Policy Changes Key To Affordable Housing

Bangalore: Affordable housing is the key to India's realty industry being able to change lanes to the fast track but cost escalations due to delayed permissions, lack of access to cheap credit and shortage of building material are proving to be major hurdles. The solution: Policy changes covering land to lending.

The demand for affordable homes alone, in the range of 1-5 million, is in the range of five million. Over a third of new homes are in this category. According to industry statistics, out of 500,000 homes to be delivered this year, a large part will be the affordable housing segment.

But the affordability of home-buyers has been severely hit by cost escalations and high project cost is proving to be the main deterrent. The lack of sustained funds flow to the realty industry not only restricts supplies, leading to housing shortage (mostly in the affordable category), but also results in a spurt in property prices.

Amid this liquidity crisis, a large number of realty companies today find themselves in a debt trap. So much so that promoters of a few companies have pledged a major part of their holdings to seek debt. There is a need to ease bank funding and make foreign direct investment and external commercial borrowings more accessible to developers.

On the private equity front, statistics show that such investments in the residential segment registered a 50 per cent decline compared to the office realty space, as these investors were more interested in income-generating assets.