India's Affordable Housing Demand to Surge to 312 Lakh Units by 2030: CII-Knight Frank Report
The cumulative demand for affordable housing in India is projected to reach 312 lakh units by 2030, with a potential market size of ₹67 trillion. The report by Confederation of Indian Industry (CII) and Knight Frank highlights the existing shortage and th
Affordable HousingCiiknight FrankHousing DemandReal EstatePolicy MeasuresReal Estate NewsDec 04, 2024
Current Scenario and Projections
The report, titled 'Affordable Housing in India Demand-Supply Assessment and Financing Opportunity,' was launched during the CII Conference on Indian Housing Landscape – Affordable to Accessible. It highlights that there is already an existing shortage of 101 lakh affordable housing units in the country. Knight Frank India’s analysis projects that the cumulative demand for affordable housing will reach 312 lakh by 2030.
Opportunities for Financial Institutions
Ghulam Zia, Senior Executive Director, Research, Advisory, Infrastructure & Valuation at Knight Frank India, emphasized that the shortage of affordable housing represents a business opportunity for real estate developers. Neel Raheja, Chairman of the CII National Committee on Real Estate and Group President of K Raheja Corp, noted that affordable housing is a pressing challenge and an opportunity to drive India's real estate growth. The report suggests that the potential financing opportunity for banks and Housing Finance Companies in the affordable housing segment is estimated to be ₹45 trillion, based on a 77% loan dependency and Loan-to-Value ratios.
Updating the Definition of Affordable Housing
The Reserve Bank of India (RBI)’s definition of affordable housing, linked to priority sector lending, needs an update. Currently, home loans qualify as priority sector lending if the unit price is under ₹45 lakh in metro cities and ₹35 lakh in non-metro cities. However, since the last revision in 2019, housing prices have increased significantly. Adjusted for consumer price inflation (CPI), the average house price in metro cities has risen from ₹45 lakh in 2019 to ₹57 lakh in 2024, while in non-metro cities, it has grown from ₹35 lakh to ₹44 lakh during the same period.
Policy Measures to Encourage Private Developers
In recent years, private developers’ participation in affordable housing projects has declined due to lower profitability, increased land and construction costs, and a lack of institutional investments. The report recommends several policy measures to attract private developers into the affordable housing sector
1. Unlocking Vacant PSU Lands The government should unlock vacant Public Sector Unit (PSU) lands to reduce land costs.
2. Increasing FSI/FAR Limits The Floor Space Index (FSI) or Floor Area Ratio (FAR) limits in Indian cities are very restrictive compared to global standards. Increasing FSI for affordable housing development can reduce overall costs and make projects more financially viable for developers.
3. Tax Incentives and Subsidies Providing tax rebates on GST and subsidies for private developers can improve the financial feasibility of affordable housing projects.
4. Developing Satellite Cities Developing new satellite cities with adequate physical and social infrastructure can help reduce the housing burden on mega cities.
Conclusion
The report underscores the critical need to address the affordable housing shortage in India. By implementing the recommended policy measures and fostering collaborations between the government, private developers, and financial institutions, it is possible to bridge the housing deficit and create a more inclusive and sustainable housing landscape in the country.
Frequently Asked Questions
What is the projected demand for affordable housing in India by 2030?
The projected demand for affordable housing in India by 2030 is 312 lakh units, with a market size of ₹67 trillion.
What is the current shortage of affordable housing units in India?
There is already an existing shortage of 101 lakh affordable housing units in India.
What is the potential financing opportunity for banks and Housing Finance Companies in the affordable housing segment?
The potential financing opportunity for banks and Housing Finance Companies in the affordable housing segment is estimated to be ₹45 trillion.
Why does the definition of affordable housing by the RBI need an update?
The RBI's definition of affordable housing, linked to priority sector lending, needs an update because housing prices have increased significantly since the last revision in 2019. The average house price in metro cities has risen from ₹45 lakh in 2019 to ₹57 lakh in 2024, and in non-metro cities, it has grown from ₹35 lakh to ₹44 lakh during the same period.
What policy measures are suggested to encourage private developers' participation in affordable housing projects?
The report suggests unlocking vacant PSU lands, increasing FSI/FAR limits, providing tax incentives and subsidies, and developing new satellite cities with adequate infrastructure to encourage private developers' participation.
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