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Q 44- Providing affordable housing requires multi-pronged approach. In this light,deliberate upon the government initiatives to boost affordable urban housing in India. (250 words)

  • Paper & Topic: GS I à Urbanization related issues


  • Model Answer:


  • Introduction:


  • The National Urban Housing and Habitat Policy (NUHHP) of India established affordable housing for everybody as a goal in 2007.
  • It became well-known in the aftermath of the 2008 Global Financial Crisis (GFC), when low real estate demand and a slowing economy drove Indian real estate developers to concentrate on low-cost housing.
  • The most significant boost came in June 2015, when the Indian government announced the Pradhan Mantri Awas Yojana (PMAY) – Urban.
  • According to the assessment of the Technical Group constituted by the Ministry of Housing and Metropolitan Affairs in 2012, India had a housing shortfall of roughly 19 million units in urban areas.
  • The majority of the scarcity is in the EWS (economically disadvantaged portion) and LIC (limited income community) (low income category).
  • With India's rising urbanisation, the demand for urban homes in this income bracket is expected to expand even further.


  • Body:


  • In India, affordable housing is defined as a house or a flat with a carpet area of up to 90 square meters in non-metropolitan cities and towns, and 60 square meters in metropolitan areas, with a value of up to Rs 45 lakh in both cases.


  • So far, the following measures have been made to make housing more affordable:


  • Over the last few years, the government and the Reserve Bank of India (RBI) have made a number of steps to develop this sector.
  • PMAY (Gramin) is administered by the Ministry of Rural Development, whereas PMAY (Urban) is administered by the Ministry of Housing and Urban Affairs.
  • Under PMAY-U, the government aims to complete 11.2 million dwellings by 2022.
  • In order to meet this goal, 4.8 million dwellings have been finished so far, with another eight million in various stages of construction.
  • The RBI's priority sector lending program also includes affordable housin
  • The government has also announced other steps to enhance the availability of affordable housing, including the CLSS (Credit Linked Subsidy Scheme) for first-time home buyers.
  • The Model Tenancy Act 2021 is a step in the right direction, as it attempts to alleviate some of the rental market's imbalances while also offering a redress mechanism that should allow India to develop a more mature rental market.


  • Affordable housing initiatives confront the following challenges:


  • Various obstacles continue to stymie India's development of affordable homes.
  • A dearth of acceptable low-cost land parcels within the city limits, a lengthy approval process with several clearances, a shortage of affordable construction credit, and low profit margins are only a few of the problems.
  • As a result, huge, organized real estate players have been limited in their participation in affordable housing developments.
  • Despite the favorable environment, affordable housing sales have failed to gain traction.
  • While a definitive cause has yet to be determined, some possible reasons include the need for additional government incentives, fragile economic conditions affecting employment and income levels, resulting in risk-averse buyer sentiments, challenges in implementing government incentives, credit availability difficulties due to the Non-Banking Financial Company (NBFC) liquidity crisis, and the millennial mindset of being asset light, preferring to rent rather than buy.
  • The Covid-19 pandemic's outbreak and subsequent lockdowns have had a major impact on all businesses, including real estate.
  • During the lockdown, all building activities had to come to a total halt.
  • While the cost of materials such as steel and cement has risen since the lockdown, the availability of construction labor has decreased, increasing the cost of construction for developers and causing delays in project completion.
  • Furthermore, in light of the current economic crisis, banks and lending institutions have tightened lending standards, making it difficult for developers to obtain credit; this, combined with low demand, has significantly damaged developer cash flows.





  • Steps to take/Conclusion:


  • Solving the problem of affordable housing necessitates a multi-pronged approach that addresses both demand and supply difficulties.
  • On the demand side, while subsidies are vital, it is also critical to augment them with infrastructure development and the provision of basic services/amenities in the vicinity of these housing projects.
  • On the supply side, because affordable housing is a low-margin enterprise, policies and measures that reduce costs will make these projects more feasible.
  • A holistic approach to affordable housing will also require other missing parts, such as a developed rental market and, in particular, a robust affordable rental housing plan.
  • Additionally, because affordable housing is a consumer-driven market, current low property prices and low home loan interest rates may encourage homebuyers to make their purchases.
  • The extension of Real Estate Regulatory Authority (RERA) deadlines for project completions will provide much-needed relief to the developer community; additionally, given the high rate of reverse migration in the wake of the ongoing crisis, this could result in increased demand for affordable housing in Tier-II and Tier-III cities.
  • The inexpensive housing segment, on the whole, has a better chance of recovering faster than other residential segments.
  • The LIG / Economically Weaker Sections (EWS) and MIG earners who make up a substantial portion of India's population are the segment's target audience.
  • If suitably incentivized, the affordable housing sector may benefit significantly from the sheer magnitude of its target group.


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