DHFL Summer Internship Report On Housing Affordability

AMITY GLOBAL BUSINESS SCHOOL-MUMBAI
Summer Internship Under
Topic On
Housing Affordability..A 21st Century
Problem
Submitted by :
Abhishek Shrivastav
Enrollment Nos: A30206410012
BBA + GDBA( 2010 -2013)
UNDER THE GUIDANCE OF

PROF Ms.Bhavna Mehta
1st Page: Same as cover page

2nd Page : Declaration- (Signed by Faculty guide )
3rd Page : Certificate from company ((Signed by
Company
Mentor/ Guide)
4th Page : Acknowledgements
5th Page : Contents
6th Page : Abstract (Executive summary)
Chapter 1- Introduction
Chapter 2 Literature Review
Chapter 3- Methodology (primary & secondary)
a. Sample details (size, demographic details)
Chapter 4- Data analysis
Chapter 5- Results, Discussion & Suggestions
Chapter 6- Conclusion
c) Bibliography
d) Appendix
( Font Type Times New roman)
(Font Size 12, 1.5 spacing)
ACKNOWLEDGEMENT
This project is the outcome of sincere efforts, hard work and constant guidance of not only me
but a number of individuals. First and foremost, I would like to thank AMITY MUMBAI for
giving me the platform to work with such a company. I am thankful to my faculty guide Ms.
BHAVNA MEHTA, AGBS MUMBAI for providing me help and support throughout the
internship period.
I owe a debt of gratitude to my company guide Mr.MANISH KIRPEKAR, Asst.General
Manager Technical,Mr.Ramrathinnam General Manager(Credit), Deewan Housing Finance
LTd,Bhavesh Prajapati,Rohit Maurya who not only gave me valuable inputs about the
industry but was a continuous source of inspiration during these two months, without whom this
Project was never such a great success.
I would also take the opportunity to thank the entire staff of Deewan Housing Finance
Ltd(DHFL), Pinky Malhotra,Rachna Chemburkar,Shonak Masurkar,Deepali Mam,Ameya
Sir who helped and shared their knowledge about the industry for which I am highly grateful.
Last but not the least I would like to thank all my Faculty members, friends and family
members who have helped me directly or indirectly in the completion of the project.
Abhishek Shrivastav
BBA + GDBA (2010 2013)
AMITY MUMBAI
TABLE OF CONTENTS
S. No. Particulars
Page No.
1.
Introduction to the organization
3-8
2.
Introduction to the project
3.
Objective
4.
Literature Review
9-10
5.
Methodology
10-14
6.
Results and data analysis
14-32
7.
Conclusion and recommendations
32-34
8.
Limitations
34
9.
Appendix 1
35-37
10.
Appendix 2
38
11.
Appendix 3
39
INTRODUCTION
General introduction.
Housing is one of the basic human necessities. It is fundamental for the physical, psychological, social
and economic well being of people. Shelter isone of the most basic needs of the people. All
over the world the having thehouse is major problem and continuous efforts have been
made to meet
thee v e r i n c r e a s i n g n e e d s o f e a c h g e n e r a t i o n , w h i l e t h e p r o b l e m o f p r o v i d i n g h
ousing is highly critical in the developing countries. Most of the advanced countries also
face this problem in varying degrees and
dimensions.A l m o s t a l l g o v e r n m e n t s , i t m a y b e d e v e l o p e d , d e v e l o p i
n g o r underdeveloped country their object is every citizen of their country shouldhave
a one decent house in a suitable living environment. Housing as a formof reproducible wealth and is a
asset of the people and their country.C o n s t r u c t i o n o f h o u s e i n I n d i a h a s b e e n o n e o f
t h e m o s t i m p o r t a n t problem, as a result of high growth of population. It has very difficult to fill
thegap between supply and demand of houses. Housing is a important factor for d e v e l o p m e n t i n
b o t h e c o n o m i c a n d w e l f a r e t e r m s . I t i s n o t o n l y a g o o d consumption but also
a productive investment.So for that, they need financial supports for construction of their ownhouse.
Specific Introduction
Solving the housing problems in India, the Government and Private financial institutions are
started their business to give financial assistances
to people. "The National Housing Bank" has started its business to giveassistance and
provide financial support to their people.T h e "
DEWAN HOUSING FINANCE CORPORATION LTD
", popularly known has DHFL has commenced its business to provide financialassistant and support to
their customers. The DHFL is providing loan for all the people. This companys main products are Home
loan, Home Extension loan,Home Improvement loan, leased Rental finance, Mortgage loan etc.,The
DHFL's Shimoga branch is providing loan for all salaried persons,self employed persons, business
people, agriculturists, fishermen's and all typesof people who want loan to build their own house in all
over Shimoga.DHFL also has the special schemes facility known as, "Swarna
JayanthiR u r a l H o u s i n g F i n a n c e S c h e m e " t o m a r k t h e g o l d e n j u b i l e e o f I n
d i a ' s independence. The scheme seeks to provide improved to access housing loansto borrowers of
constraints/ acquisitions/ up gradation of housing rural areas of the country.
