Simultaneously, a shortage of 31.2 million homes is anticipated, with over 10 million units already lacking. Urbanisation and employment growth will drive the need for 22.2 million homes in urban areas, with 95.2% (21.1 million units) falling in the affordable housing category. Of this, 45.8% will be for EWS families. To meet this demand, an estimated 1.9 lakh acres of land will be needed, and the report suggests using vacant government land through public-private partnerships, along with offering developers tax incentives and additional free floor space index.
The affordable housing loan market in India currently stands at Rs 13 lakh crore and is expected to grow significantly with increasing demand. Homes with a carpet area of up to 60 square meters and priced below Rs 45 lakh fall under the affordable housing category. Between 2011 and September 2024, the sector attracted $1.6 billion in investments, accounting for 9.8% of total residential real estate investments.
Compared to 2019, the average price of affordable housing units has significantly increased, impacting affordability, especially for EWS buyers. In Mumbai, the average price of affordable housing has risen from Rs 48 lakh in 2019 to Rs 73 lakh. Smaller units have seen a larger price hike, with units under 30 square meters increasing by 55% and those with 60 square meters by 29%.
The growing demand for affordable housing has encouraged developers to take more initiative. However, rising land costs, construction expenses, and a lack of institutional investment have reduced profitability, leading to lower private developer participation. The report suggests measures to attract private developers, including:
a) Unlocking Vacant PSU Land
Allocating unused PSU land to developers will reduce construction costs, lowering the selling price of homes. Knight Frank estimates that 1.9 lakh acres of land will be needed to build 31.2 million homes.
b) Expanding Free FSI
Low FSI/FAR limits in Indian cities drive up prices, limiting home affordability for low-income families and increasing project costs. Increasing the free/base FSI for affordable housing can reduce construction costs. Knight Frank estimates that a 50% increase in FSI would boost supply by 50% and reduce costs by 24%.
c) Providing Tax Incentives :
Current tax incentives are limited to a one-year income tax exemption, which has limited impact on developer participation due to the low profitability of affordable housing projects. To improve financial viability, there is a need for additional incentives like GST rebates and subsidies for private developers.
The housing shortage in the affordable housing sector presents significant opportunities for real estate developers and financial institutions, according to Gulam Zia of Knight Frank India. Vipul Roongta, MD and CEO of HDFC Capital, emphasized the need for a proper marketing strategy for affordable and middle-income housing. He mentioned their focus on middle and lower-income sectors, with homes under Rs 2 crore categorized as middle-income and under Rs 1 crore as low-income. Roongta also highlighted that HDFC Capital has provided loan assistance for 300,000 homes.
According to Credai-Colliers and Liases Foras…
According to a report by Credai-Colliers and Liases Foras, house prices in eight major cities rose by 11% during the July-September quarter. Delhi NCR saw the highest increase at 32%, while Hyderabad grew by 3%. The average price across these cities reached ₹11,000 per square foot. Delhi NCR topped with ₹11,438, followed by Bengaluru at ₹11,743 (24% increase). House prices in Hyderabad have increased by an average of 3%. The average price per square foot has reached Rs 11,351. Pune rose by 10% to Rs 9,890, while Mumbai saw a 4% rise to Rs 20,438. Kolkata’s price increased by 3% to Rs 11,351, Chennai’s price stood at Rs 7,889, and Ahmedabad saw a 16% increase to ₹7,640.
