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Housing Deficit Situation in the Country

India is regarded as one of the fastest growing economies in the world, and as a country, it has seen a large scale countrywide rural to urban migration in recent years. Today, more and more people are rushing towards their nearest city or town to comprehend bigger dreams in life, and this continuous movement of people from rural to urban regions of the nation has given birth to one of the biggest problems in the country- The Housing Deficit.

With the growing concentration of urban dwellers, the number of people living in slums has also increased simultaneously, and the increasing prices of the land and real estate in the major cities of the country have forced the economically weaker section of the society to occupy the marginal lands with poor living conditions and inadequate living facilities. It is now quite evident from the current scenario of the country, that there exists a huge demand-supply gap in the housing sector, and it needs to be addressed soon.

Since EWS (economically weaker section) and LIG (low-income group) comprise almost 95% of the total housing deficit pool, we have put together a list of key points, which we think might be the biggest reasons behind this housing space shortage scenario in the country.

1. Scare Urban Land

As per the data collected by Federation of Indian Chambers of Commerce (FICCI), India will see a net increase of about 900 million people in the urban landscape of the country, and the rate of urbanization (2012-2050) is likely to increase at the CAGR of 2.1 per cent, which is almost double than that of China. With the rapid industrialization human density in the urban locations have gone up significantly, and on top of that, poor management of the land resources by the government entities have given rise to a hoax land shortage scenario, which in turn has restricted the access of affordable land and housing schemes to big developers further adding to the misery of the urban residents.

2. Approval Delays From Civic Authorities

As per an estimate it is believed that the real estate developers have to float their files across 150 tables in 40 different government departments for approvals before they can actually start working on the project. This long and tedious process of approvals and delays add about 25-30% extra cost to the project, making the final outcome more expensive and out of budget for the middle-class civilians.

3.Continuous Price Surge in Construction Costs

if we just focus on the affordable housing scheme projects rather than premium projects, we find that the selling price of affordable schemes comprise 50-60% of the construction costs, and in the past years this cost has been rising at a constant rate. Raw materials such as cement, sand and steel have seen a surge in their prices, and labour costs have gone up with time, owing to the government employment guarantee schemes. All these factors cumulatively have made affordable housing schemes not so affordable anymore.

4. Avalability of Skilled Manforce

India lacks skilled manpower in the real estate industry by a large percentage, owing to the lack of proper education and training institutes in the country that would produce efficient and skilled labours. Though it might not be seen as a big problem by the government today, but looking at countries like Japan, we can be sure that skilled man force plays a very vital role in the infrastructure development of a country.

5. Finance Availability to EWS & LIG Section

due to shortage of finance options available to EWS and LIG section of the country, people who don’t have collateral to back their loans or people who have fluctuating farming income, find it difficult to secure housing loans, this leads to a very dire situation in the country where people with money are given more of it, while people in need are left hanging amidst the formalities. The loan market for 3-10 lacks amount is estimated to be worth around 10-11lac crore in India, but still, as per FY2011 data, only about 20% of that value was disbursed to the lower-income groups by housing finance companies.

6. Taxation and Government Laws Shortcomings

Due to lack of proper guidelines and taxation laws in the real estate industry, it is not quite clear yet, if the real estate is considered as product or service by the taxation authorities. The central government, state governments and other local authorities levy multiple indirect taxes on the real estate projects, which leads to increase in the overall pricing of the affordable schemes. The stamp duties vary from 5 to 15 per cent across different states in the country and without a proper taxation roadmap and laws, this issue will only get more complex over time.

All these above-listed points are a FEW but not ALL the reasons behind the rising housing deficit situation in the country, but looking at the past trends of the real estate industry, if we could address at least these concerns, we would be able to make some significant progress in eradiating the housing problems of the urban India.


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