What Affordable Housing Really Means In India

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

Affordability, especially in the Indian real estate sector, can mean a wide range of things. Specifically, the term holds different meaning for different categories of demographics. Further, there are also several socio-economic variables governing a city or location to consider.

Generally, ‘affordable housing’ refers to residences that have been especially designed for the economically weaker section (EWS) and Lower Income Group (LIG) who are looking for the same comfort and security of a self-owned property/home that the more fortunate middle class enjoys.

In the earlier years of real estate development in India, the EWS and LIG categories did not get much attention to their needs. However, with changes in administration and especially with the current government coming to power, a significant amount of changes has taken place in this respect.

These two sections make up the thickest segment of the demographic for India, and form the base of the country’s economy. It has been overdue that their requirements are looked into.

Thankfully, there have been several initiatives by the BJP government under the leadership of PM Modi that have boosted affordable housing sector. For example, it is seriously looking into is the betterment of accessibility – read reduced commute times.

Lack of accessibility has been one of the top reasons why low-cost housing was inaccessible. Even if such housing is outside of the main city periphery, improved connectivity makes distances shorter and such areas more viable and desirable as residential destinations.

Why is affordable housing important?

Creating affordable housing is not just about helping a certain demographic to achieve their dream of home ownership. True, from a political viewpoint it is obviously important to cater to the demands of a massive vote bank.

But there is an important economic angle to be considered, as well – the working class must have a good-enough reason to not move out of their city to be able to work and earn. It is important to understand that we are not just talking about people living on below or on the edge of the poverty line.

In 2012, the Housing and Urban Poverty Alleviation Ministry made an upward revision on the criteria that define EWS. With this revision, families with an annual household income of up to Rs. 1 lakh now come under the classification of Economically Weaker Section (EWS). This was a significant change from the earlier limit of Rs. 5,000 a month or Rs. 60,000 annually.

The category of Lower Income Group or LIG also saw an upward revision – now, families with an annual income of between Rs. 1 to 2 lakh came under the LIG category. Previously, the definition applied to families earning Rs. 5001 to 10000 a month or Rs. 60,012 to 1,20,000 annually.

Colori Phase 2 Undri

The people who fall under both these categories are extremely important for the country’s economic progress. They provide myriad services which our cities can simply not do without, but are very prone to migrating out of cities which do not support their needs.

For them, as for everyone else, home ownership provides not only a strong psychological anchor but also financial security and a better lifestyle – important incentives to stay put rather than migrate elsewhere.

What about affordable housing for the middle class?

This is an important question, and calls forth the real definition of affordability in the Indian context. Affordable housing also comes under the ambit of a much wider local meaning, wherein it constitutes homes that are affordable to the maximum segment of demographics.

It can also apply to the local population in a city which, despite being more economically fortunate and flexible than the EWS and LIG segments, are sensitive to high home prices within their city.

Such buyer groups will have sufficient funds to buy a decent-sized property on the outskirts, but face challenges when buying a home closer to the employment hubs and conveniences available within the city limits. Another way to understand this situation is the deficiency of properties within the city locations for buyers in the budget groups of Rs. 35 to 50 lakh.

Thus, a city would be said to be deficient of affordable housing even if it has enough homes in the outskirts within a price range of Rs. 20 lakhs. In this case, the potential buyers are those who can pay beyond Rs. 20 lakhs and are not interested in living on the outskirts.

Affordable housing as a whole is a profitable business because of its high rate of absorption. However, such housing also advances socio-economic growth both at a locality and city level, because it invites in higher earning groups.

Overall, if the majority of a city’s working class does not find suitable homes meeting both their needs and budgets, it can be said that there is a dearth of affordable homes.

About The Author

Kishor Pate, Chairman & Managing Director of Amit Enterprises Housing Ltd. is the driving force behind one of the most successful real estate development firms in Pune and beyond. Apart from its signature luxury projects like Montecito in Sahakar Nagar and other premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic and Colori in Undri and the Mediterranean-style township Astonia Royale in Ambegaon.

Demonetisation: Immediate And Long-Term Impact On Real Estate

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

PM Modi’s surprise move to remove Rs. 500 and Rs. 1000 currency notes from legal use came as a shocker to all Indians. As of now, everyone is still inconvenienced, but all Indians also realize the greater good this move will accomplish in cleaning out black money from the economy.

Crowds outside ATMs are already thinning out and life is gradually normalizing across Indian cities. However, the ones who will continue to be affected the most are obviously those who have been holding and transacting in large amounts of unaccounted cash.

When considering the business sectors on which the demonetisation move has greatest pertinence and effect, the real estate sector comes almost naturally to mind, and Indian real estate industry has historically seen a high incidence of cash transactions.

However, the large-scale turmoil that many market pundits have been predicting is an exaggeration. The market is expecting a correction in the resale properties segment, which is very likely to happen.

The primary sales market in the larger cities is not going to be affected, especially when it comes to strong, established developers.

Prices have already stabilized in view of the situation prevailing prior to the demonetization move, and there is minimum chance of further correction – especially in low-end projects. High-end and luxury projects may see a correction to some extent.

