Challenges faced by affordable housing schemes

  • Various challenges continue to hamper the pace of affordable housing development in India.
  • Lack of suitable low-cost land parcels within the city limits, lengthy approval process and multiple clearances, lack of access to cheap credit for construction finance, low profit margins are a few such challenges.
  • This has limited the participation of large, organised real estate players in affordable housing projects.
  • Affordable housing sales have failed to gather momentum despite the conducive environment.
  • While a definitive cause is still to be ascertained, a few possible reasons could be the need for further government incentives, frail economic conditions impacting employment and income levels resulting in risk-averse buyer sentiments, challenges in implementation of government incentives, difficulty in credit availability due to the Non-Banking Financial Company (NBFC) liquidity crisis, and the millennial mindset to be asset light preferring to rent instead of purchase.
  • The outbreak of the Covid-19 pandemic and the subsequent lockdowns have had significant impact on all businesses, including real estate. All construction activity had to be completely halted during the lockdown phase.
  • Post lockdown, while cost of inputs such as steel and cement have increased, the availability of construction labour has gone down.
  • This has not only increased the cost of construction for developers but has also caused delays in project completions.
  • Further, as banks and lending institutions have resorted to tighter lending norms in light of the present economic situation, developers are finding it hard to avail credit.
  • This, along with muted demand, have severely impacted developer cash flows.