The demand within the affordable housing segment remains robust. Given that the target customer of this segment typically relies on bank funding. Consequently, ICRA research has taken a note of the significant growth in the sub Rs 250 million category.
Housing has been universally recognised as a basic human need and requirement. While the attributes, quality and requisites for housing vary depending on the cultural as well as socio-economic references, the fundamental tenets for housing include adequacy (with respect to the requirements), security as well as accessibility. With affordability being a relative concept, the definition of affordable housing also varies depending on the home price as well as the income level of the target group (or the household in question). The home price, in turn, is a function of the city or the market or location, size of the dwelling and the amenities available.
The High Level Task Force on Affordable Housing for All, appointed by the Ministry of Housing and Urban Poverty Alleviation (MoHUPA), described the affordable housing as an adequate shelter, at an affordable cost in relation to the household's income. As per the High Level Task Force's report dated December 2008, affordable housing is reckoned in terms of:
(i) Multiples of household income
(ii) Size of the tenement
(iii) In case of rented accommodation, in terms of the percentage of the household income.
Further, the report draws inspiration from the United Nations Habitat Agenda, which defines adequate housing as much more than a physical shelter. 'It also means adequate privacy, adequate space, physical accessibility, adequate security, security of tenure, structural stability and durability, adequate lighting, heating and ventilation, adequate basic infrastructure such as watersupply, sanitation and waste management facilities, suitable environmental quality and health-related factors and adequate and accessible location with regard to work and basic facilities; all of which should be available at an affordable cost (The Habitat Agenda Goals and Principles, Commitments and the Global Plan of Action, 2003).'
The demand for housing is expected to remain strong, supported by the growing population as well as young demographic profile (50 per cent of the population below 25 years of age) and a shift towards nuclear families.
As per Census 2011, the population of India stood at 1.21 billion, having grown by 18 per cent in the past decade (decadal growth). The share of urban population in the total population of the country increased from 28 per cent to 31 per cent in the same period, highlighting the increasing urbanisation in the country. The urban population increased from 285 million in 2001 to 377 million in 2011, reporting an astounding decadal growth of 32 per cent.
The total number of urban units, which includes all places with a municipality, corporation, cantonment board or notified town area committee or those satisfying minimum criterion of the population occupation as well as population density, increased by 54 per cent in the past decade.
Given the wide disparity in the household income in the country and the high real estate prices, which acts as a deterrent for buyers, a predominant share of this demand for housing would be concentrated in the low affordable housing segments.
The distribution of the households by the annual income level as defined by the National Council of Applied Economic Research (NCAER) is given in the exhibit below. Despite various initiatives taken by the government to improve housing access for the population, a significant gap exists between the demand and supply for housing in the country. Some of the key factors behind this shortage include low income levels and affordability, rapid urbanisation and demand growth, congestion and land availability constraints in urban areas. While housing construction in India remains primarily an individual enterprise, private developers and government local bodies are playing an increasingly larger role in catering to the demand through group housing projects, especially in urban areas.
To improve the availability of housing and tap the demand potential from large segments of the population that are currently not addressed, the government unveiled various schemes and legislation. The Pradhan Mantri Awas Yojana (PMAY) scheme is one such scheme that aims to build around 30 million houses in rural areas by 2022 (PMAY-Gramin, launched in November 2016) and another 12 million houses in urban areas (PMAY-Urban, launched in June 2015). The progress under PMAY-G has been reasonably satisfactory, with a total of 3.75 million houses having been built till March 2018 as against an immediate target of 10 million houses by March 2019. Till September 6, 2018, 4.78 million houses have been completed. The performance under PMAY-U has been less than satisfactory, with the number of houses completed by March 2018 at 0.4 million units, which is around 3 per cent of the total target to be achieved by 2022. The same has improved to 0.83 million units as on August 6, 2018.
The budgetary allocation under the PMAY-G has been at Rs 160 billion in 2016-17, Rs 230 billion in 2017-18 and Rs 210 billion in 2018-19 budgets. The budgetary allocation under the PMAY-U has been at Rs 48 billion in 2016-17, Rs 60 billion in 2017-18 and Rs 65 billion in 2018-19 budgets. Some of the constraints faced under this scheme are the availability of land in urban areas, relatively low fund allocation, delays in construction of houses by beneficiaries and challenges in verification of beneficiary applications.
In ICRA's view, increasing access to low-cost land, the type of support extended by the state governments and urban local bodies as well as the ability to arrange the required finances are some of the critical success factors for this scheme. It may be noted that, both PMAY-U and PMAY-G are heavily reliant on extra budgetary resources of Rs 250 billion and Rs 120 billion, respectively in 2018-19 and similar levels can be expected in the years going ahead also in order to meet the targets. Over the next four years, Rs 600 billion is expected to be raised through the National Urban Housing Fund to support the funding under the PMAY-U scheme.
The demand within the affordable housing segment remains robust. Given that the target customer of this segment typically relies on bank funding. Consequently, the ICRA research has taken note of a significant growth in the sub Rs 250 million category. The trend in disbursements for HFCs and public sector banks is presented below:
As can be seen from exhibit above, 47 per cent of the incremental disbursements for home loans were in the sub Rs 250 million category. Further, HFCs have a sizeable share of disbursements in the sub Rs 100 million category.
As per the ICRA research, 60 per cent of the market portfolio was concentrated in the Rs 100-500 million segment, with only 16 per cent of the portfolio in the sub Rs 100 million category.
Overall, the number of beneficiaries in the affordable housing segment and the loan disbursements has seen a sharp rise over the last few years. Correspondingly, the Non-Performing Assets (NPA) of the institutions involved in lending to this segment have also increased moderately in 2016-17. Among all slabs, housing loans up to Rs 20 million had the highest level of NPAs and the PSBs reported higher NPAs than the HFCs in the last two fiscal years.
The exhibit below has the trend in NPAs. The real estate sector has been witnessing demand headwinds, especially in the luxury and super luxury segment. Going forward, the affordable housing segment is expected to grow faster on account of various steps announced by the government to promote the demand and supply in this segment. Also, from a social welfare perspective, safe and affordable housing will remain one of the critical requirements of the population in a country like India.