Affordable Housing and Mumbai

I meet and hear a lot of people who talk and discuss about various strategies to boost affordable housing in Mumbai Metropolitan Region. Nevertheless, the facts are bewildering. As per the recent JLL study, Kolkata is the most affordable housing market with a score of 192 following by Pune (183), Bengaluru (167) and Chennai (161). Please note that as per the JLL study, Mumbai is the least affordable market with a score of 100. 

The report further says that the aspect of affordability is further set to come down with increase in home loan interest rates and inflation reasons. 

Also, if you read the consumer sentiments, it will be clear that citizens of Mumbai Metropolitan Region are craving for real time affordable housing. Mumbai’s biggest challenge is to provide housing as a startling number of people are forced to live in substandard housing or in peripheral locations. As per the research of CREDAI-MCHI, the estimated demand of housing in MMMR over the next five years is more than 900000 housing units. While over 1 million apartments were introduced to the real estate market in last 10 years, the lack of affordable housing is a major issue as of now. 

At national level the affordable housing topic has gained lot of momentum in the last 3 years with the Central Government announcing various promotions for affordable housing. Nevertheless, Mumbai, specifically has a different challenge to face when it comes to affordable housing.  Various technical definitions for affordable housing are as follows :

  1. Section 80 IBA : The carpet area of the residential unit comprised in the housing project shouldn’t exceed 60 sqm. (if in MMR)
  2. GST: For affordable housing, units have a threshold of a) sale value of INR 45L and carpet area not exceeding 60 sqm. for metro areas. 
  3. RBI : The cost of affordable housing should be less than INR 65L in metro cities. 

If you understand the above definitions in its total sense, Mumbai city, especially, will struggle to offer a housing unit in the range of INR 45 L. 

Though affordable housing today is well received by buyers, developers and financiers, the following steps must be taken by the Government of Maharashtra to meet the Housing for all Mission of GoI :

  1. Reduce and arrest the stamp duty at flat 3% in the state. 
  2. Reduce the building premiums and approval fees at 50% for at least one fiscal year. 
  3. Redevelopment schemes for EWS/LIG/MIG under 33(5) should be granted rehab component without charging premium and not to be restricted to the existing BUA as defined by the planning authorities.  
  4. Introduction of single window clearance
  5. Exclusion of Rs. 45 L limit for affordable homes
  6. Exclusion of various charges and cess on realty projects in MMR. 

Above suggestions, if implemented, will enable the Government of Maharashtra to empower every stake holder involved in the process, especially private developers who are capable of spurring development of quality affordable homes and infusing much needed stability in the market. The involvement of private developers in affordable housing will increase if above suggestions are accepted, so that the developers can pass on the monetary savings to buyers. Similarly, affordable housing projects can also appeal to investors as projects under this segment invariably cost at least 25-30% less than other projects in the same vicinity but outside its ambit. Further push by the State Government will enable the real estate sector to provide quality housing at affordable rates and this phenomenon will fuel the growth of real estate sector, employment and living standards of millions of citizens. 

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