Census data reveals that around 70% of India’s population lives in its villages. However, experts also estimate that nearly 600 million people would move towards urban housing by the year 2031. Staggering as it may be in contrast to the 2011 census numbers, it begs the question that are we even ready for this explosive growth?
Our infrastructure systems need massive upgrades to handle these demands. Most of these home seekers would move towards securing a home loan for their housing aspirations and try to find the best offers.
However, rural constituents from India’s low minority classes have a unique set of roadblocks to the dream of an urban home.
Financial knowledge
The LIG and EWS section of Indian society are generally devoid of financial literacy. Most of them would not use credit cards, have salary slips, banking or credit histories to pass financial obligations set by lending institutions.
- The lack of financial know-how either makes them miss the opportunities for affordable housing for a long time or sets them for monetary exploitation
- Financial institutions that provide education to the weaker section can generate a win-win situation by empowering the people and creating more lending opportunities for their organisations
- Some of them who may know the basics of banking would still be put off by seemingly hefty processes of documentation involved with securing loans. They are also wary of things like collateral against loans. Only the right financial know-how from a credible source can change this
Socio-economic pressures
Data suggests that the minorities residing in rural areas have significantly lower per capita income than their urban counterparts. Agricultural incomes are not always steady and are heavily affected by external factors like climate. As a result, the financial situation that the rural minorities are in does not fare well with the banking institutions’ prerequisites for home loans.
- The incomes from singular sources like agriculture do not result in large savings, credit history and real-estate. This makes it difficult for potential buyers to secure a healthy amount of loan from lenders
- Especially for this section of the society that has lower annual incomes and usually larger families, affordable housing is a tricky business. Most people looking to buy their first house want it in the city, but shelling out INR 40-50 lakhs is unimaginable for them
Demand vs supply
While the demand for affordable housing is ever rising, the supply is massively lagging. One of the key reasons for this is the unavailability of land in the urban areas and lengthy approval process for projects.
- Dynamically executed housing projects have been successful worldwide – Hong Kong and Malaysia have seen how creating affordable housing for a large chunk of their population led to a massive boost in their economy
- Reports suggest that by the year 2030, 25 million more such units would be required in India, but the supply trajectory shows high variation against the requirements
Ownership costs and connectivity
Most of the taxes and fees like VAT, service tax and stamp duty increase the cost of the home by one third the price. This is a huge, unnecessary burden on the already economically weak!
- These additional costs are more in line with high-end housing schemes. Reductions in these would mean the removal of a huge roadblock to individuals seeking affordable housing
- Lack of significant chunks of land for affordable housing projects drives them to the edges of cities. This, in turn, leads to transportation issues – efficient public transport services from the city centres and business parks to housing services are necessary to foster quicker movements
A worthy goal
The affordable housing sector, specially geared towards the low-income sections of minorities has a diverse set of stakeholders, both government and private entities such as trusts, banks and state governments.
- If they continue working with a singular vision and precise implementation of strategies, the country can meet its growing demands with flying colours
- The documentation and approvals for projects catering to these demands can be sourced via a one-stop-shop for quicker processing. Timely approvals will enhance the confidence of the community
Empathy towards the EWS, LIG and low minorities and a comprehensive approach by all the stakeholders would set us on the right track
Successful creation of projects to meet the demands of affordable home buyers, enhancing their financial know-how and improving things like transportation will empower the low-income class minorities to apply and get home loans, leading to economic prosperity for them and the nation.
