Hidden in Low-Cost Housing: Rs 13 Lakh Crore for Developers

Monday, December 21, 2009

Even as large established developers shy away from the underserved affordable housing market in urban india, the shortage in the low-income housing segment — estimated to be around 2.1 crore households — presents a Rs 13 lakh crore opportunity for developers.

Housing finance for the low-income segment, defined as those with a monthly household income between Rs 7,000 and Rs 24,000, has been categorised as untested but relatively low-risk segment with significant business potential, according to a recent study by Mumbai-based Monitor Group, a global consulting firm.

The study has projected housing demand in different price categories and mapped the availability of housing finance for them.

At the bottom of the pyramid, with monthly household income levels between Rs 5,000 and Rs 20,000, the affordability of a house has been defined as between Rs 3 lakh and Rs 10 lakh. At this price, there could be potential of 21 million house buyers.

“Research shows that market-based solutions to address housing shortage for this segment can be found, which are profitable too,” said Monitor Group chief executive officer Ashish Karamchandani.

While financing is readily available for those with a monthly household income above Rs 12,000, the study shows that financing is negligible for those with lower household incomes belonging to the informal sector. The study defines affordability as households which have an equated monthly installment/monthly household income ratio of 40 per cent of a home loan which has a 20 per cent down payment on a home value.

Source: Indian Express (link opens in a new window)