LOW COST HOUSING A BIG OPPORTUNITY

Low-income urban families need 15 million homes in a price range of Rs 4-10 lakh, presenting an untapped opportunity of a whopping Rs 9 lakh crore for real estate developers, according to a report by Deloitte India. At least 30,500 housing units were launched below Rs 10 lakh by private developers across 22 cities between June 2011 and January 2013, of which maximum (nearly 39 per cent) were in Gujarat. There is an increased interest in supplying housing and housing finance to low-income customers but the gap between supply and need is huge, according to the report 'State of the Low-Income Housing Market' launched by Housing and Urban Poverty Alleviation Secretary Arun Kumar Misra. "There is a large proportion of low-income urban families, with a monthly household income of Rs 10,000-25,000, who can afford privately build formal housing costing Rs 4-10 lakh without any aid from the government. "There is an estimated demand of 15 million homes from these low-income customers, which translates into an opportunity of Rs 9 lakh crore for developers and Rs 7 lakh crore for housing finance companies," Deloitte said. The housing finance, which was almost non-existent for these low-income customers 5 years ago, is now accessible with over 10 housing finance firms lending to low income customers. The report highlighted that three cities -- Ahmedabad, Mumbai and Indore -- are leading in providing housing below Rs 10 lakh with over 20 projects in each city. "The western and central states of Gujarat, Maharashtra and Madhya Pradesh are doing better than the rest of the country. In the northern region, there is a limited LIH supply," the report said. Out of 30,668 homes launched during June 2011 to January 2013 period, Gujarat witnessed maximum supply of 11,823 units followed by Maharashtra and Madhya Pradesh with 8513 and 4759 units, respectively. Asked about the reason for Gujarat being ahead of other states, the co-author of the report Ashish Karamchandani said: "Developers in Gujarat had entered in the low-income housing earlier. Also, the approval time for projects is faster."  
The study covered research in 22 cities, interviews of 27 active developers and 9 HFCs serving the low-income customer and survey of 700 low-income customers. Developers, covered in this study, cited challenges like rising land prices, high construction cost and long approval timelines. Fifty-nine per cent of the surveyed developers considered the tedious approval process to be one of the top two challenges to their business. Some developers reported an approval time-frame of 18-36 months for their projects. If the approvals were much quicker the same developer with the same capital could produce twice as many LIH units. The housing finance industry is serving the low-income customers well. Eight HFCs that were included in the study, started after 2007, have a combined loan portfolio of Rs 1,000 crore, are growing at 100-300 per annum and have near zero NPAs.