Affordable housing is a global concern as more and more people in developed and developing countries face financial difficulties in purchasing homes, having been restricted by exorbitant prices as opposed to their relatively mediocre incomes. The scope and definition of ‘affordable’ is however, subjective as per the prevalent housing affordability index in a particular country. In India, affordable housing is basically a reference to housing units that are affordable to that section of society whose income is less than the median household income.
It is noteworthy here, that the term “affordable housing” is often used interchangeably with “low-cost housing” in India. “Low-cost housing” comprises of the bare minimum housing facilities and is meant for the economically weaker sections (EWS). On the contrary, “affordable housing” refers to housing for the lower and middle-income groups, which come with basic amenities such as schools, hospitals and other community services.
It is no secret that popular government schemes are often exploited by marketers to their advantage. In recent times, there have quite a few good examples of the same. Paytm promoted itself aggressively in the aftermath of demonetization in late 2016. Similarly, Jio was launched disguised as a part of the Digital India initiative as envisaged by Prime Minister Narendra Modi.
Similarly, there is a direct correlation between populist government schemes and real estate. In 2014, when the government allocated Rs. 7000 crore for the development of 100 smart cities, a number of real estate projects were marketed as ‘smart’ irrespective of delivery of any such definitive features.
Likewise, at a time of slow-down in the market, ‘affordable housing’ is a blessing for developers and many projects are launched in the category, promising a low cost-to-customer. But soon after market improves, developers increase the prices on some pretext or other. It is also considered ‘smart marketing’ in real estate circles, for developers to collect a large portion of the money at the time of launch. Thus, most affordable housing projects do not survive in India as everything from apartment size, to price and amenities change afterwards. The rationale for this is said to be the fact that there are bigger margins in luxury projects. Also, given that land is a large portion of the cost component, it makes sense for developers to do what gives them economies of scale.
In recent developments, the government has announced a new PPP policy for private investments in affordable housing. The objective is to boost its ‘Housing for All by 2022’ scheme and complete the target as per schedule. As an incentive, the government is contributing Rs. 2.5 lakh per house built under the scheme apart from interest rate subsidies of up to 4% on loans of 12 lakh and 3% on loans of Rs. 9 lakh. The government has also increased the carpet area for houses that will fall under the PMAY, thereby making it possible for middle-class to be able to purchase bigger houses at low costs. The move has augured well for builders who had large inventories of unsold houses that did not fall within the prescribed limits of the PMAY-HFA earlier.
Conclusively, caught in the middle of the government’s promotion of affordable housing and the real estate marketer’s exploitation of the term, the buyer must be able to discern between what ‘affordable housing to support PMAY’ is and what is ‘affordable housing under PMAY.’