Urbanization has resulted in people increasingly living in slums and squatter settlements and has deteriorated the housing conditions of the economically weaker sections of the society. This is primarily due to the skyrocketing prices of land and real estate in urban areas that have forced the poor and the economically weaker sections of the society to occupy the marginal lands typified by poor housing stock, congestion and obsolescence. In this dissertation, we will explore major issues in the development of affordable housing in India and steps taken by the Government and private sector to address them inclusively.

1. MAULANA AZAD NATIONAL INSTITUTE OF TECHNOLOGY,
BHOPAL
“AFFORDABLE HOUSING AND
ITS SIGNIFICANCE”
NOVEMBER 2012
Presentation by:
STANLEY GEORGE

2.  Introduction
 Definition of Affordable Housing
 Affordable Housing in India
CONTENT
 Correlation of Market and Affordable Housing
 Issues in the Development of Affordable
Housing
 Policy Framework and Regulations for
Affordable Housing
 Affordable Housing Stakeholders
 Their Concerns
 Prototype House: an emerging Affordable
Housing option
 Impact of Affordable Housing on the
Surrounding Areas or Communities
 CONCLUSION
 References

3. INTRODUCTION
 As per 2011 census, the country had a population of 1,210.98 million,
out of which, 377.10 million (31.16%) lived in urban areas.
 According to Ministry of Housing and Urban Poverty Alleviation
(MHUPA), the urban housing shortage in the country at the end of the
10th Five-Year Plan was estimated to be 24.71 million for 66.30
million households.
Note: Of this, 99% shortage pertains
to houses for Economically Weaker Sections
(EWS) and another 11% for Lower-Income
Groups (LIG).

4. THUS, IT IS THE HOUSING REQUIREMENTS OF THE LOWER MIDDLE-
INCOME AND LOWER INCOME GROUPS THAT ARE GROSSLY
NEGLECTED, AND
THERE EXISTS A HUGE DEARTH IN THE SUPPLY OF
AFFORDABLE HOUSES PRIMARILY DEMANDED BY
THIS INCOME GROUP IN INDIA.

5. DEFINITION OF AFFORDABLE HOUSING
 ‘for a household to pay no more than 30% of its annual income on
housing. Families who pay more than 30% of their income for
housing are considered cost burdened and may have difficulty
affording necessities such as food, clothing, transportation and
medical care’. –
As per US Department of Housing and Urban Development
The JNNURM Mission Directorate of
MHUPA has also defined affordable
housing in its amended Guidelines for
Affordable Housing in Partnership
released in December 2011.

6. DEFINITION OF AFFORDABLE HOUSING
 According to the KPMG Report on „Affordable Housing – A Key Growth
Driver in the Real Estate Sector‟, affordable housing is defined in terms of
three main parameters, namely income level, size of dwelling unit and
affordability.

7. AFFORDABLE HOUSING IN INDIA
 Affordable housing - also called low-income housing - is an emerging segment
in the housing sector in India.
 Current affordable housing initiatives do not focus on the poorest.
 Even if the potential size of rural housing market is bigger than the urban one,
affordable housing projects are mainly implemented in urban areas. That is
due to the low density of rural areas, which makes it very difficult to develop
successful affordable housing business models.
 From researches done, players involved in low-income housing in India
are mainly targeting the lower-middle class: people earning Rs. 7 000 to Rs.
20,000 per month, which means 30% to 60% of Indian population. As a result,
price range of affordable housing units currently under construction is between
Rs.300,000 and Rs.1,000,000.

8. CORRELATION OF MARKET AND AFFORDABLE
HOUSING
 The reason for high (unaffordable) price of housing in the market lies in:-
 High land prices,
 Cost of construction
 Transaction cost (including search cost, brokerage, and stamp duty and
registration fee. )
 Taxes & legal charges, and
 Profit margins of private operators.
 Price of land is the single most expensive component in the cost of housing in
urban areas. High price of land is a consequence of the inability of land market to
respond quickly to increased demand for land with growth of urbanization.
 The cost of construction itself is hiked by taxes and duties levied on construction
materials and services rendered by various professionals in the project. Sale tax,
excise duty, VAT are levied on building materials like steel, cement, paint, varnishes
etc.
 Conversion of land from one use to another takes a long time due to various state
regulation and procedures.

