At every conference, every seminar, every meeting, eminent speakers from the Real Estate Industry and Housing Finance Industry have been speaking about the affordable housing. It is a known fact that the demand for residential housing is ever increasing, particularly in the higher and lower income groups. Housing for the poor classes is always an issue, which remains unsolved, since no one is interested in taking up the housing projects for these people. Apart from the affluent class, middle class (higher as well as lower) and poor class, there is one class that is people below poverty line (BPL) which, it seems, has never been addressed. The demand for houses for middle and poor class is said to be quite high, but the property developers seem to be not very much interested in taking up any projects as the profit margin will be comparatively low.
Affordability is a relative term. It varies from people to people, even person to person. There are people who can afford to have housel flat costing Rs.75crore and there are people who cannot purchase a house/flat even costing Rs.5lakh without raising a loan. They cannot pay even the interest on such loans. Now-a-days the loan facilities are available easily and people do try to have their own houses flats by raising loans. Of course, people in the urban areas, particularly in major cities and Metros, put themselves in ‘search’ mode and try to purchase a dwelling accommodation affordable for them.
The property developers organize, through their associations, periodically exhibitions, property Melas etc. in the major cities for promoting their properties. To attract the NRIs, exhibitions and melas are organized by the property developers in other countries, especially in the middle east.
As we are talking about affordability, who can afford is a matter that is perhaps decided by the financial institutions who come forward to offer loans. The affordability is determined on the basis of monthly income of the person, the job security of the applicant, collateral securities available, number of years the applicant will be in service before retirement, etc. Accordingly, the financial institutions work out the amount that the applicant can afford to pay monthly and the period for repayment of loan and interest here on.
The developers take up the housing projects in various parts of the city. The projects are generally designed to suit various classes of people. The higher class people have no problem of affordability. Number of developed flats/houses/sites will be available in the property market at the prices which may suit them. In most of the cases of this category, the affordability is not a problem at all as they can buy the property outright or through the financial institutions as they can raise loans without any problem. They buy the property which they can afford easily without any fuss about the EMIs.
Property developers are also more interested in this class of buyers as the deals are finalized quickly. The affordable housing, about which we are talking, is applicable to the lower middle class and poor people as they are the main buyers. These people will be planning to purchase houses, flats with the help of financial assistance from the banks and other financial institutions. In view of the high cost of construction, the minimum cost of flats, as we see from the offers made by the developers through the media, is above 15- 20lakhs.This minimum cost is affordable only by the middle class people.