Private developers are stepping away from affordable housing due to soaring land prices, says G Hari Babu, President of India's National Real Estate Development Council. He highlights that state governments are struggling to fund housing schemes, largely because of mounting financial burdens from populist freebies.

Mumbai

Private developers in India are increasingly shifting their focus away from affordable housing projects, citing high land costs and better profit margins in premium developments. The lack of affordable land in city centers and insufficient government incentives have contributed to this trend, with developers preferring to invest in higher-end projects where buyers are less sensitive to price.

State governments are also struggling to support affordable housing initiatives due to financial constraints, including the burden of subsidies and other expenditures. As India's urban population continues to rise, the shortage of affordable housing is expected to worsen, leading to an increase in slum areas and limited alternatives for low-income residents.

Why builders are ditching affordable homes in India

How difficult is it to make the economics of these projects work for the private sector, for developers? And the developers arguably are partly to blame for moving up market, focusing on premium launches where these margins are higher and buyers are less sensitive to price. So how can you get, how does government affordable housing policy get those private developers on board to take part? Private developers have left this area because of land costs. If land is available from the slums and government is allotting to these people, and developers will come forward because this is the heart of the city. Heart of the city, many areas are available and these people can come back again. Give a development basis to the new developers, it's a simple thing. You take one project as a sample example, and the last 15 years nobody has done in Hyderabad to do one slum redevelopment at all. You focus on one area and give it to the developer and say, okay I want this many houses for the affordable housing and balance you can construct on your own. It is all available at free of cost for the government. It is actually a win-win situation. And in 10 to 12 years, one after one, one after one, one after one, every year the developers can develop 1,000 acres. 10,000 acres means in Hyderabad, every year we can develop 1,000 acres. In 1,000 acres, each acre today very easily we can construct 200,000 square feet. 200,000 square feet, one lakh square feet goes for the builder, one lakh square feet goes to the thing. That means one lakh square feet divided by 750. So, so many apartments are available, flats are available. Those flats you can give to the redevelopment. If government is having a different idea and they want to do it perfectly, they have to allot first their own land for this purpose. And what is the problem in these governments now? All the state governments, most of the state governments, not I will say all the state, but most of the state governments are having financial problems. Yes. Because of the freebies. Everybody knows. This is an open secret. There's nothing of hiding anything. So paying the interest and paying the principal and paying the salaries and pensions and the freebies, all the governments have become, they don't have even money of 1,000 crores to spend on this scheme. So again, going for the loan, going for the some other thing, and half-heartedly they are doing the projects. In the long term, nothing is moving. One way, our urban population is increasing rapidly. 2.75% increase every year. 2.75% is the increase in urban population. Today's urban population is about 42 crores and that will jump to 70 crores in the next 20 years. So a place like Hyderabad, with a population of 1.15 crores, is going to see 2 crores in the next 20 years. So the more the urbanization means, the more the slums will create. See, our slums were about 14-15% about 25 years back. Today, we are 25%. Some areas are increasing and people are occupying and staying there. And there's no alternative. There's no alternative for these people also.

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Kuala Lumpur

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Stockholm

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Bangkok

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Breakdown