9. ISSUES IN THE DEVELOPMENT OF
AFFORDABLE HOUSING
 Lack of Availability of Urban Land
 With high population density, which is growing due to rapid urbanisation, there exists a huge
demand for land in urban India. The real shortage has been further exacerbated artificially by
poorly conceived central, state and municipal regulations.
 Excessive Control on Development of Land Creates Artificial Shortage
 By excessively controlling the volume of construction in centrally located areas and by making
land recycling difficult, some regulations tend to centrifugally push urban development towards
the periphery.
 Lack of Marketable Land Parcels
 Government authorities or state-owned entities such as railways and ports own large tracts of
urban land, which are nonmarketable. Non Marketable land Parcels also provide for proliferation
of slums and squatter settlements, as authorities are often incapable of monitoring their own
holdings regularly.
 Titling Issues and Lack of Information
 Due to lack of transparency in getting correct transactional information, there are long search
times and high costs involved in acquiring land.

10. ISSUES IN THE DEVELOPMENT OF
AFFORDABLE HOUSING
 Rising Threshold Costs of Construction
 During the past decade, construction costs have significantly increased by nearly 80–
100% due to the appreciation in prices of construction materials such as steel, cement
and sand. Shortage of labour has also resulted in a rapid increase in wages.
 Regulatory Constraints:
 Lengthy Approval and Land Use Conversion Process
 To obtain a plan sanction for a project, the developer has to visit nearly 40
departments starting from central (environment, airport authority etc.), state
governments (revenue, fire, high rise, environment etc.) and local bodies (water,
sewage, traffic etc.). From entering into an agreement for land purchase to the date
of commencement of construction, it takes nearly two to three years.
 Lack of Clarity in Building Bylaws and Guidelines
 The building bylaws and rules for Floor Space Index (FSI), zoning and development
plans formulated by the Urban Local Bodies (ULBs) and Urban Development
Departments (UDDs) in India lack clarity and have several overlapping guidelines
for real estate development.

11. POLICY FRAMEWORK AND REGULATIONS FOR
AFFORDABLE HOUSING
 Central level schemes
 National Urban Housing and Habitat Policy (NUHHP), 2007
Objectives listed below:
 Facilitating accessibility to serviced land and housing with focus
on economically weaker sections and low-income group
categories;
 Land assembly, development and disposal to be encouraged by
both private and public sectors;
 Forging strong partnerships between public, private and
cooperative sectors for accelerated growth in the housing sector
and sustainable development of habitat;
 Accelerating the pace of development of housing and related
infrastructure;
 Creating adequate housing stock both on rental and ownership
basis with special emphasis on the economically weaker sections
through appropriate capital or interest subsidies; and
 Using technology to modernise the housing sector and enhance
energy and cost efficiency, productivity and quality.

12. POLICY FRAMEWORK AND REGULATIONS FOR
AFFORDABLE HOUSING
 Jawaharlal Nehru National Urban Renewal Mission (JNNURM), 2005
 JNNURM was launched in December 2005 with an aim to encourage
and expedite urban reforms in India. For the housing sector in
particular, its main aim was construction of 1.5 million houses for the
urban poor during the mission period (2005–2012) in 65 mission cities.
 Basic Services for the Urban Poor (BSUP)
 The scheme is managed by the Ministry of Urban Development. It
seeks to provide seven entitlements or services – security of tenure,
affordable housing, water, sanitation, health, education and social
security to low-income segments in the 65 mission cities
 Integrated Housing and Slum Development Programme (IHSDP)
 The scheme is applicable to all cities and towns as per 2001 census
except cities/towns covered under BSUP.
 The sharing of funds would be in the ratio of 80:20 between Central
Government and State Government/ULB/Beneficiaries.

13. POLICY FRAMEWORK AND REGULATIONS FOR
AFFORDABLE HOUSING
 Rajiv Awas Yojana (RAY)
The scope of RAY envisaged is as follows
 Integrated development of all existing slums, notified or non-notified, i.e.
Development of infrastructure and housing in the slums or rehabilitation colonies for
the slum dwellers or urban poor, including rental housing.
 Development, improvement and maintenance of basic services to the urban poor,
including water supply, sewerage, drainage, solid waste management, approach
and internal roads, street lighting, community facilities such as community toilets
and baths, informal sector markets and livelihoods centres.
 Other community facilities like preschools, child care centres, schools, health
centres to be undertaken in convergence with programmes of respective ministries.
 Convergence with health, education and social security schemes for the urban poor
and connectivity infrastructure for duly connecting slums with city-wide
infrastructure facilities and projects.
 Creation of affordable housing stock, including rental housing with the provision of
civic infrastructure and services, on ownership, rental or rental-purchase basis.

