Despite massive demand for affordable housing in Mumbai Metropolitan Region (MMR), there is a huge supply gap in the low-income category, i.e. houses with a ticket size of less than Rs 25 lakh. While the demand for this segment is 67 percent, the supply is only limited to 22 percent and that is primarily on account of the high cost of land, as well as better returns from other asset classes which makes it unviable for real estate developers to undertake affordable housing projects in prime areas, a report by Knight Frank and Naredco said on October 7.
MMR registered high demand for affordable housing units with 67 percent demand concentration being registered for units less than Rs 25 lakh. The demand concentration for housing units in the range of Rs 25 to Rs 50 lakh was recorded at 13 percent and units above Rs 50 lakh at 20 percent. Despite the strong interest in this segment, the affordable housing supply has not been able to cater to the demand, said Knight Frank India’s report titled ‘Brick by Brick – Reimagining Affordable Mumbai’, brought out in collaboration with NAREDCO.
The supply of housing units above Rs 50 lakh recorded the highest concentration at 44 percent followed by units in the range of Rs 25 to Rs 50 lakh at 34 percent. The supply concentration for housing units less than Rs 25 lakh was recorded the lowest at 22 percent, clearly showcasing the huge supply gap for urban affordable housing in the region, it said.
Regarding the price willingness of an individual for buying a house, 38 percent of the respondents would prefer to buy housing units priced less than Rs 15 lakh. As many as 26 percent of the respondents preferred a budget of Rs 16 lakh –Rs 25 lakh, whereas 36 percent of the respondents had a budget of more than Rs 25 lakh for buying a house, it said.
The report also observed that nearly 97 percent of all people living in rented accommodation are willing to purchase and move to a better housing unit if the travel time is less than 1.5 hours from their place of work; however, 64 percent of the respondents have a budget of less than Rs 25 lakh.
According to the report, Mumbai registers almost 20,000 to 50,000 residential leave and license agreements every year. Considering an average annual number of 35,000 of leave and license agreements with an average tenure of 22 months and adding additional consideration of non-registered agreements the total pool of active residential tenants in Mumbai works out to almost 1,00,000 units. The MMR region witnessed the registration of over 1,05,984 residential leave and license transactions since January 2020.
“Mumbai’s biggest challenge is in terms of providing housing for its inhabitants, unfortunately, the majority of the city is forced to live in either substandard housing options in the core city or in peripheral locations. The estimated demand over the next five years is 850,000 housing units which will be an uphill task if a proper strategy is not put in order. This demand can be met with a focus on building affordable housing townships in the peripheral areas of the city, backed by robust infrastructure and travel options,” said Shishir Baijal- Chairman and Managing Director at Knight Frank India.
“This can cater to the bulk of the housing ownership needs. There is also a requirement to create rental housing within the city limits to accommodate the transient population between rental and ownership. We feel that a combination of these two will provide the right response to the city’s housing challenges,” Baijal added.
Unavailability of urban land for affordable housing, insufficient transport and social Infrastructure to support distant neighbourhoods, easy access to finance for the development of affordable housing projects, lengthy statutory clearance and approval processes etc. are some of the key shortcomings which are leading to a shortage of affordable housing supply in the region.
The solutions
The report states that there is a need to refocus on affordable housing. This need not be in the city centre anymore, rather it should be in locations well-serviced by transport and civic infrastructure, and those that can offer affordable pricing.
Secondly, for mainstream Mumbai, there is a need to establish institutional mechanisms for the creation and management of affordable rental housing supply and drive under-utilised government housing towards affordable housing, enabling mid to long-term monetisation.
It said that the unabated supply of housing for upper-mid and upper-income groups can continue within the city.
There is also a need to develop mass affordable housing projects close to the existing employment nodes. Additionally, an affordable housing project is a volume-driven business, hence the major challenge is to identify suitable locations where large tracts of land are available at an affordable price range of Rs 1 to 3 crore per acre.
Project timelines are a key factor which impacts the viability, as delays lead to cost escalations. Some of the key issues which lead to project delays include lengthy statutory clearance and approval processes. A typical housing project in MMR needs at least 30 regulatory approvals including no objection certificates (NOCs) from various departments.
These approvals generally take anywhere between six months to even more than a year in certain cases. This not only delays a project but also increases the cost of the property by 10 percent to 20 percent. Hence, it is imperative for the Government to launch a single window clearance for affordable housing projects, the report added.
Mumbai Metropolitan Region (MMR), spread over 4,355 sq. km, consists of eight Municipal Corporations viz. Greater Mumbai, Thane, Kalyan-Dombivali, Navi Mumbai, Ulhasnagar, Bhiwandi- Nizamapur, Vasai-Virar and Mira-Bhayandar: and nine Municipal Councils viz. Ambarnath, Kulgaon-Badalapur, Matheran, Karjat, Panvel, Khopoli, Pen, Uran, and Alibaug, along with more than 1,000 villages in Thane and Raigad Districts. MMRDA is responsible for the balanced development of the MMR. Greater Mumbai occupies an area of 437.71 sq. km. within the MMR.
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