The Global Urbanist

News and analysis of cities around the world

Time to question India's assumptions about affordable housing

From Western rules of thumb about the affordability of mortgages to an obsession with high-rise private sector developments, India's approach to affordable housing is full of hopelessly outdated assumptions. Greg Randolph picks them apart.

Greg Randolph

Greg Randolph

Cities: Delhi, Mumbai

Topics: Housing, National governance, Private sector governance, Property and real estate, Poverty and inequality

India's ballooning cities are on the front lines of the global affordable housing crisis. It isn't only civil society activists and urban policymakers that understand the critlcal need, but urban dwellers from Delhi to Kolkata, Ahmedabad to Kochi who have seen rents skyrocket and jhuggis (informal housing) emerge in the interstices of overflowing metropolitan areas. The problem of affordability affects the poor and recent migrants the most, but the middle class, longtime city residents and suburban families have not been shielded from the housing crunch either. Just to keep up with the rapid rate of urbanisation and economic growth, 700 to 900 million sq metres of residential and commercial space — or a new Chicago — must be built every year in India. Without effective policy intervention, the tremendous pressure on housing infrastructure will drive skyward the number of households living in substandard conditions, currently pegged at 19 million.

If it seems too simple, it probably is

Should India's urban poor have to live in this precarious financial situation just to secure safe, legal housing? Clearly this is only trading one threat of eviction for another.

Given the sweeping nature of the problem, all levels of the Indian government should be entertaining innovative policy approaches toward assisting those under-served in today's urban housing markets. But assumptions recently articulated by the Ministry of Housing and Urban Poverty Alleviation (HUPA) show that India's bureaucrats are defining both the need and the solution in narrow, antiquated terms.

For anti-poverty programmes — housing schemes included — policymakers define their target groups ("economically weaker section" and "low-income group") by one absolute income figure. Imagining that poverty equates to the same income in every urban centre across India is in any case flawed, but especially in the case of shelter. Factors like cost of living, government efficiency in service delivery, cost of construction and income inequality must be considered in determining which populations lack quality housing. In a city like Mumbai, where 62% of residents live in substandard housing but fewer than 40% (according to the Centre for Monitoring Indian Economy) fall into the government's low-income categories, improving housing infrastructure will require a nuanced approach that looks beyond policymakers' simplistic definitions of poverty. Especially since "slum dweller" and "low-income" are not perfectly overlapping categories in India's urban centres.

The Indian government's even larger mistake, and the one that might have the most perverse effect on policymaking, is in the way it extrapolates affordability from income. According to remarks given by Sushil Kumar, HUPA's Joint Secretary for Housing, at the recent conference of the National Real Estate Development Corporation, policymakers believe the poor can buy a home that costs five times their annual income. This might be an appropriate benchmark in Europe and North America, or among the sallaried upper-middle class in Bangalore, but the urban poor face a difficult lending environment. Even when low-income households access a formal loan — which, given their informal income sources, they often cannot — this "micro-mortgage" requires at best 12% per annum on a maximum loan term of 15 years. Given this scenario, policymakers are supposing that a family in the low-income categories can spend 58% of its monthly earnings on mortgage payments. (Affordable housing experts such as Bennett L. Hecht recommend a 30% limit on proportion of income spent for housing.) Should India's urban poor have to live in this precarious financial situation just to secure safe, legal housing? Clearly this is only trading one threat of eviction for another.

The Indian government's illusion around affordable housing pivots on two inaccurate assumptions about how to solve a housing crisis: (1) that the solution will have to entail high-rise, developer-driven housing projects, and (2) that every family must own a home. This thinking drives budget-conscious policymakers to limit their assistance to one subset of households feeling the crunch — leaving lower-middle and middle-income families to live in substandard conditions. Moreover it goads the government into calling "affordable" that which developers can afford to build, rather than what the urban poor can or want to buy … or rent.

The (real) affordable approach.

A complex, multi-faceted problem like India's affordable housing shortage deserves a diversity of solutions — from public, private and grassroots actors. Developer-driven housing complexes aren't simply too expensive for the urban poor (and ultimately unsustainable for the government to subsidise, particularly given the soaring cost of land). They also aren't an appropriate solution for everyone.

Moreover it goads the government into calling "affordable" that which developers can afford to build, rather than what the urban poor can or want to buy ... or rent.

For home-based workers who rely on the street as a workspace and need easy access to markets where they can sell their goods, living on the twelfth floor of a high-rise is impractical. These families would benefit from initiatives that facilitate upgrading of substandard homes and informal settlements. Instead of forcing these families to buy an expensive flat not designed for their lifestyle, government programmes could enhance tenure security, enable access to formal financing so dwellers can make minor but much needed improvements to their homes, and improve delivery of basic public services like water, electricity and sewerage. Allowing communities to improve their current housing situation would also empower citizen groups and civil society organisations to get involved in addressing the housing crisis.

Many households, particularly seasonal migrants who spend only part of the year in the city, prefer to rent. The government should look at innovative ways to catalyse the informal rental markets or incentivise the creation of formal rental units, where all different types of households including migrant families can live affordably. A rental or dormitory model designed specifically for single migrants can be dense and economical, making it feasible in central districts that are proximate to places of employment.

And families who do aspire for developer or formal-sector units would be better served by rent-to-own models that allow them to work towards home ownership in an incremental and financially sound way.

Indian cities deserve more than an oversimplified, one-size-fits-all approach to affordable housing. The government can empower communities to make their own housing choices if it tosses aside tired assumptions and engages all stakeholders in creating a comprehensive portfolio of housing solutions.

Greg Randolph is a William J. Clinton Fellow of the American India Foundation. Based in Delhi, he works with micro Home Solutions, a social housing initiative.