Land transactions, which have historically been driven by cash, are taking a major hit and we can expect a correction of 20-30% in land valuations in the unorganized sector.

Lower land costs in emerging areas and smaller cities will eventually result in lower cost of budget housing, as developers will assuredly pass on the benefit of these savings to their customers.

Pricing is a critical factor in the current market environment, and no player will lose the chance to offer more benevolent price tags in order to secure business.

The full impact of demonetisation will be more visible only after the next Union Budget is announced in February. The negative sentiment currently prevailing is likely to be negated to a large extent by some very positive announcements.

We expect the Finance Minister to roll out special incentives for first-time home buyers in the budget properties category, and also a positive revision of income tax slabs – which will help reduce the financial burden on home buyers and increase purchasing power.

With home ownership always being a priority investment objective for all Indians, this will have very positive implications for the residential real estate sector.

DEMONETISATION

On the whole, the demonetisation move is very good news for the health of the Indian real estate sector. The Real Estate Regulatory Bill (RERA) will be deployed across the country by mid-2017, and Maharashtra has recently put forth its own draft laws.

Along with the impact that the demonetization move has had on India’s parallel ‘black economy’, we will see a lot of sanitization in the industry.

The Indian real estate sector will now become more transparent, credible and attractive to all kinds of serious investors, especially institutional investors.

In the long term, we will see a much more holistic and healthy pattern of growth in the Indian real estate sector.

The Government’s many initiatives to render the Indian business environment more attractive for both domestic and foreign investments will definitely bear fruit.

For end-users and investors, the current time is extremely favourable to make their move to secure the best real estate bargains.

Smaller residential developers and investors will be more eager than ever before to offload their inventory so as to alleviate their liquidity woes to some extent.

The salaried class which uses home loans to purchase properties will not face any problems at all because of the demonetisation move.

Since the above measures will serve to make the real estate sector more transparent and wholesome, future growth in the residential property sector will be steady and rational.

Those who invest in residential real estate now can, therefore, look forward to very satisfactory long-term capital appreciation.

Also, to be noted – the slowdown induced by the demonetisation move has nothing to do with the huge pent-up demand for housing in India. This is still very much intact and in fact growing at steady pace.

The residential sector was in fact in revival mode shortly before this move, and though overall sentiment has now faced a new setback, this is strictly temporary.

Fly-by-night developers get driven out and large players who have already made transparent transactions a standard will emerge stronger.

Within the next 12-18 months, we will see a much more sustainable and robust real estate market emerging in India.

About The Author

 Kishor Pate, Chairman & Managing Director ofAmit Enterprises Housing Ltd. is the driving force behind one of the most successful real estate development firms in Pune and beyond. Apart from its signature luxury projects like Montecito in Sahakar Nagar and other premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic and Colori in Undri and the Mediterranean-style township Astonia Royale in Ambegaon.

Concrete: A Highly Sustainable Building Material

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

With the term ‘concrete jungle’ having become so popular and widely used, it is easy to overlook that this building material has been around for so long for very good reasons.

Also, that it has some excellent attributes which make it very important in today’s context.

Yes, it is easy to produce and use, but the fact is that concrete is an eminently environmentally friendly building material during the entire span of its life cycle, beginning from its production as a  raw material right until it is demolished.

This renders it the perfect and obvious building option for the construction of sustainable homes.

The cement utilized in concrete is sourced from limestone, which is an abundantly available mineral that will literally never deplete.

However, one can also manufacture concrete from materials such as slag cement and fly ash, both of which are generated by industries like steel mills and power plants as waste byproducts.

From the point of recycling of existing resources, concrete is therefore a real boon to the planet.

Concrete is also highly durable, and is used in erecting buildings which are not subject to rust, do not burn or otherwise degrade.

In fact, buildings built with concrete have twice or even thrice the life- span of buildings erected with many other construction material.

The life-spans for concrete building products can be double or triple those of other common building materials.

Concreting Work Construction Worker

What is equally important from a sustainability perspective is that the use of concrete in forming the foundation, floors and walls of a building renders it extremely energy-efficient.

One of the benefits of this building material is its ability to absorb and retain heat. In other words, people who live in homes built of concrete save significantly on both cooling and heating bills.

In a concrete building, one can install air conditioners of lower capacity, resulting in significant electricity savings. Also, concrete reduces the incidence of processes that result in urban heat islands.

When concrete, which is inherently light in colour, is used to build pavements and roofs, the end result is that less heat is absorbed and more incoming solar radiation is deflected.

Finally, concrete as a building material, results in the least waste of raw building materials, as it can be manufactured and used in the actual quantities required to build a building or other project.

Once a building or structure built of concrete has completed its life-cycle or fulfilled the purpose for which it was erected, the concrete can be recycled into aggregate which can then be used to lay concrete pavements or provide an underlying base for roads.

About The Author

 Kishor Pate, Chairman & Managing Director ofAmit Enterprises Housing Ltd. is the driving force behind one of the most successful real estate development firms in Pune and beyond. Apart from its signature luxury projects like Montecito in Sahakar Nagar and other premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic and Colori in Undri and the Mediterranean-style township Astonia Royale in Ambegaon.