Affordable housing promises about $1 trillion worth of investment opportunities in five years: Knight Frank

Only 17% of PE investment in the residential segment allocated to affordable housing since 2011. Ministry of Housing and Urban Affairs pegs affordable housing demand at approximately 11.22 million houses by 2022

File photo
File photo

The country’s affordable housing sector offers funding opportunities of about $1 trillion, $0.62 trillion to be precise, for private funds, following the government push for this segment, a report by real-estate consultant Knight Frank India says.

The affordable housing sector has witnessed private equity (PE) investments to the tune of $2,597 million since 2011, said the report titled ‘Brick by Brick – Long Term Capital to Fund Affordable Housing for All’.

Of the total PE investment in the residential segment, only 17 percent has been allotted to the affordable housing category in the last 10 years (since 2011). It is yet to become a major theme as there are only a few private equity funds dedicated to funding affordable homes.

In the first quarter of 2021, PE investments in affordable housing amounted to $107 million, compared to $368 million in the residential sector as a whole. This means that the share of affordable housing was around 29 percent, the report said.

The report was released during the ongoing Asia Pacific Real Estate Association (APREA) Leaders Congress 2021 (November 22 - 26, 2021)

11.2 million houses needed

India constitutes 11 percent of the world’s housing need gap, translating to 35 million homes.

The Ministry of Housing and Urban Affairs’ demand-based assessment, based on an assessment of the number of houses which households will choose to occupy, given their preferences and ability to pay (at given prices), has pegged the affordable housing demand at approximately 11.22 million houses.

Urban India comprises 35 percent of the country’s population and it is witnessing unprecedented rates of migration, leading to rapid urbanisation, resulting in demand preceding supply.

As much as 57 percent (4.5 billion) of the world’s population lives in urban areas and almost a third of this (1.3 billion) lives in substandard housing. This has translated to a housing need-gap of 325 million homes globally, of which India contributes to 11 percent.

 

 

‘Over 40% of India’s to live in urban India by 2030’

It’s estimated that, by 2030, more than 40 percent of the Indian population will live in urban India against the current figure of 35 percent, which will create additional demand for affordable units, with huge investment opportunities for private equity players, the report said.

Funds worth nearly $1,662 million are invested with a focus on development of affordable homes in India in the last three years, the report said.

To address this housing crisis, various funds and institutes have stepped into the affordable housing segment. These funds have focused their entire investments on affordable housing, while providing liquidity/credit to credible developers, while using asset management to hedge risks.

The largest of these funds is HDFC Capital Advisors (HCARE Fund), which has raised $1.1 billion. It is primarily used for long-term financing of affordable housing projects across 20 cities. The fund is committed to financing 1,71,000 homes in India and develop 180 million sq ft.

The Pradhan Manti Awas Yojana (PMAY) promises to build 11.22 million urban homes by 2022. Since the policy was launched in March 31, 2021, 11.3 million houses have been sanctioned. Out of this, 4.8 million have been completed till date.

The figures indicate that the policy is close to achieving the target. Over 50 percent of all-India residential launches in the top eight cities in the last five years have been in the sub-Rs 50 lakh segment

“The PE investments in affordable homes have increased since the introduction of reforms in the sector. The presence of a few large funds dedicated to financing the affordable housing projects signifies the potential of the segment. However, a significant portion of this investment is in the mid-income segment and very little has been invested in constructing the EWS and LIG segments, where the actual housing shortfall is,” said Gulam Zia, Senior Executive Director – Research, Advisory, Infrastructure and Valuation, Knight Frank India

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