The ACfS will next publish a research report on “Affordable Rental Housing for Migrant Construction Workers” in collaboration with Terwilliger Centre for Innovation in Shelters – Habitat for Humanity. The aim is to propose options for implementing the Affordable Rental Housing Complex Scheme (ARHC scheme) effectively for migrant workers of the construction industry.
The primary research is to involve a robust survey of construction workers in their states of origin, namely Odisha, Bihar, Uttar Pradesh and West Bengal, and who were working in Maharashtra prior to COVID-19 lockdown from 27 March 2020. The research will identify the challenges in the provision of rental housing for migrant construction workers, developers, project financers and the urban local bodies (ULBs) in cities, as well as recommend market-driven solutions to enable ULBs and developers to effectively implement rental housing and social infrastructure for the migrant construction workers.
In India, there is a mismatch between the shortage of housing and the presence of a large stock of vacant houses, especially in the affordable housing segment. The estimated housing shortage in India is 18.78 million and heavily skewed towards the country’s poorest socio-economic group. On the other hand, according to Census 2011, the percentage of vacant houses in the country increased from 6.3 in 2001 to 7.5% in 2011. In order to explore the reasons for this mismatch, the Anant Centre for Sustainability is committed to undertaking research on the ‘Paradox of Vacant Houses in India’ in selected cities in the country.
The first research was undertaken in schemes for the Economically Weaker Section (EWS), Low Income Groups (LIG) and Middle Income Group (MIGs) in Ahmedabad during 2019 to determine the reasons for vacant houses in the city. The findings from the research reveal that some reasons are specific to the dynamics of the city and some to the development of housing schemes by the government of India and the private sector.
The Government of India’s goal of achieving “Housing for All” by 2022 is more likely to be made if the vacant houses come into the rental market. To identify the reasons for the mismatch between the shortage of housing on the one hand and the presence of a large stock of vacant housing, on the other hand, it is crucial to understand the reasons for vacant houses across all income groups. This report is an attempt to examine the significant determining factors of vacant houses in Ahmedabad. We observe that the paradox of vacant housing in Ahmedabad can be attributed to several reasons, some of them are endemic to the whole country, and some are specific to the dynamics of the city and the state and some just to a particular building type (government vs. private).
Indian population has not been so fortunate in having a decent house with all necessary amenities. The problems of housing emerged when not all, but most of these features are missing in a house. Many houses in India lack a dignified living in:
Many of these problems are well reflected in data compiled by census 2011. Out of the total, 92.5 percent of the houses in India have occupied census houses, where 93.8 percent in rural areas and 89.9 percent in urban areas. On the other hand, 7.5 percent of the total census houses in India are vacant, and that is 6.2 percent in rural areas and 10.1 percent in urban areas. Only 53.2 percent of houses of the total number of census houses are in good condition, whereas 41.5 percent are in liveable conditions followed by 5.3 percent in dilated condition. An additional worry is that the good condition houses are more in numbers in urban areas and lesser in rural areas. However, ownership of houses is better in rural areas, wherein 94.7 percent of the total owned houses in India are in rural areas and 69.2 percent in urban areas. On the other hand, the rented accommodation is at a higher percentage in urban areas than in rural areas, which is perhaps very obvious. Due to the process of urbanization attracting more and more people each day for trying their settlements in cities and the townships.
The research data shows that there are more vacant houses in government schemes then in privately constructed schemes. Further, there are more vacant houses in the South-East than in the South-West areas. On average, South-East and North-East zones seem similar in vacant houses. However, their distribution in government and private societies are significantly different. In the case of the South-East zone, the overall vacant house rate is about 14.2 percent; however, the rate of vacant houses in government societies (20 percent) is almost double as compared to private societies (10.7 percent). The difference of about 9.3 percent is statistically significant at a 1 percent level of significance.
