Project Finance Management 2010

FACTORS INVOLVED IN HOUSING SHORTAGE IN INDIA

“Problems affecting the largest number of people has the least attention paid to it. “
Aristotle

It has been exactly the same in the Indian housing context

The Housing Requirement

The total housing requirement of the country is 200-225 million units.

Current status: Available 170 million house, a shortage of approx 30-55 million. In next

15-20 years, additional 70 millions houses would be required

Year 2020 - 100 million additional houses required.

Facts Related to Housing Sector in India

 Returns from realty in India are at an average of 14% annually. Merrill Lynch

forecast India real estate sector to grow from $12 billion in 2005 to $90 billion in
2015. Housing is expected to account for nearly 90% of real estate sector.

 Percentage share of urban population has up from 10.8% in 1901 to 27.8% in

2001 and it is expected to grow faster than rural. In 2001 more than 5000 centers
identified as urban centers – 2001 census.

 By 2015, 20% (222 million) of total population will reach the 22 early 30 age

bracket. Keeping 0.89% mortality rate and average size of household equal to 3,

68 million household will require independent housing—age demographic effect.

Taking 30-49 age group, total demand will be much more.

Submitted By:- Nidhi Sharma, 3rd Sem MBEM 1

 Project Finance Management 2010

 Housing shortage in India: Total housing shortage for period 2007-12, 73.96

million out of which rural housing shortage 47.43 million.

Segmentation of Indian Households

Source:- Hansa Research-Guide to Indian Market

Submitted By:- Nidhi Sharma, 3rd Sem MBEM 2

 Project Finance Management 2010

Segmentation of Indian Households

Source: National Council of Applied Economic Research, 2005

Submitted By:- Nidhi Sharma, 3rd Sem MBEM 3

 Project Finance Management 2010

Factors affecting the housing shortage

5. Irregular distribution pattern of existing housing

One more factor contributing to the housing shortage is the distribution pattern of existing
housing.

6. Obsolence Factor
This considers the number of houses which have become obsolete over the time increasing
the need of new houses to replace them. The obsolence factor as per the estimates of
Technical Group on Estimation of Housing Shortage (2006) is 3.60% of the acceptable
housing stock and the total obsolete urban housing stock estimate is 2.39 million units.

Submitted By:- Nidhi Sharma, 3rd Sem MBEM 4

 Project Finance Management 2010

Market Scenario

Ascending Housing Finance penetration in both urban (currently 35%) and rural

(currently 7%) India due to:

• Growth in branch network, increasing incomes, evolving demographic profile, and

increasing acceptability of loans amongst customers due to high rise in property

prices

• Disbursements in the last 3 years account for ~71% of the total outstanding

portfolio

• Penetration is expected to go up to 41% in urban India and to 11% in rural India

by FY ’12

Submitted By:- Nidhi Sharma, 3rd Sem MBEM 5

 Project Finance Management 2010

The housing dreams of the Indian middle & lower income groups,

A challenge for the system

Submitted By:- Nidhi Sharma, 3rd Sem MBEM 6