14. POLICY FRAMEWORK AND REGULATIONS FOR
AFFORDABLE HOUSING
 State Sponsored Initiatives
 Andhra Pradesh
 The Master plan of Hyderabad requires a reservation for affordable housing projects
that comprise a minimum area of 4 hectares. Of the developable area, 5% has to be
developed for EWS housing with the maximum plot size of 50 sqm. Another 5% is to be
allotted to LIG housing with a maximum plot size of 100 sqm.
 As per the provisions of this project, the government is to provide housing for such
income groups at a minimum of 25% less than the prevailing market rate.
 Maharashtra
The Maharashtra State Housing Policy (2007) promotes LIG and EWS housing along with
rental housing as a key objective.
 The state has also constituted a Slum Rehabilitation Authority (SRA) to focus on
rehabilitation as well as redevelopment of slums. This scheme is being implemented in
the cities of Mumbai, Pune and Nagpur.
 Additionally, the National Slum Dwellers’ Federation (NSDF) works actively with
Mumbai authorities to develop and implement resettlement plans and ensure that the
most vulnerable sections of society are not marginalised.

15. AFFORDABLE HOUSING STAKEHOLDERS
1) Government
 Interest Rate Subsidy
1% subsidy on loans upto INR 1 million for purchase of houses costing less than INR 2 million
 FSI (Floor Space Index)
Haryana & Tamil Nadu Government have announced increase in FSI for housing projects targeting lower and
middle income groups.
Tamil Nadu has announced 50 percent extra FSI for projects targeting EWS in Chennai Metropolitan Area (CMA)
Tamil Nadu has further announced 30 percent extra FSI for projects targeting MIG
 Resumption of Profits
Profits from housing projects approved between April 01, 2007 and March 31, 2008 will be made tax free if they
are completed by March 31, 2012
 PPP Measures
EWS rental project at Virar, Mumbai by MMRDA (Mumbai Metropolitan Regional Development Authority) and
HDIL(Housing Development and Infrastructure Limited); Bengal Ambuja Housing Project
Modification in JNNURM (Jawaharlal Nehru National Urban Renewal Mission) to encourage affordable housing on
PPP (Public Private Partnership) basis
 Policies
Launch of Rajiv Awas Yojana to promote slum free India

16. AFFORDABLE HOUSING STAKEHOLDERS
2) Real Estate Developers
 Private developers have been aggressively pursuing affordable housing post the
economic slump of 2008
 Developers have realized the opportunity and need of affordable housing and have
taken several steps to tap the same
 Developers have on an average reduced the prices by 30 percent in last one year
and are willing to operate at a lower margins
 Players like Tata Housing, DLF, Unitech, etc. have multi-city, pan-India plans of
developing 10,000 -15,000 units over next four years
 Tata Housing has taken the lead by launching an affordable housing project in
Boisar
 - Phase I will be allotted to LIG families – one room kitchen and one bed room hall kitchen
(BHK) flats upto INR 0.7 million
 - Phase II to MIG families – 2/3 BHK apartments at INR 1.2 million and above

17. STAKEHOLDERS CONCERNS
Source: KPMG’s report analysis

18. PROTOTYPE HOUSE – AN EMERGING
AFFORDABLE HOUSING OPTION
A prototype house, outlines the key components :
1. The multi-level structure consists of a skeleton free-standing concrete pillar and rigid floor as its
main organizing principle.
2. Floors are connected by in-situ cast concrete stairs and a toilet pan is placed on the level best
suited to the client – alternatively because of the small size of the plots.
3. Single brick walls enclose the toilet pan and the blackwater waste pipe work installed would
either connect to mains sewerage or a private tank.
4. Basic key enclosures are built using reclaimed material from the previous kutcha house or
purchased items such as cheap bamboo mats or tarpaulin.
5. The house is consolidated with more walls for increased privacy triggered for example, by the
arrival of a bride or a girl coming of age.
6. Alternative infilling can be used or cheap jali walls can offer partial segregation and improved air
circulation.