Similarly, in the case of the North-East zone, rates of vacant houses in government societies (18.9 percent) are almost four times higher as compared to private societies (5 percent). This four-times difference is also statistically significant. South-West zone shows the least vacancy rate (3.7 percent) among all zones. Interestingly, here, we have more vacancy rates in private societies (5.2 percent) as compared to government societies (1.2 percent). This difference is also significant but at a 5 percent level of significance. North-West zone seems very comparable with the North-East zone in case of the size of the difference between government and private societies for vacant houses. Though, we have 10.7 percent vacant houses in the South-West zone, which is lesser than the North-East zone. Nevertheless, vacant houses in government societies (17.7 percent) is more than 3 times higher as compared to private societies (5.6 percent). This difference is also statistically significant at 1 percent level of significance.
The type of road may be a perfect proxy for the connectivity and the level of prosperity of that area. It is interesting to notice that societies associated with the main road reported the least percentage share (6.25 percent) in the critical vacancy category (greater than 30 percent vacancy rate). Because these societies must be located in posh areas and access to basic amenities such as schools, garden, mall, and hospital, etc. are likely to be more convenient. Societies associated with interior road reported the highest percentage share (22.47 percent) in the critical vacancy category. Because they are likely to be located in the interior part of the city where people might be facing the problem of connectivity, lack of accessibility to basic amenities, poor infrastructure, and security issues, etc. These factors must have discouraged potential buyers from purchasing a house, or people might have bought the house for investment purposes but did not have shifted to stay.
The report also tried to measure the present value of the houses and value of the same houses 3 years ago. Then, the growth of value appreciation has been calculated for 3 years and classified into 5 different quintiles. Quintile 1 refers to the least appreciation, while Quintile 5 presents the highest appreciation. It is interesting to notice the negative appreciation in Quintile 1, which means that there are some societies where the value of houses has come down as compared 3 years ago. Though, value appreciation of Quintile 1 to Quintile 4 has been increased from 4.4 percent to 49.2 percent. However, the rate of vacant houses in the first four quintiles (Quintile 1 to Quintile 4) do not look significantly different because they range from 10.1 percent to 11.2 percent. In the case of Quintile 5, where the highest appreciation has been reported in the last 3 years, it also said the highest vacant houses (about 14 percent). In this quintile, on average, the value of a house has been increased by 124.2 percent, where about 80 percent is the minimum appreciation, and about 185.7 percent is the highest appreciation in the last 3 years. The direct and positive relationship between appreciation values and the number of vacant houses shows an indication of investment. More appreciation is more likely to happen in prosperous areas, and well-connected societies, where there is a possibility of having more than double value in only 3 years. So, people purchase these houses for investment purposes and do not prefer to shift in those houses or rented out them to others.
We classified primary reasons in 6 different categories. Documentation issues with 23.41 percent and Investment purpose with 23.08 percent consist of the most significant shares of primary reasons followed by poor infrastructure with 19.04 percent. The category of documentation issues refers to the situation when houses are vacant because the buyer did not pay the required amount on time, delay in registry or issue of possession, and non-approval of loan process due to incomplete documents. The category of poor infrastructure is the combination of several factors such as no space for kids to play, non-availability of school, outer area of the city, no parking space, a higher level of pollution, rent is too high, higher traffic, and lack of water facilities. Distance from the workplace (10.03 percent) and Shifting soon (9.7 percent) are the other two primary reasons. Apart from these factors, we clustered some fewer frequency factors in one category, namely others. This other category is the vector of different factors such as:
Results from the regression analysis show that distance from workplace and poor infrastructure are the most prominent reasons compared to investment purposes in determining the rate of vacant houses. When cities prosper, demand for houses and other real estate increases, which pushes up the prices of the property. This is a simple principle of the law of demand that refers to the situation when demand for a product will increase supplier will try to increase the price to maximize his profit. Consequently, a large number of individuals and households face problems in finding suitable and affordable housing close to their jobs. The next best option for them is to live near a transport network, so that affordable, safe, and accessible modes of transport can help them to commute easily from home to workplace and vice versa.