COMPANY PROFILE
Introduction
D H F L i s a h o u s i n g f i n a n c e c o m p a n y t h a t h a s t a k e n t h e r o a d l e s s travele
d. The journey began on the 11th of April 1984. On this day, RajeshKumarWadhawan
began his mission to correct what had troubled him for years, the sad truth that most Indians
couldn't get a housing loan on fair terms.The Founder Chairman saw the owning of a home as a critical
element to
the b u i l d i n g o f i d e n t i t y a n d c o n f i d e n c e o f e v e r y I n d i a n . D H F L w a s o n l y t h e s e c
o n d h o u s i n g f i n a n c e c o m p a n y s e t u p i n I n d i a . A n d i t s s t a t e d b u s i n e s s objective
was unusual to say the least, to provide access to housing finance
tol o w e r a n d m i d d l e i n c o m e I n d i a n s . M o s t e x p e r t s l a u d e d M r . W a d h a w a n ' s a l t r
u i s m b u t s h o o k t h e i r h e a d s a t h i s a p p a r e n t l a c k o f b u s i n e s s a c u m e n . Especially
as in the beginning DHFL disbursed funds from its own equitycontribution and had a
return on equity of less than 8% at a time when the interest rates were about 18%. But that
is the difference between those who seethings as they are and the visionaries who see things as they
can be. Over twodecades later, DHFL is still profitably doing what its founder intended it to do.DHFL
has disbursed loans amounting to over 53 billion, its non performing assets are the lowest in
the industry. The Founder Chairman had a unique andtimeless insight into the character of the
majority of Indians who are generallydismissed as high credit risk. They respond unequivocally to trust.
They have avery emotional relationship with the idea of an own home. To them it isnt
ani n v e s t m e n t . I t i s a s a n c t u a r y . A s y m b o l o f w h o t h e y a r e . T h e y w i l l n o t
d o anything to jeopardize this symbol of security. This insight was the prime mover behind
DHFL.
Today, DHFL has an asset base of over Rs. 3,580 crores with a strong presence across India
through its 72 branches and 116 service locations. DHFLcaters to a large section of Indians working in
the Middle East through its over seas branch in Dubai.
Vision
Transform lives of Indian households by enabling access to home.
Mission
Be easily accessible to every Indian who desires to own a home.
Understand our customers inner needs and speak their language.
Go to any length to make sure our customers dont feel intimidated.
C o n t i n u o u s l y c o n f i g u r e o u r c r e d i t p o l i c y t o m a k e s u r e t h e m a x i m u m number of
people can be eligible for loans.
Find ways to help our customers tide over difficult times
Spread our network to every corner of India
Respond promptly and courteously to all enquiries.
Values
Treat all our customers with dignity and respect.
Be totally transparent in all our dealings.
Strive to be a learning organization.
Dedicated to team excellence and employee happiness
Be single mindedly committed to the betterment of our society
PRODUCT PROFILE
Dewan Housing Finance Corporation Limited, this is a company
whicho f f e r s t h e f i n a n c i a l s e r v i c e s t o t h e p e o p l e . T h e c o m p a n y o f f e r s i n t a n
g i b l e packages in the form of financial services, which are not the physical goods asthe
product of the company.The main business and aim of the Dewan Housing Finance
CorporationL t d , i s p r o v i d i n g l o n g t e r m l o a n s t o i n d i v i d u a l s , c o o p e r a t i v e s o c i e t i e s , Corporate bodies and associations of persons for the purpose
of acquisitionconstruction and improvement of the residential houses.DHFL offers different
types of Housing loans schemes i.e. Home loan,Home Extension loan and Home Improvement
loan etc.,
PRODUCTS
DHFL Home Loans
DHFL Home Loans are offered to Individuals, Co-operative Societies,Corporate bodies and
Associations of Persons.T h e h o m e l o a n s e e k e r c a n a v a i l l o a n s u p t o R s .
100,00,000/- but
note x c e e d i n g 8 5 % o f t h e c o s t o f t h e p r o p e r t y . T h e a c t u a l l o a n a m
o u n t i s determined after taking into account factors like
repayment capacity, age,e d u c a t i o n a l q u a l i f i c a t i o n s , s t a b i l i t y a n d c o n t i n u i t y
o f i n c o m e , n u m b e r o f dependents, co-applicant's income, assets, liabilities,
saving habits etc. Thetenure of the loan ranges from 1 to 20 years. The term however does
not extend
4. Literature Review
The rising population in the cities has been identified as a contributing factor in rising housing
costs, to the extent that housing affordability has been declining in Australia. Sydneys
population continues to grow and the NSW Governments Metropolitan Strategy (2005),
hereafter referred to as the Metro Strategy, expects on average, Sydney to grow by about
40,000 people per year, or 780 people per week. About two thirds will be from natural
increase and the remainder of the growth is expected to come from interstate and overseas
migration.
