Why no one is now talking about Affordable Housing ?

 

Why no one is now talking about Affordable Housing ?

During 2010, every other media articles in real estate would talk of the need to push Affordable Housing. Suddenly that noise is conspicuous by its absence. 

 

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Here are two news items from NCR real estate …

 

·      In just 72 hours, DLF sells 1100 luxury apartments priced at an average Rs 7 cr 

 

·      At about one-tenth of this prices, Affordable Housing units of  DDA struggle to find buyers.  

 

 

Interestingly, other sectors too are showing a similar trend :

 

    Mercedes Benz sees an all time high sales in 2023 and entry-level cars are seeing negative growth 

 

    An “almost nil” growth in entry-level smartphone, while premium smartphone sales are seeing  50% 

            plus    growth.

 

 

Across many consumer markets, the marketers are increasingly seeing far more growth in the premium/luxury segments than  affordable segment. 

 

The reasons for this rather surprising trend are, post-covid, consumers are moving away from ‘die happily’ to ‘live happily’ and  therefore spending more than before ; secondly, social media is increasingly mounting pressure to spend ; thirdly, micro credit making consumption a seamless act even at the bottom of the pyramid. 

 

While, more apt reasons will be known as detailed research gets published but for real estate industry, what it of current interest is that the ubiquitous clamour around Affordable Housing (AH) has suddenly come down.  In fact, with steep property prices, the noise around AH should actually enhance multiple times ? Why is this noise missing ?

 

 

To answer this, one needs to understand where was the noise earlier coming from ?  

 

Within the business community it was from  the Developers, Bankers and the Analysts. During the slowdown of 2010s, AH provided survival to Developers, lowered risk lending opportunity to Bankers and business activity for  Analysts, so it was in everyone’s interest to talk about it. Now with consumers gravitating to premium segment and with the continuation of old definition of AH (less than 45 lacs and less than 60 sq mt area) in this rising property, the AH pie has reduced considerably.  

 

The reduced business explains the lowered noise around AH by the business community. However, what is more intriguing is the absence of  noise  from the political class. Steep property prices should make a great talking point for politicians across party lines. And yet no one is talking about AH.

 

 

To understand this complex logic one needs to delve deeper.

 

Firstly, did you ever realise that in your entire lifetime, you would have always  heard “homes have become unaffordable”. And yet, it was  only around 2007-08 that one saw noise around the then newly coined term “Affordable Housing”. Why ? This has to do with history and politics

 

In 70s, 80s, and 90s the struggle for home purchase was largely restricted to the middle class. The poor then lived typically in shanties. The former then had little political muscle. And the latter that wielded political power was struggling with do waqt ki roti and hardly had aspirations to buy home So for political leaders there was little political dividend in creating aspirations around “Affordable Housing”.

 

 

But with the benefits of years of Liberalization and Globalisation Policies ( beginning 1991) trickling down, many from the Low Income Groups started emerging into what is known as the new middle class or the aspiring middle class. By mid 2000s, this aspiring middle class had aspirations similar to those of middle class homes. They no longer wanted to live in shanties but wanted pucca homes with clear title AND within their budgets. Their numbers together with growing middle class created a large size of population for whom home became an aspirational product. The power of Housing Finance proliferated these numbers to the next level – enough for smart politicians to see political dividends. Thus was born the term “Affordable Housing” – a new  voter-friendly slogan.

 

But then why is there no noise now ?

 

The issue gets further complex here. The political call for Affordable Housing can also be interpreted by the voters as “property prices should come down”. And that would also mean a call for reduction in asset values of large number of citizens from  the aspiring middle class and middle class who had bought homes during the last 10-15 years. Hence, such a call also runs the risk of displeasing  a large influential population. Not many would like to risk it.

 

Politics is not as linear as it appears….!

 

 

The noise around AH has definitely come down in the media but the demand in the market has not. The solution to AH lies neither in just redefining the term AH nor in expecting technological breakthroughs in construction but in many structural changes - quicker settlement of land disputes, much simplified approval system, efficient tax structures et al.  Till that happens, the term Affordable Homes would remain an ‘oxymoron’ …….the home that you want is not affordable and what is affordable is not the home that you are looking for….!

 

 

- Deepesh Salgia is the author of the book REAL ESTATE : The Good, The Bad & The Unanswered