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.

Affordable Housing

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”!

Arun Jethmalani

Arun is one of the founders of ValueNotes. Apart from trying to build a high-quality research business, he has spent the last 27 years researching, analyzing, and dissecting companies and industries. He has worked with clients of all shapes and sizes, from all parts of the world – in providing them insights that make a difference to their business.
Prior to ValueNotes, he was an equity analyst/advisor, and wrote extensively on investing – including a column titled “Value for Money” which ran for 10 years in the Sunday edition of the Economic Times. To this day, he remains an avid “value” investor.
He has also been published in several other publications, and is a regular speaker at events related to technology, investing, competitive intelligence, business process management, Internet, etc. See: Valuenotes Events
He has been instrumental in developing a community of research and intelligence professionals in India, and is the founder and current chairman of the SCIP (India) Chapter. Arun holds a B Tech from IIT, Bombay and an MS from Duke University, NC, USA. LinkedIn Profile

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