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India's $1.3 Trillion housing push


The swelling middle class in India is demanding better housing and increasingly has the means to get it. The country is marked with sprawling slums at one end of the housing spectrum and obsession with luxury at the other. Conditions are ripe for a broad acceleration in residential construction in the $2 trillion economy.  The last decade was about price appreciation. This decade will be about volume growth. 
The demographic arguments for rising home sales in India have been long building. About 69 percent of the country’s 1.3 billion people are in prime house-buying age -- 20 to 40 years -- more than any than any other nation. Per capita income has grown at a compound annual growth rate of 10 percent for the past five years. The growing migration of people to urban areas has overwhelmed infrastructure, pushed up land costs, and led to housing shortages. Building costs have also risen in recent years and developers have concentrated on the luxury end where margins are fat.

Government funding has largely flowed to the rural sector. PM has broadened reforms this year to foster construction and home buying under his “Housing for All” program, launched in June 2015. That aims to build 20 million urban homes and 30 million rural houses by 2022. Property has also become the most affordable in two decades. Among the reforms: builders of affordable housing received “infrastructure status,” making them eligible for state incentives, subsidies, tax benefits and institutional funding; interest-rate waivers and rebates were extended to households with incomes up to 1.8 million rupees and laws to tackle building delays and protect home buyers came into effect on May 1. 

A focus on the jobs market would be necessary for a fully-fledged middle class housing boom. Land is a very price-sensitive commodity, and its current shortage in major city-centric areas prevents the development of affordable housing in areas where it is most direly needed.  Property ownership plays a key role in the middle class growing their wealth over time without necessarily having to invest in speculative assets such as stocks.

Since the housing incentives were announced, 113,508 homes have been completed and another 755,083 are in progress. There is a palpable movement forward, in private sector participation; Banks are also rushing to get a piece of the action. More than 16 mortgage financiers started operating in the country in the two years.

Banks offer loans as a way to boost capital and offset soured commercial loans.  60 million new homes are expected to be built in India between 2018 and 2024, with social and affordable housing rising almost 70 percent to 10.5 million by 2024.

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