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There is a fast growth in the
urban population and fast growth in urbanisation in India. As there is a huge
unmet demand for housing and the real estate developers are focusing only on
the upper class families’ housing needs, the life of urban poor became
extremely unbearable in the slums and shelters. it became an urgent  need to provide affordable housing to the
urban poor and economically weaker sections of the society. There are
possibilities as well as challenges i
n providing
housing at lower cost.

in this paper, an attempt is being made to analyse the possibilities and
challenges of financing in affordable housing in India.

 Key word: affordable housing, urbanisation,
sustainable cities and communities, sustainable development goals












Significance of the study



Review of literature



Methodology of the study



Definition of affordable housing



Possibilities of affordable housing



challenges of affordable housing



Findings and suggestions












There has been an increase in the affordable housing
projects in India as huge unmet demand and favourable  government policies have encouraged many
developers to launch new projects in this segment . In 2015, the “Housing for all by 2022” scheme was
announced by the central government targeting 2 crore homes to be built across
all urban locations over the next five years. Affordable housing is an
attractive proposition both for developers and consumers as the demand is huge
and largely unmet. The high focus of central govt. has resulted in the
availability of more funding options for the developers such as External
Commercial Borrowings (ECB), Foreign Direct Investment (FDI), and debt
financing from national financial institutions at highly competitive rates.
Affordable housing promoters have been granted more time for project
completion, they will get a year’s time to pay tax on notional rental income on
completed but unsold items, the qualifying criteria have been revised and a new
Credit Linked Subsidy Scheme was announced with a provision of Rs 1,000 crore.

            How ever there are challenges for
affordable housing projects. The biggest challenge to create affordable housing
is the unlocking of land in urban areas. Unless adequate land is made
available, creating a 2 crore homes will be a distant dream. High construction
costs and unfavorable tax environment are the other major challenges faced by
affordable housing segment.










of the study

As per 2011 census,
31.16 percentage of Indian population (377.10 million out of 1210.98 million)
lived in urban areas. This growing concentration of people in urban areas has
led to housing shortfall, land shortage, and congested transit and has also
severely affected basic amenities like water, air and power. Urbanization has
increased the number of people living in slums and squatter settlements and
deteriorated the housing conditions of economically weaker sections of the

This is primarily due
to the increasing price of land and the real estate in urban areas.  There exists a wide gap between the demand
and supply of housing in urban India. According to the estimates of MHUPA, the
urban housing shortage in the country at the end of 10th five year
plan was estimated to be 24.71 million for 66.30 million households. It was
further estimated that 88% of this shortage pertains to houses for Economically
Weaker Sections (EWS) and another 11% for Lower Income Groups (LIG).

In India private
Developers primarily target luxury-end and upper mid housing segment. On the
other hand housing for the poor and economically weaker sections is primarily
provided by the government for welfare purposes. However it is insufficient
compared to the existing shortage in this segment. Thus it’s the housing
requirement of poor and economically weaker sections of the society that are
grossly neglected and there exists a huge deficit in the supply of affordable
housed primarily demanded by this income group in India.







of literature

(2012), in their study, affordable housing in India, An inclusive approach to
sheltering the bottom of the pyramid, have discussed the urbanization and
housing shortage, income levels and housing affordability, issues in the
development of affordable housing, policy framework and regulations for
affordable housing and private play to affordable housing in India.

Prof. P.S.N Rao, in his
study Role of real estate developers in affordable housing and climate change,
has demonstrated the structure of population, Affordability and market
structure, and the affordable housing developers In India. He also discussed
the challenges and the financial and technical barriers in providing affordable

Akeju, in his study
titled “challenges to providing affordable housing in Nigeria” lists out the
challenges of affordable housing in that country.




of study

study is descriptive in nature. The data used in this study are secondary in
nature. It involves the collection, presentation and analysis of data from
different sources like articles, websites, news papers books etc






Affordable Housing

is no clear cut definition for the term ‘affordable’ as it is a relative
concept and could have several implied meanings in different contexts.

1.      According to the RICS report on Making Urban Housing
Work in India, affordability in the context of urban housing means provision of
‘adequate shelter’ on a sustained basis , ensuring security of tenure within
the means of the common urban households

2.      According to the KPMG report on ‘Affordable housing
–A Key Growth Driver in the Real estate sector’, affordable housing is defined
in terms of three main parameters, namely income level, size of dwelling unit
and affordability. While the first two parameters are independent of each
other, the third is a dependent parameter that can be correlated to income and
property prices.

3.      As per US Department of Housing and Urban
Development, the generally accepted definition of housing affordability is ‘for
a household to pay no more than 30% of its annual income on housing. Families
who pay more than 30% are considered cost burdened and may have difficulty
affording necessities such as food, clothing, transportation and medical care.

4.      According to the Task Force on Affordable housing
set up by the MHUPA in 2008, affordable housing for various segments is defined
by size of the dwelling and housing affordability derived by the household
income of the population.

