Affordable housing, an opportunity for all

The real estate sector has been in the news lately for the scorching pace of home sales. The unsold inventory  is also down in the Jan-March quarter of 2023-24. The government has been pushing the sales of affordable housing but without much success. Most of the houses that are being sold nowadays. In an interview with Money9, Co-Founder & CEO, BASIC Home Loan talks about the trends in the affordable market.

What are the current trends in the affordable housing market?
Considering the recent increase in housing demand, there has been a shift in focus towards the affordable housing market. Both government initiatives and developer strategies have adapted to cater to this segment, which serves low and middle-income households. Affordable housing solutions are being made more accessible through various avenues such as government-funded programs tailored for low-income groups or flexible home loan options from private lenders and NBFCs. The Union Budget for 2023-24 underscored this commitment with a substantial allocation of Rs. 79,000 crore (US$ 9.64 billion) for the PM Awas Yojana, marking a significant 66% increase from the previous year. This injection of funds reflects a concerted effort to address the pressing need for affordable housing in India and signifies a promising trend toward making housing more attainable for a broader demographic.

How has the demand for affordable housing changed over the past decade?
Over the past decade, the demand for affordable housing has undergone significant transformation, gathering widespread interest from buyers, developers, and financiers alike. Today, affordable housing is seen as an opportunity for all involved parties. Housing finance companies have expanded their reach into new territories, simplifying the home ownership process through streamlined procedures and promotional campaigns. Governments have also focused on empowering stakeholders, particularly private developers to construct quality affordable homes, thereby bringing stability to the market. With affordable housing gaining infrastructure status, private developers have been incentivized to participate more actively, enabling them to access loans at preferential rates and subsequently pass on the benefits to buyers. This shift has contributed to a more dynamic and accessible landscape for affordable housing, reflecting the evolving needs and aspirations of communities.

What are some of the biggest challenges facing the affordable housing market today?
One of the significant challenges confronting the affordable housing market today is the shortage of available housing units relative to the growing demand, leading to increased competition and higher prices. Additionally, rising construction costs, including materials and labor, pose a barrier to the development of new affordable housing projects. Zoning and land use regulations often restrict the construction of multifamily or high-density housing, limiting options for affordable housing solutions in desirable areas. Furthermore, stagnant wages and income inequality exacerbate affordability issues, making it difficult for many individuals and families to afford housing even when units are available. Addressing these challenges requires comprehensive strategies that involve collaboration between government agencies, private developers, nonprofits, and communities to increase supply, reduce costs, and ensure equitable access to affordable housing options for all.

How are government policies and regulations impacting the affordable housing sector?
Government policies and regulations play a crucial role in shaping the affordable housing sector. Through initiatives like subsidies, tax incentives, and zoning regulations, governments aim to increase access to affordable housing for low- and middle-income individuals. However, these policies can also inadvertently create challenges. For instance, stringent building codes and zoning laws might increase construction costs, making it harder to develop affordable housing units. Additionally, regulatory hurdles can slow down the approval process, delaying projects and driving up costs further. Conversely, well-designed policies can stimulate investment in affordable housing, encouraging developers to prioritize such projects. Overall, the impact of government policies on the affordable housing sector depends on their effectiveness in balancing incentives for developers with the need to ensure affordability for residents.

Can you explain the role of technology in addressing affordability issues within the housing market?
Technology plays an important role in tackling affordability challenges in the housing market. Through innovative solutions like modular construction, 3D printing, and AI-driven design, costs associated with building materials and labor can be reduced. Additionally, digital platforms streamline processes, connecting buyers with affordable housing options and enabling efficient property management. Smart home technology further promotes energy efficiency, cutting utility expenses for homeowners. Moreover, data analytics aids in identifying areas with potential for affordable housing development. Overall, technology fosters efficiency, cost-effectiveness, and accessibility, contributing significantly to addressing affordability issues within the housing market.

What specific technological advancements have had the most significant impact on making housing more affordable?
Technological advancements such as Building Information Modeling (BIM), 3D-printed homes, and Prefabricated construction technology (PCT) have significantly impacted housing affordability. BIM streamlines the planning and construction stages, reducing costs. 3D-printed homes utilize materials efficiently, cutting waste and labor, resulting in substantial cost reductions compared to traditional construction methods. Prefabricated buildings address urban housing shortages by offering sustainable and cost-effective solutions. These innovations hold promise for making housing more affordable globally, particularly in developing nations like India, where the demand for affordable housing is critical, paving the way for a more accessible housing market.

How are startups and tech companies innovating to make housing more accessible to low-income individuals and families?
Startups and tech companies are innovating to make housing more accessible to low-income individuals and families through various strategies. One key approach involves reducing construction costs with modular and prefabricated housing, which can cut costs by up to 50% and speed up delivery times by up to 80%. Other efforts focus on improving environmental sustainability with smart building technologies that optimize energy efficiency and reduce environmental footprint. Additionally, increasing operational efficiency through digital solutions streamlines processes for property owners and managers, translating into lower rents or prices for tenants and buyers. These innovations collectively address the pressing social issue of housing affordability.

What are some plans or initiatives BASIC Home Loan has to further improve its services or expand its reach within the affordable housing market?
We are expanding our reach in the affordable housing sector through strategic partnerships with government bodies and financial institutions. This includes aligning with national housing schemes and offering diverse financing options. We are targeting underserved regions with high demand for affordable housing, supported by our extensive network of over 12,000 agents, especially in Tier 2 and Tier 3 cities. These agents provide personalized services and understand local dynamics. The BASIC Academy empowers graduates in these cities with housing market knowledge. Additionally, we’re launching initiatives like Franchise Expansion in Tier 2 and Tier 3 Cities to improve accessibility and BASIC Credit to serve under-represented segments. These efforts aim to make homeownership accessible to all by deepening market penetration and service offerings.