Closing the gap
A potential template for financial companies to follow can be found in the $1.1billion private equity fund that HDFC Capital Advisors has recently established, which seeks to address the demand-supply gap through a combination of funding, partnerships and technology.
The fund will provide long-term, equity and mezzanine capital to developers at the purchase or pre-approval stage if they commit to building affordable housing. Developers who partner with HDFC will have access to long-term capital, and be encouraged to create their own operational capabilities in areas such as design, technology, project management, sales and branding. A mentoring programme to partner with and invest in proptech companies will help drive innovation within the affordable housing ecosystem, creating efficiencies and lowering costs at each stage of the development cycle.
But solutions to the affordable housing shortage cannot come from the private sector alone. There are extreme infrastructure challenges both in rural and urban areas. The adequate provision of water, transport, sewerage and power is a pressing issue; as is the painfully slow planning system. The government needs to streamline the process of obtaining approvals for construction, as delays result in substantial cost overruns. The concept of a "one-stop shop" for clearances is widely recognised as an effective tool.
Ironically, there is also a substantial amount of existing housing that remains unsold. Buyers lack confidence in the ability of developers to complete projects, which has adversely affected cashflow for projects that are already under way. That is the main constraining factor on housing development right now; government support is required to kick-start these stuck projects and restore customer confidence.
There is no denying that the development of affordable housing in India has gathered momentum in the last four years. But equally, there is still a lot of work to doby 2022, and beyond.
This article originally appeared in the Modus Asia-Pacific edition, Q3 2019, under the headline 'Deconstructed: Housing for All who can wait'