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Low Cost Housing – India

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Urban India has a shortage of 25 million homes and half of them correspond to low income housing. This situation is more tragic in metropolitan areas where every year millions of poor people from neighboring states and cities throng in a hope of better standard of living. But, with growing demand of housing in metropolitan areas and consequently increase in its price, it is very difficult for majority of population to buy a house as a result they have no other alternative except for living in shanties or in rented accommodation.

With so much demand for affordable housing in the market, why has low-cost housing remained a distant dream in big metros like Mumbai and Delhi?  There is a short-supply of land for developers. There is enough unused primeland under railways and defense but it can’t be used for development, government of India owns 2/3 of land but it imposes restrictions on land ownership for private developers. Even privately-held land is locked into legal disputes. So when land is available, the last thing on a developer’s mind is low-cost housing. So, in a nut-shell, government is the main culprit behind non-availability of affordable housing for people.

Another reason behind short supply of affordable housing is low revenues associated with it. Developers usually chase opportunities that offer the highest returns – commercial office space and high-end homes. Large builders like DLF, Rahejas or Hiranandani would make 25 to 30 per cent returns on such an investment, assuming it has bought the land at going market rates. As a result, returns are often huge.

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June 27, 2010 Uncategorized Neha Verma

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