The importance of public transport is so far neglected or underestimated in Indian housing policies. Income seems the most important determining factor in choosing the size of the house and its location. However, location is very much dependent on the distance or location of the workplace. Usually, we see a significant trade-off between the size/quality of the house and the closeness to the workplace. This means, if a household prefers to live close to the workplace to save their time and transportation cost, they might have compromised with the size and quality of the house. This is because, given the income constraint, households can either live in homes farther from the city centre, which is cheaper and incur higher expenses on commuting or live closer to the city centre and save on commuting but instead spend more on housing. Therefore, the importance of public transport increases, especially for low-income households, because this will help them to decide either higher savings or having more disposable income for incurring expenses on other necessities.
Further, Mass public transport reduces the dependency on own mean of transportation such as cars and other motor vehicles, that will undoubtedly minimize the requirement of parking in residential buildings. If parking requirements are removed or reduce up to a significant level, there will be a decrease in the cost and time for construction. This lower cost and time for construction will increase the affordability for houses and will reduce the possibility of vacant houses. Further, mass transit systems will also lower environmental costs by lowering vehicular emissions.
Rental yields in India remain very low, housing rental yields range between 1 to 3 percent annually, more than 50 percent lower than the risk-free rate. Structurally it is impossible to address this as to bring it at a sustainable level; either incomes or willingness to pay should be more than double or value should be halved. The government has tried to bring down prices for other reasons, but the corrections have been marginal at best. A few changes that the government can implement.
Not tax rental income from housing up to a certain threshold. This threshold should be determined by the type of urban area (tier I, tier II, etc.) and type of rental – EWS, LIG, MIG, or HIG. There should be a higher limit for exemption if the rental is EWS or LIG in a tier I city. The added benefit is that this would help more declaration of income and reduce cash transactions that are the norm in most rental housing deals.
Make eviction easier – most housing rentals contacts are structured for 11 months, and this brings uncertainty both to renter and property owner. From the renters’ point of view longer tenancy will entail investment in the rented property and from the property owner’s perspective more visible cash flows
Housing projects or affordable housing projects that have at least x% of units (30 percent to 50 percent) as rental and owned by the company/institution should be part of priority sector lending. These projects should be made exempt from income tax and other taxes.
Housing projects that have x% of rental units (30 percent to 50 percent) should be able to access higher FSI and made exempt from paid FSI; these rental units should have a lock-in of 5 to 7 years – the minimum time that the developer cannot sell them.
Homes that are owned by individual owners and not occupied for more than 6 months a year should be taxed at a higher rate through higher property tax and notional rent.
We believe that markets themselves are the most powerful regulators, but at the same time, there is a complete asymmetry of information, especially in the affordable housing space. We observe that due to loopholes in building guidelines based on locations, a large number of projects on the outskirts of cities lack the necessary infrastructure.
Developers should be compensated through tax credits or tax exemptions to build trunk infrastructure to connect their projects to existing trunk infrastructure. This would include roads, water supply, drainage, and electricity.
The government should create these specifications at a national level through the National Building Code (NBC), so a minimum standard can be maintained. To reduce rent-seeking opportunities, this infrastructure can be certified by third-party inspectors.
Priority for infrastructure should be given when it is being built by private parties, as suggested above, or in areas lacking infrastructure where multiple projects have come up.
The national building code should be strengthened regarding building guidelines, mainly when the buildings are located in peripheries of cities where there no clear jurisdiction or panchayat jurisdiction. We have seen projects that have unit sizes smaller than 200 fts that are practically unliveable.
Maintenance should be kept as a responsibility of the developer for a fixed number of years – especially elevators, water supply, sewerage, and garbage disposal. This lack of necessary infrastructure is one of the critical reasons for the high vacancy, especially in buildings with higher floors.
Government projects have shown a higher than average rate of vacancy in our study – some projects are critically vacant (30 percent or above). We have attributed this to many reasons, but the major ones are investors who can gain access to this supply through loopholes, communities where multiple individuals are allotted homes in different locations through the lottery system. At times these random allocations result in the beneficiaries having to move out of these homes as either they are logistically inconvenient, or the social infrastructure they had in their previous locations does not exist.
The allocation process of beneficiaries needs to be changed. Allocation of units should be done to groups – that can be vetted with the help of non-government organizations (NGOs). As these groups will already have a strong social infrastructure in place, it would result in a better and more vibrant community.
