Delhi’s affordable housing situation, is a potential crisis

[ecis2016.org] With Delhi facing a potential housing shortage of 20 lakh units, we look at steps that the authorities need to urgently take, to achieve the government’s mission of Housing for All by 2022

The shortage of affordable housing in Delhi, should be viewed within the wider context of an overall housing shortage in the country. Housing supply in urban areas has not kept pace with the additional demand generated by growing urbanisation. There is an increasing trend of people moving to urban areas in search of employment opportunities, better infrastructure, better educational facilities, etc. India’s urban population is expected to reach about 600 million by 2031. Estimates suggest that during 2015-2031, the pace of urbanisation in India is likely to increase at a CAGR of 2.1 per cent, which is double that of China.

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Delhi being the capital city of India, sees a rush of migrants every year. According to the Economic Survey of 2017, Delhi, Gurugram, Noida and Greater Noida, received the maximum influx of migrants between 2001 and 2011. The average decadal growth in Delhi’s population since 1951 is 45.8 per cent, which is higher than the national average decadal growth rate. Migration accounts for more than 23 per cent of the total increase in population. Had there been no migration, Delhi’s decadal growth rate during 2001-2011 would have been lower than the national average of 17.64 per cent. Former chief minister Sheila Dikshit once warned that Delhi’s population, if unchecked, could touch 1.6 crores in 2021, a significant rise from the 1.3 crores now.

Housing demand and supply mismatch in Delhi-NCR

The increase in population has led to a rise in demand for homes, especially in the affordable housing category. The city faces a huge housing shortage. Delhi has a unique problem of low Floor Space Index (FSI) ratio, which means that the potential for vertical development is limited. There is not much land available in the city to develop affordable housing. This has led to an increase in demand for housing in Delhi’s suburbs, such as Gurugram, Noida and Greater Noida. However, according to the Delhi Master Plan, 2021, 20 lakh new dwelling units will still be required in Delhi, to accommodate the growing population.

Delhi is staring at a housing crisis, if measures are not taken to address the housing shortage. There are two primary reasons for the housing shortage. One is the non-availability of good quality land within the city’s municipal limits and the second reason is the reluctance of private sector real estate developers to build affordable homes. The general trend is to focus on premium homes instead of affordable housing, because the margins in this segment are wafer thin. Cost of construction has increased over the years and developers prefer building premium and luxury homes, which offer attractive margins.

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Government measures to boost affordable housing

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The government is well-aware of this and in the 2017 Union Budget, it announced several incentives to promote affordable housing. Infrastructure status was accorded to affordable housing, which will make it easier for developers of affordable homes to access finance at attractive rates.

It has also given 100 per cent deduction for profits to developers for flats up to 30 sq metres in Chennai, Delhi, Kolkata or Mumbai and 60 sq metres in other cities. These projects have to be approved during June 2016 to March 2019 and completed in three years.

The government is also partnering with private sector developers under a public-private partnership model, to make ‘Housing for All by 2022’ a reality.

[ecis2016.org] A business-friendly strategy, is the only way to create affordable housing

Recently, the Delhi government announced a land pooling policy to expand the urban limits of Delhi. In land pooling, a group of people pool their land and give it to the Delhi Development Authority (DDA) to develop basic infrastructure such as roads, sewage system, etc. The developed land is given back to land owners on the condition that the owners have to construct a certain percentage of economic housing on the land. The owners sell 50-60 per cent of this housing to the DDA at Rs 2,000 per sq ft and the DDA in turn, sells these homes to the economically weaker sections of the society.

In the recent land pooling policy, the government has said that it will notify 89 villages as ‘development areas’. This will unlock around 20,000-25,000 hectares of land across Delhi, mostly in urban villages and smaller towns at the city’s peripheries, for real estate development. It is expected that 10 lakh housing units will be developed in Delhi in locations such as Bawana, Narela, Dwarka and Rohini, out of which 2.5 lakh units will be in the affordable housing segment. These 10 lakh units will meet the needs of around 95 lakh people.

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Private sector participation in affordable housing

Government measures aside, the private sector has also started taking an interest in affordable housing. Many developers have announced plans to develop affordable housing, after the government incentivised it through measures such as granting industry status to the affordable housing sector and launching an affordable housing fund. It is estimated that the market size for affordable housing in urban India will grow to 38 million in 2030.

In Delhi, measures such as the land pooling policy will release good quality land for affordable housing. Some of the city’s housing shortage will also be met by neighbouring suburbs such as Noida, which are seeing a flurry of launches in the affordable housing segment.

Concerted efforts by the government and an increased interest in affordable housing from the private sector, should help in easing the housing shortage in Delhi. In the long term, however, measures such as unlocking unutilised/underutilised parcels of land and possibly increasing the FSI limit in some parts of the city would be needed, to meet the growing demand for housing.

(The writer is associate dean and director, School of Real Estate, RICS School of Built Environment)

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Source: https://ecis2016.org
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