01 Dec 17 Affordable housing in India: Is this a paradigm shift?

Suddenly affordable housing for the poor and middle class Indian is “hot”. So much so that an asset management company, HDFC Mutual Fund has launched a new fund called “HDFC Housing Opportunities Fund”. This, even as the real estate sector is down in the dumps.

So what is happening?

Traditionally developers in India have preferred going after the premium housing segment, where sale value per unit and margins (if you can sell the units) are higher. After all, it’s less of a hassle (or used to be) to sell 10 units of Rs 5 crores, versus 200 units of Rs 25 Lakhs! However, the high-end of the real estate market has always been driven by investment demand and not by “real” demand. Today, people are chary of investing in real estate due to declining returns as well as the scrutiny and anti-black money initiatives of the government.

At the same time, substantial initiatives are being provided to “affordable housing”, such as:

• Infrastructure status for housing
• Pradhan Mantri Awas Yojna (PMAY)
• Housing for All
• Expansion of interest subsidy scheme under PMAY to larger units (up to 150 sq.m.)
• Declining interest rates
• Tax exemption for developers

All this is feeding into real demand. The demand for affordable housing is huge, as compared to the demand for high-end homes. And for the first time, the government appears determined and is pulling out all the stops.

Time will tell whether this is a game-changer or a paradigm shift – one that will not only create housing for all (or most) Indians and simultaneously boost employment and production of a vast variety of construction materials and building products.

The signs are positive, for sure – and that’s why we will probably see more funds like the “HDFC Housing Opportunities Fund”!