Better marketing – government projects are being built to much better standards and, in most cases, outstanding locations. The perception of these being substandard needs to be removed and communicated both to beneficiaries and the public in general.
Mixed-use developments – government projects are usually classified according to the class of beneficiaries, and thus each development is meant for only one economic class. Mixed used developments could help increase multiple development indicators and could potentially reduce class and community segregation in certain areas. This could help in reducing vacancies and possibly help property owners gain better rental incomes.
Larger integrated projects with more commercial elements – large mixed-use developments would help in creating more inclusive communities with better infrastructure. Commercial activities – shops, offices, or even government offices would create organic demand for occupancy in these developments at multiple price points and could help towards reducing vacancy.
A large part of the vacant stock in Ahmedabad is unsold inventory. The demand exists but most likely at a price point 20 to 30 percent lower than what it is offered at present. Conventionally it would not be possible for a developer to correct prices by 30 percent, but the government can introduce some measures to try and address this.
Funds appropriated for priority sector lending are largely left unused, the government can earmark these funds for first time home buyers in projects that are more than 50 percent unsold one year after completion or issue of occupancy certificate. This loan can be capped at INR 15 to 20 lacs depending on location.
The government can retrospectively implement section 80 IB in cases where the unsold inventory is over 50 percent, two years after completion or occupancy certificate has been issued.
The government can introduce an exemption to stamp duty in projects that have been completed for more than 2 years and are more than 50 percent vacant.
The above two measures can help developers who had not launched their projects under section 80 IB reduce their prices by up to 15 percent to clear inventory.
An added incentive can be free TDR equal to the unsold inventory if the developer can clear the inventory is 12 months after notification. This not only incentivizes the developer to slash prices but to avail the benefit he has to develop another project, which in turn helps keep the investment cycle going. There should be a provision that any promoter can avail of this only once.
Considering that the cost of TDR is usually 60 percent of the circle rate, free TDR would be a considerable incentive to liquidate unsold stock at deep discounts; it would indirectly help the economy and increase the supply at substantially lower rates.
As per the United Nations, India will have added 416 million urban dwellers by 2050. We need to, therefore, focus on sustainable management of cities and the provision of decent housing for their dwellers. However, one of the problems facing Indian cities is the presence of vacant housing. This creates a paradoxical situation as a sizeable population has no access to decent housing; on the one hand, while on the other hand, there is a presence of a large stock of vacant housing. As per the Census of India 2011, around 10.07% of the total urban housing stock of the country comprises of vacant houses.
Ahmedabad-the fifth largest city in India by population- has one of the largest stocks of vacant houses. As per the IDFC Institute (India Infrastructure Report 2018), 14.82% of the total residential census homes in Ahmedabad are vacant. Census (2011) data on the vacant housing stock is available, but it does not identify the reasons why they are vacant.
The Centre for Sustainability at Anant National University will address these two questions in a series of reports on vacant houses in cities in India, starting with the city of Ahmedabad. What are the reasons for this vacancy? What are the solutions?
The Centre for Sustainability at Anant National University (AnantU) is interested in
Miniya Chatterji, CEO, Sustain Labs Paris and Director of Centre for Sustainability
Dhaval Monani, Founder and CEO, First Home Realty Solutions
Dr. Sharadbala Joshi, Aashray Incubators and visiting researcher at AnantU
Vaidehi Tandel, Senior Fellow at IDFC Institute
Prof Madhu Bharti, Professor, Faculty of Planning, CEPT University
Kavya Tibrewal, Researcher, Centre for Sustainability, Anant National University
Since our objectives were to identify the reasons and solutions for vacant housing in housing schemes constructed after 2010. Experts suggested to categorised residential houses as per the Pradhan Mantri Awaas Yojana annual household income levels, namely:
Economically Weaker Sections: Households with an annual income of up to Rs. 3 lacs.
Low-Income Groups: Households with an annual income between Rs. 3 lacs to Rs. 6 lacs.
