New Delhi: The affordable housing market in India that is increasingly being targeted by developers is worth at least Rs3 trillion and will see demand for 2.06 million homes by 2011, a survey conducted by property consultant Knight Frank India has found.
Although buyers with an annual income of between Rs3 lakh and Rs10 lakh will drive demand for affordable houses, around 80% of the demand is expected to come from those earning between Rs3 lakh and Rs6 lakh a year, a report based on the survey said.
“Basically, what we are saying is that a house is considered affordable when it costs five times the buyers’ gross annual income,” Pranay Vakil, chairman, Knight Frank India, said. “So, if a person’s gross annual income is Rs3 lakh, the maximum that he can afford to buy is a Rs15 lakh house.”
The report, titled Affordable Housing: Understanding the Drivers, is based on a survey conducted across 1,400 households in seven cities including Mumbai, Chennai, Bangalore, Hyderabad, Kolkata, Pune and the national capital region (NCR).
Mumbai, Bangalore and the NCR, which includes New Delhi and its suburbs, are the most unaffordable cities because of the high cost of land, while Kolkata and Pune have a large number of affordable locations , the survey found.
For instance, in the NCR, a house that can be sold within Rs1,600-2,200 per sq. ft is considered affordable. However, due to the high cost of land in the region, it is difficult for builders to provide apartments in that price range, the report said.
“There is no disputing the fact that there is demand for affordable homes in the Rs10-20 lakh range but how much of that can be developed by private developers is the question,” R. Nagaraju, head, corporate planning and strategy, Unitech Ltd, said. “Not all of the demand for affordable housing can be met by real estate developers, so the demand needs to be met by both developers and the government, which can pitch in by supplying land.”
In Mumbai, where land is expensive, it is difficult for middle-income households to buy a house within the city. Households with annual incomes of Rs6-8 lakh, that prefer residences of 750-800 sq. ft, may not be able to pay beyond Rs3,400-3,800 per sq. ft—a range not available in most residential locations according to the report.
There is also a sizeable gap between the preferences of buyers and affordable housing projects being developed. While many such projects have been announced by developers, the locations do not always have adequate infrastructure, the study said.
While most households preferred homes between 550 sq. ft and 1,200 sq. ft in size, many of the affordable housing projects offer apartments that are at least 1,200 sq. ft; thus, even though a project may be affordable on the basis of its per sq. ft rate, the large size of the apartments ends up making it unaffordable, the study said.