5.       The JNNURM
Mission Directorate of MHUPA has  also
defined affordable housing in its amended guidelines for  Affordable housing in partnership released in
December 2011







of Affordable Housing

There is an urgent necessity to provide housing for
the poor and economically weaker sections of the society. But the developers
are always focusing on the upper class people which keep the demand for housing
by the EWS unmet. Government is implementing some welfare schemes which are not
enough for the large number of population. The following are the possibilities
for real estate to provide affordable housing for the urban poor.

1.      Huge unmet demand

There is a huge unmet demand for
the affordable houses in urban areas which is arisen due to the increase in
population and urbanization. It is sure that if the developers are able to
construct houses at lower cost they will get enough demand for earning a
reasonable profit.


2.      Increase in population

The population of India as per
2011 census is 1210.98 million and out of these 377.10 million lived in urban
areas. There is an increasing trend in the urban population as well as
urbanization. This increase in urban population is creating more and more
demand for affordable houses.

3.      Rapid urbanization

There is rapid growth in the
urbanization in India as a huge number of people are migrating to the cities
for job and studies. The increase in the population is also a reason for


4.      A culture of home ownership

There is a trend to own a home
rather than to rent one in India even among the Economically Weaker Sections of
the society irrespective of their level of income.

It will enhance the scope for
affordable housing in India.


5.      Availability of funding options

It’s a big challenge for the
developers to arrange the financial resources for the construction of houses.
But now a days various funding options are available for providing financial
assistances to the developers. Some of these are mentioned below.

Commercial Borrowings (ECB)

direct investment (FDI)

financing from national institutions


6.      Favorable government policies

As the government schemes are not
enough for providing housing for the huge unmet demand, it is essential to
promote the private participation in this field. For this purpose the government
has implemented the following policies.

from the tax for notional income

welfare schemes like Housing for all by 2022


7.      Scope for low cost and  eco friendly construction methods

               There are different methods of
construction like Laurie Baker model which will result in highly eco friendly
houses that can be done in lower cost also.

 Challenges of Affordable Housing

There is a fast growing trend in the housing construction
in India. Still these developers are not focusing on affordable housing or the
demands of the low Income Groups. The following are the challenges that are
faced by the developers in providing affordable housing in India.


1.      Cost of land

Land is a scarce resource and the demand for land is
increasing. So there is a hike in the price of land which makes housing


2.      Unavailability of land

As there is an increase in the urban population and
there is no increase in land, land for construction becomes unavailable.  Unlocking the land is the biggest challenge
in urban affordable housing.


3.      Titling issues

There are some titling issues in unlocking the land
for affordable housing which is the biggest problem in providing affordable


4.      Cost of construction

There is a hike in the prices of materials and wage
which leads to high cost of construction which makes house unaffordable

5.      Limited access to home finance for LIGs

Access to the home financing is limited for the low
Income Groups in India. It makes their housing plans a far distant dream.


6.      Regulatory constraints

ranks 185 out of 187 countries in the Ease of obtaining Construction Permits
Index released by the World Bank

7.      Lengthy approval and land use conversion

8.      Lack of clarity in building bylaws and guidelines.

9.      Lack of clear definition of affordable housing.

The government should redefine the term affordable
housing if it is giving tax benefits to encourage the developers who construct
affordable houses











and suggestions

is found in this study that,

1.     There is a huge unmet demand for affordable housing
in India.

2.      there are
some  possibilities in providing
affordable housing to the economically weaker sections of the society like
favorable government policies, financial assistances, huge demand, increase in
the population, tax exemption etc.

3.     There are many challenges in providing affordable
housing to the economically weaker sections of the society like lack of land,
high cost of land, cost of construction, regulatory constraints etc.

4.     My humble suggestion to the real estate developers
is to follow low cost and eco- friendly construction methods like Laurie Baker
model for construction.


There is a hike in the urban
population and fast growth in urbanisation in India. As there is a huge unmet
demand for housing and the real estate developers are focusing only on the
upper class families’ housing needs, the life of urban poor became extremely
unbearable in the slums and shelters. it became an urgent  need to provide affordable housing to the
urban poor and economically weaker sections of the society. There are
possibilities as well as challenges in providing housing at lower cost. But we
have to find out low cost and eco-friendly measures to provide affordable
houses and unlock the land for this.






Gopalan, K., & Venkataraman, M. (2015). Affordable
housing: Policy and practice in India. IIMB Management Review, 27(2),

Leopold, J., Getsinger, L., Blumenthal, P., Abazajian, K.,
& Jordan, R. (2015). The housing affordability gap for extremely low-income
renters in 2013. Washington, DC: Urban Institute.

Akeju, A. A. (2007, October). Challenges to providing
affordable housing in Nigeria. In Proceedings of 2nd Emerging Urban
Africa International Conference on Housing Finance in Nigeria (pp.

Mayank, H. (2012). Affordable Housing in India: An
inclusive approach to sheltering the bottom of the pyramid. Associated
Chambers of Commerce and Industry of India.