Middle Income Group: Households with an annual income between Rs. 6 lacs to Rs. 18 lacs.,/p>
High Income Group: Households with an annual income above Rs 18 lacs.
For ownership, the residential houses are categorised under government housing schemes and private housing units. To include the variability of geography in the sample, it was suggested to include housing in the city within the scope of Ahmedabad Municipal Corporation (AMC) and periphery, the area outside the AMC, and within the scope of Ahmedabad Urban Development Authority (AUDA).
Further, it was suggested to explore the major reason for vacant houses discussed in the existing literature. For this, significant determining factors for vacant houses were identified through a review of the literature.
The major factors were found to be:
Geography (distance from the city centre, peripheral properties)
Infrastructure (roads, hospitals, schools, transportation)
Economic issues (income level, rental yields, expected rent, investible asset class).
Thereafter, a two-pronged approach for data collection was suggested for the study. One was to get data from the Census office, private builders, government agencies, and property agents working around selected areas with a large stock of vacant housing, and the other was to conduct a survey amongst residents on the challenges/ benefits of living in the identified housing schemes.
The Centre for Sustainability, AnantU has conducted a survey in Ahmedabad to take stock of the reasons for vacant houses. The report on the paradox of vacant houses is an attempt to examine the significant determining factors of vacant houses in Ahmedabad. We observe that the paradox of vacant housing in Ahmedabad can be attributed to several reasons, some of them are endemic to the whole country, and some are specific to the dynamics of the city and the state and some just to a particular building type (government vs. private).
Scrol down for the executive summary of the report. The full report is available here.
Elective course for School of Architecture 8th semester on affordable housing and economics
Affordable housing module at the Anant Fellowship
Affordable housing module at the Anant Fellowship for Climate Action
Affordable Living course at the School of Architecture
1. Affordable housing & carbon footprint, Sunday, 14 March 2021 | Ruchie Kothari | Shwetang Monani – link
Terwilliger Centre for Innovation in Shelter (TCIS) – USA, is an independent entity set up within Habitat for Humanity International to deal with a market-based approach and create an impact on 100 million lives. It functions independently of Habitat for Humanity with its budget and team. TCIS has set up and manages several funds for investing in housing ecosystem start-ups, including the much-lauded Micro Build Fund – which has led to the development of commercial paper by Credit Suisse for investments in the affordable housing space.
AnantU partners in research on areas of mutual interest with TCIS. The areas of cooperation may include, subject to mutual consent, any desirable and feasible activity that would further the goals of each institution.
Such interaction may include cooperation in a variety of joint academic and education activities such as:
The impact of accessibility to housing microfinance on low-income familiesWhich materials or services have the most impact in creating a vibrant housing ecosystemHow to integrate sustainable technologies in low-income housing construction
Further, both organizations are keen to develop and conduct modules for capacity building in the affordable housing space. The capacity-building platform would be open for students and faculty members to work with the portfolio companies of TCIS.
Habitat for Humanity – India (HfHI) is one of the largest organizations working to provide decent shelter to families. HfHI sets the stage for families, volunteers, donors, and supporters to come together to build suitable homes that provide the foundation for a better life.
HfHI and AnantU anticipate that a number of initiatives will occur during the period of this MOU. The key objectives of this exercise would be to address the issue of 30 million uncomplete homes and their possible solutions. The focus would be on the self-build space, which accounts for 60 percent of all home construction in India.
To fulfil the above-mentioned objectives, scope of the work is classified in key heads such as:
Volunteering Programme: Assistance to each other with Construction, Technology, Innovation & Design to the affordable housing by sending their students/staffs on the field for volunteering programs.Knowledge Hub and Workshops: Facilitate and host key research workshops to enhance the efficiency of the housing projects.Research and Development: Undertake research, assessment, development of tools and resources that facilitate dialogue and synergy of best practices between different operating models and stakeholders.Research Aspect: To conduct joint action-based research such that it is implemented in field-level, policies and practices. These researches shall make an impact in creating awareness within the areas worked upon and the public, in general.Publishing: Case studies and innovation may be presented in national/international conferences and published in reputed Journals and Magazines.