Final Report Affordable Housing Sector in India
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FINAL REPORT AFFORDABLE HOUSING SECTOR IN INDIA Prepared for: DEPARTMENT FOR INTERNATIONAL DEVELOPMENT Prepared by: KNIGHT FRANK INDIA PVT. LTD I ABBREVIATIONS Securitisation and Reconstruction of Financial GoI Government of India SARFAESI Assets and Enforcement of Security Interest HFCs Housing Finance Companies SCB Scheduled Commercial Banks National Bank for Agriculture and Rural NABARD PSB Public Sector Banks Development NBFC Non-Banking Financial Company AHFC’s Affordable Housing Finance Companies PSU Public Sector Unit/Undertaking y-o-y Year-on-Year IFC International Finance Corporation C.B. Cantonment Board/Cantonment CBD Central Business District G.P. Gram Panchayat CDP City Development Plan M. Municipality DP Development Plan M.B. Municipal Board HH’s House Hold’s M.C. Municipal Committee GNPA Gross Non-Performing Assets M.Cl. Municipal Council IT Information and Technology M.Corp. Municipal Corporation/Corporation ITES Information & Technology Enabled Services N.A. Notified Area KPO Knowledge Process Outsourcing N.A.C. Notified Area Committee/Notified Council EWS Economically Weaker Section N.P. Nagar Panchyat LIG Low Income Group N.T. Notified Town MIG Middle Income Group C.T. Census Town UMIG Upper Middle-Income Group U.A. Urban Agglomeration HIG Higher Income Group O.G. Outgrowth PBD Peripheral Business District IRR Internal Rate of Return SBD Suburban Business District No’s Numbers SEZ Special Economic Zone INR./sq.ft. Rupees per Square Feet BUA Built Up Area Sq.ft. Square Feet COC Cost of Construction Sq.m. Square Meter FSI Floor Space Index II TABLE OF CONTENTS ABBREVIATIONS ............................................................................................................................................... I TABLE OF CONTENTS ........................................................................................................................................ II INTRODUCTION ..............................................................................................................................................III EXECUTIVE SUMMARY ................................................................................................................................... IV DEFINITIONS ................................................................................................................................................ VIII DEFINING AFFORDABLE HOUSING .................................................................................................................. X DEFINING INFORMAL SECTOR ....................................................................................................................... XII APPROACH & METHODOLOGY ......................................................................................................................... 1 1 GROWTH OF POPULATION IN INDIA ........................................................................................................ 2 2 URBANISATION IN INDIA ....................................................................................................................... 16 3 STATE OF AFFORDABLE HOUSING IN INDIA ........................................................................................... 25 4 PREVALENCE OF SLUMS IN INDIA .......................................................................................................... 31 5 SHORTAGE OF AFFORDABLE HOUSING IN URBAN INDIA ....................................................................... 43 6 ROLE OF NON-GOVERNMENT ORGANISATIONS (NGOS) TO PROMOTE AFFORDABLE HOUSING ............ 50 7 INFORMAL INCOME SEGMENT IN INDIA ................................................................................................ 81 8 DEMAND FOR LOW COST AFFORDABLE HOUSING IN INDIA .................................................................. 87 9 HOUSING FINANCE MARKET IN INDIA ................................................................................................... 96 10 AFFORDABLE HOUSING POLICIES - INDIA ............................................................................................ 116 12 INNOVATIONS IN AFFORDABLE HOUSING SECTOR IN INDIA ................................................................ 153 13 INTERNATIONAL CASE STUDIES ........................................................................................................... 156 14 RECOMMENDATIONS .......................................................................................................................... 174 15 REFERENCES ........................................................................................................................................ 177 III INTRODUCTION Department for International Development (DFID), is a United Kingdom government department responsible for administering overseas aid to promote sustainable development and eliminate world poverty. DFID's main programme areas of work are Education, Health, Social Services, Water Supply and Sanitation, Government and Civil Society, Economic Sector (including Infrastructure, Production Sectors and Developing Planning), Environment Protection, Research, and Humanitarian Assistance. Affordable housing is a major area which offers DFID scope to make interventions to correct the demand-supply asymmetry in the low-cost housing finance market in India. The possible scope for intervention arises due to the following • Nearly 85 percent of the demand for housing in India is from the EWS – Economically Weaker Section and LIG – Low Income Group segment of the population. • Housing Finance companies and Scheduled Commercial Banks are not focusing on this sector, owing to high cost of operations as well as higher chance of loan defaults. • Regulations in few states forbid Housing finance companies to provide loans to slum households. In order to understand the possible intervention areas in the field of low-cost housing aimed at EWS – Economically Weaker Sections and LIG– Low Income Group segments of the Indian population, DFID has engaged Knight Frank India Pvt. Ltd, to undertake a research study on state of the Affordable Housing sector in India. This research report on “Affordable Housing Sector in India” provides a detailed understanding of the demand for affordable housing, the state of the affordable, various stakeholders involved and the prevalent regulatory scenario in the low-cost affordable housing sector in India. IV EXECUTIVE SUMMARY Despite being one of the fastest growing economies in the world, a significant majority of households in urban as well as rural India are devoid of adequate housing. The Ministry of Housing and Urban Poverty Alleviation had estimated an urban housing shortage of 18.78 million units in 2012, which stood revised at 10 million in the year 2017. Although 95 percent of the urban housing shortage is primarily driven by EWS (Economically Weaker Sections) and LIG (Low Income Group) segments, most of the capacity addition has been going on in the segments beyond the reach of EWS and LIG customers. This ever increasing gap between demand and supply in the affordable housing segment is forcing people to live in slums and informal settlements in urban areas without proper civic amenities and facilities. It is evident that the issue, if not dealt with effectively, will have negative impact on the country’s economic growth and poverty reduction efforts. In this regard, the research study “Affordable Housing Sector in India” is an effort to understand the state of low-cost affordable housing sector in India and seven focus states (Uttar Pradesh, Madhya Pradesh, Jharkhand, West Bengal, Chhattisgarh and Rajasthan). The study has made special focus in analysing factors driving demand for low cost housing such as growth of population, growing urbanisation, proliferation of slums, demand supply scenario, housing gap and impact, state of the low cost affordable housing finance market & addressable opportunity, various measures undertaken by the government through policy and its impact so as to ascertain the possible interventions that are required to be undertaken to bridge the demand-supply gap and improve the accessibility of the EWS and LIG sector towards dignified housing. Growth of Population, Urbanisation and Impact The growth of population with rising levels of urbanisation in India has resulted in increasing pressure on the housing sector as well as the basic urban infrastructure and services provided in the cities. Apart from organic growth of the urban population, employment-based migration appears to be the biggest driver for urbanisation. As a result, Urban population in India is expected to grow from the current 31 percent to 53 percent by 2050. Displacement of labour force from the rural economy and their absorption in manufacturing and other labour-intensive sectors in cities has created serious stress on the urban infrastructure. The capacity of the cities and towns to assimilate the migrants by providing employment, access to land, basic amenities etc. has remained limited and not expanded in line with the demand. This has led to emergence of slums or squatter settlements in urban locations with poor housing conditions and lack of civic amenities. The slum population in India has increased from 52 million in 2001 to 65 million in 2011. Data from Census 2011 suggests that nearly 18 per cent of India’s urban population live in slums or squatter settlements due to the non-availability of decent affordable housing in urban areas. Unavailability of urban land for affordable