Affordable housing - myth or reality?

Even if you earn Rs 50,000 a month, you cannot own a home in Delhi NCR. DNA analysed the middle-income range of officially affordable categories and found housing prices are beyond affordable for most of the working population.

On the basis of RBI's affordability, EMI, and income ratio, you would rarely get a house within Rs 20,00,000 in the NCR area of Ghaziabad, Noida or Gurgaon.

If a person is making Rs 50,000 a month, let us assume he or she can afford an EMI of Rs 20,000 a month for at least an 800 square feet flat. Now, keeping in mind the thumb rule of Rs 1,000 EMI per lakh, he or she can afford a house priced at Rs 20 lakh. If we compare this affordability ratio to prices in the micro-market of Delhi NCR, there's barely any project available in the range.

These calculations are based on the lowest price range used by 99Acre.com's 'Insite Report 2018 (July-September)'.

Three years ago, the RBI had analysed the housing market on the basis of bank data and had come out with an interesting result about the affordability of home buyers. The report revealed that 40 per cent of a person's gross income can be paid to own a house. The EMI as a percentage of his or her income was based on the interest rate and price of the house.

Based on an individual's capacity to pay, especially capacity to pay EMIs, the price of houses is set. But, quite the opposite happens. Whereas, the cut-off should be based on public policy.

Affordable housing has been morphed from being a public policy initiative to being a marketing exercise. The correct sequence would be to first establish the spectrum of purchasing power of people in a city or town, and then decide on a cut-off above which homes can be made affordable.

Sanjay Sharma, MD and founder of real estate exchange firm QuBREX said to DNA, "The affordable housing rates are first decided (for example Rs 4,000 per square feet in Haryana) and then, it just becomes a marketing exercise to identify the people who can afford it."

Also Read: Housing for niche clients no more in the lap of luxury​

It could be a reason that Delhi NCR has the maximum unsold 'affordable stock' comprising nearly 30 per cent, followed by MMR with 20 per cent.

Affordable housing schemes have not been applied in its true spirit in India. It just has provided an opportunity for builders to seek buyers who are willing to accept a little lower price in exchange for higher population density and lesser amenities; and the government's changing rules have made it possible for private builders to build more units in the same piece of land, and also to reduce costs by providing lesser amenities.

The Economically Weaker Sections (EWS) and Middle Income Groups (MIG) are the official criteria for affordable housing.

According to the Ministry of Housing and Urban Poverty Alleviation, affordable housing is defined on the basis of property size, its price, and the buyer's income. For instance, for the EWS, an affordable house must measure between 300 and 500 square feet with prices below Rs 5,00,000 and Rs 4,000-5,000 as monthly EMIs. The income ratios, in this case, should be 2:3. These numbers change for the Lower Income Groups (LIG) and the Mid-Income Groups (MIG).

Pricing data of NCR reveals that no single project is available in this category.

However, if you earn enough to fulfil the official criterion of affordable housing of Middle-Income Groups (MIG) under the Pradhan Mantri Awas Yojana (Urban), you can plan to buy a house by compromising on the maximum carpet area.

There are two categories-MIG-I and MIG-II. People who earn between Rs 6-12 lakh or have an average monthly income of Rs 75,000 will be lucky to find a house within Rs 30,00,000. However, if your income is between Rs 12-18 lakh or your monthly income is Rs 1.25 lakh, you can think of availing the benefit of MIG-II categories. Under the MIG-II category, one can still afford a house worth Rs 50,00,000.

An official of a property consultancy firm, said, "Since the Modi government took charge in 2014 and envisioned to provide 'Housing to All by 2022,' the term 'affordable' has become one of the most misused terms in the Indian real estate. The term is being used too loosely by a few developers to attract homebuyers for their unsold stock that sometimes compromises on quality, location and amenities."