19. IMPACT OF AFFORDABLE HOUSING ON THE
SURROUNDING AREAS OR COMMUNITIES
Impact on surrounding Property Values:
 The impact of housing projects on surrounding property values
may depend on neighborhood context.
 In a review of literature on the topic, Ahrentzen (2008) found
that affordable housing is most likely to generate positive
results when located in low-poverty neighborhoods in low
concentrations (typically less than 50 units).
 In contrast, in high poverty neighborhoods, larger scale housing
projects generate the most positive impacts.
 Regardless of neighborhood context, affordable housing
projects generate the most neighborhood property value
benefits when replacing blighted conditions such as vacant lots
or abandoned buildings.

20. IMPACT OF AFFORDABLE HOUSING ON THE
SURROUNDING AREAS OR COMMUNITIES
Impact on Crime Rates:
 A common reason for neighborhood opposition to affordable housing
development is the fear that it will result in an increase in crime in the
neighborhood.
 According to research by Himle Horner (2009), the fear that affordable housing
residents will bring crime ranks as one of the strongest perceived negative
consequences of affordable housing projects.
 The most recent research has typically found that scale is the most important
factor in determining the effect of affordable housing on neighborhood crime.
 Several studies have found that when affordable units occur in small quantities
(typically less than 50 units), there is typically no impact on neighborhood crime.
However, large projects or a large concentration of affordable units within a
neighborhood may have the effect of increasing crime.

21. IMPACT OF AFFORDABLE HOUSING ON THE
SURROUNDING AREAS OR COMMUNITIES
Impact on Health Outcomes:
 Affordable housing impacts both the households that reside in it and
residents of the surrounding community.
 Research identifies numerous pathways through which poor housing
conditions may lead to negative health outcomes, especially through
exposure to hazards such as lead paint and risk factors for
respiratory illness. Additionally, research finds that households with
housing cost burdens frequently cut corners on spending on health
care and nutrition.
 Higher quality, affordable housing may improve health outcomes for
its residents by reducing exposure to hazards in poor quality
housing, improving neighborhood conditions, and reducing budgetary
constraints that prevent spending on health insurance and nutrition.

22. IMPACT OF AFFORDABLE HOUSING ON THE
SURROUNDING AREAS OR COMMUNITIES
Impact on Educational Outcomes:
 Affordable housing may improve educational outcomes to the extent that it improves
housing conditions among children previously living in overcrowded housing.
 Research has shown that overcrowding has a detrimental impact on education
outcomes for children. Braconi (2001) found that children living in crowded housing were
significantly less likely to complete high school; boys in crowded housing were 11% less
likely to graduate, while girls were 7% less likely to graduate.
 Conley (2001) found that children living in crowded housing completed on average three
months less schooling by age 25 than did children not experiencing sustained crowded
conditions in their housing.
 As affordable housing programs are specifically intended to provide quality living
environments and improve residential stability, it can be logically inferred that higher-
quality affordable housing improves education outcomes.

23. CONCLUSION

24. CONCLUSION
 While the basic necessities of life ‘ food, clothing, and shelter ‘ are increasingly becoming a
luxury and unaffordable, luxury items such as televisions, mobile phones, refrigerators, etc. are
become affordable.
 While we are often amazed at the progress our country has made when we see an auto
rickshaw driver with a mobile phone, we fail to notice that he is still living in a slum-like
dwelling.
 It is understandable that economic growth leads to rise in income but this has led to even faster
rise in property prices leaving it unaffordable for majority of population.
 Affordable housing is expected to have a positive by improving basic quality of life. Problems
like traffic congestion, air quality, commute times, etc. can be resolved by providing proper
housing facilities to the weaker sections of the society.
 While the concept of affordable housing seems to be a simple solution to current housing
woes, its execution remains complicated due to the unclear policy framework.
 To make affordable housing work in India, it would require ‘will’ from all the stakeholders by
slightly adjusting their interests towards a wider social cause.

25. CONCLUSION
 Unless the Government provides land for free or offers tax rebates, affordable housing will continue to
remain an elusive dream.
 Private Developers need to be incentivised and taxes must be reduced.
 The most important step, however, is to simplify the approval process. In India, the approval process
can take anywhere from 12 months to 18 months, and that's a long wait. In real estate, time equals
money, and the extra cost is automatically loaded on to the end user. A single window clearance
system will be the ideal solution.
 Besides, land acquisition rules must be streamlined, and less complicated.
 Affordable Housing finance needs to be extended to developers and consumers alike.
 Vocational training centres can be set up by the Government in partnership with private bodies to
train skilled and unskilled labour.
These steps though, if taken, Affordable Housing will then provide a much-needed fill-up to the
housing sector.