Low-income Groups to be hit the hardest due to the shortfall in supply of housing units
In order to house its fast rising population, the biggest city of Gujarat —Ahmedabad — will be needing over 2.48 lakh houses in the next five years till 2018. However, the city is expected to build only 44,200 houses, falling short of over 2 lakh houses. This in turn could artificially jack up prices of homes, say realtors.
Between 2014-18, the demand for houses in Ahmedabad is estimated to be for over 2.49 lakh units, of which 46 percent will be from the Low-Income Groups (LIG) , 42 from the middle-income groups and the remaining 12 percent from the high-income groups, states a recent study done by global consultants Cushman & Wakefield.
However, the estimated supply of houses during this five year period will be only 44,200 units. The hardest hit will be the Low-Income Groups, says the report. “The LIG demand seems completely unattended with a massive cumulative gap of around 1.07 lakh units,” it states explaining how Ahmedabad will be building only 6900 houses of LIG segment against an estimated demand for 114,300 houses during this five year period.
This short fall in supply of homes, especially for the LIG segment, is expected to happen despite AUDA or the Ahmedabad Urban Development Authority earmarking a 76 square kilometer area on the periphery of Ahmedabad city to provide 15 lakh affordable homes.
“Government support surely plays a crucial role in instilling confidence, and initiatives such as earmarking affordable housing zones in the City Development Plan are aimed at providing a solution to the affordable housing shortage. However, such measures are not enough to incentivize developers,” says Sanjay Dutt, executive managing director (South Asia), C&W.
The lop-sided supply will see residential projects cropping in certain parts of the city. According to C&W, locations like Bopal, Satellite, Prahaladnagar, Vasna, Thalej, Vejalpur, etc in the west, and Chandkheda, Motera, Ranip, Gota in the North will see new residential projects, but areas like Vatva, Ghodasar, Nikol, Odhav that house LIG population in the East and southern parts of the city “are likely to witness poor supply of houses”.
Nearly 6,000-7,000 units are launched in every year in Ahmedabad which has a population of over 60 lakh. Dutt points out that between January 2012 and September 2014, “just 28% of the units launched were in the affordable segment.”
“Due to increasing land rates, lack of credit at lower interest rates and increasing construction and manpower costs, the input cost of residential housing projects have risen. As a result, developers largely build mid and high-end segment offerings. This has created a tremendous mismatch, which is likely to continue in the next five years; of the overall shortfall of 2 lakh houses, the LIG segment may account for more than 50%,” he said adding that the pipeline of supply will not serve the anticipated demand as the rate of industrialization in Gujarat is expected to give a fillip to demand in the LIG segment, causing higher migration to the city from other cities and even states.
Ahmedabad-based real-estate developers who did not wish to come on record said that the poor supply of houses would lead to an “unusual rise” in the prices of homes in the coming years. “In the affordable segment targeting the LIG households, demand is high and hence, capital values will remain high and even increase in some cases unless the supply is increased substantially,” says Dutt.