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Affordable Housing in Mumbai
Affordable Housing in Mumbai
Reports state that the affordable housing segment in India is set to grow at a faster pace than the rest of the real estate industry.

Mumbai is the most populous city in India, the 4th most populous city in the world and one of the populous urban regions in the world. Affordable housing in such a city sounds like a boon for people who migrate here primarily for better employment opportunities. The 'Housing for All by 2022' is an initiative under the Pradhan Mantri Awas Yojana (PMAY) by the Indian Government that gave birth to the concept of 'Affordable Housing.'

Promising affordability is a tricky model of thoughts because affordability, as a concept, is relative and dependent on an individual's financial capability, city of consideration, demand-supply dynamics and real estate prices, which makes the definition very subjective. Yet, in a city like Mumbai when all parameters are taken into consideration, a ready flat will not cost less than ₹1 crore, but experts believe that on an average, a price band of ₹50-60 lacs is something that can be considered as affordable.

According to the Bloomberg Global Housing Affordability Index, Mumbai ranks 4th among the list of top 20 cities with least-affordable housing relative to income, which leaves us to believe that if affordable housing gains momentum in Mumbai, the projects would be situated farther from the city centre. Which is exactly what you see at present. More properties are now coming up in areas like Thane and Navi Mumbai and instead of the luxury or semi-luxury concept, projects are focusing on affordable housing.

The Investment Information & Credit Rating Agency (ICRA), confirmed in a recent report that the affordable housing segment in India is set to grow at a faster pace than the rest of the real estate industry - at more than 30% over the medium term.

A large migrating population with growing trend of nuclear families, driven by young professionals all over the country and government policies like RERA infusing fresh-buyer-confidence, have increased the demand for affordable housing exponentially.

Many builders did not validate the concept of affordable housing since it reduced their profit margins but the government did come up with solutions.

In order to accomplish the mission of 'Housing for all by 2022', the government has awarded infrastructure status to affordable housing which aims at increasing private participation, focused institutional financing to attract private players, opening of the external commercial borrowing (ECB) route, increase in size of minimum carpet area, relaxed period of project completion from 3 years to 5 years along with access to more funds at lower costs and other benefits to the segment.

The most important stimulus by far has been the fact that affordable housing has now been granted infrastructure status. This translates into easy financial credit for builders and makes it a lucrative segment for them to invest in. The government provided higher allocations for affordable housing development under the PMAY. It has also extended the Credit Linked Subsidy scheme to loans of value up to ₹12 lacs.

With these benefits, the advantage that affordable housing brings to the table for both parties is that, it not only offers low-cost homes for the buyers but also, enables builders to enjoy economies of scale. They tend to sell more number of flats due to the lower price point.

The big question that affordable housing brings to light is the quality of construction and availability of support infrastructure, since these projects are located in the outer areas of Mumbai. However, new launches in the affordable housing segment have seen a jump of 27% in the first three quarters of 2017 across India with Mumbai taking the lead, said a report by Cushman & Wakefield.

More than 26,000 new units were launched in 2017 under this category. Out of the total new launches in affordable units, 40% were in Mumbai (10,500 units), followed by Kolkata and Pune. All other categories have seen a decline with high–end and luxury segments witnessing a significant drop in new launches, it said.

"Affordable housing is an attractive proposition both for developers and consumers as the demand is huge and largely unmet. The high focus of the central government has resulted in the availability of more funding options for the developers such as ECB, FDI and debt financing from national financial institutions at highly competitive rates. However, there are challenges for affordable housing projects in Tier 1 cities, where land costs and availability within established locations is very difficult," said Anshul Jain, Managing Director, Cushman & Wakefield India.

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