Beginning with the National Housing Strategy definition of affordability to convey a notion of
reasonable costs in relation to income, Gabriel et al (p8, 2005) define housing affordability as
a term usually denoting the maximum amount of income which households should be
expected to pay for their housing. Similarly, PCA (2007) and Whitehead (1991) point out that
housing affordability is expressed by the relationship between housing expenditure (rent or
mortgage) and household income.
In way or another, housing affordability is measured and expressed as a ratio between
expenditure on housing and income.
As a general rule property analysts (PCA, HIA, UDIA) use 30 percent as the benchmark for
housing affordability. Yates and Gabriel (2006) defined as having
housing stress, those in the nations lowest two income quintiles (40 percent) that need more
than 30 percent of their disposable income for housing and refer to it as the 30/40 rule. Using
this definition, in a study for the Australian Housing and Urban Research Institute (AHURI),
they have identified that there are 862,000 households in Australia experiencing housing
stress.
A survey of 159 major markets in Australia, Canada, Ireland, New Zealand, the United
Kingdom in 2006 by Cox and Pavlevich (2007) showed that Australia has the most pervasive
housing affordability crisis. The measure used to rate housing affordability was the Median
House Price to Median Household Income Multiple, and thereby deriving the Median
Multiple ratio. The survey also identified that the housing cost escalation is principally the
result of supply factors.
Day (2006) points out, that in Australia, it is not the house itself that has risen in
price, rather it is the land the house sits on, which over the previous ten years (19952005) has nearly trebled across Australia and by comparison the cost of building a new house
on that land has hardly moved. Where land once represented 25 percent of the cost of a new
house and land package, it is now 60 percent .
UDIAs (2007) submission to the NSW Department of Planning regarding the City Centre
Plans in four city centres (Penrith, Liverpool, Parramatta and Gosford) concluded that it is not
feasible to undertake new medium and high rise dwelling development in these areas as the
cost of supplying the new dwelling is less than
the expected price realisation. UDIA contends that regulatory and market conditions are
presently unsympathetic to apartment construction and contend that there need to be a
reduction taxes and charges, in particular, developer contributions (Sect 94 levies). In a
previous report, UDIA (2002) calculated that for every $10,000 increase in the cost of
developing land, 240,000 Australian households are no longer able to afford a basic house
and land package.
As noted from above, there are varying views as to cause of affordability as the REIA (2007)
points out, the affordability problem has been caused by a broad range of complex factors
including policy inaction by various levels of government. In a case study of residential
developments, Karantonis (2007) found that the government receives 60 percent of total
income, whilst the developer with the risk, receives 40 percent. In a study for the Property
Council of Australia, UrbisJHD (2006) found that government levies and compliances now
make up for 35 percent of the total cost of homes in Sydneys northwest and 28 percent of the
cost of new units. HIA (2003)
also noted that state and local government approaches to the supply and funding of
infrastructure associated with residential development have impacted negatively on housing
affordability.
Internationally, in a review of housing supply in the UK (UK Treasury, 2004), known as the
Barker Report, identified that the long-term upward trend in real house prices has been
2.4 per cent per annum over the last 30 years compared to the EU
average of 1.1 percent. To bring the UK real price trend in line with the EU, an extra
120,000 houses each year would be required. In their submission to the review, the
Home Builders Federation (HBF) stressed that land supply is the key to sustainable
housing (Anonymous, 2007).
Finally, UDIA (2003) noted that providing affordable housing is determined by three
interacting factors; namely, demand side factors, supply side factors and government.
The latter included its intervention in planning regulatory mechanism, provision of
infrastructure, which are predominantly on the supply side
GROWTH OF HOUSING REQUIREMENTS AND HOUSING FINANCE IN INDIA
ABSTRACT
In a developing country like India, many institutions operate with varied objectives, in various
sectors of its economy. Some of these institutions provide it with a strong industrial base while
some others conduct their operations to provide financial base to sustain the pace of
economic growth. The latter category included financial institutions, which are required to
manage finance for other institutions. Finance is the life blood of almost all the activities,
involved in operating an economy. The housing finance institutions, as a whole, may be said that
precursor of the new era of finance. The existing housing finance institutions though have
done pioneering job in the nation building but in recent years it has been felt that they have
not been able to shoulder that social responsibility, to a desirable extent. Indeed, this was the
very crux of establishing the housing finance institutions in the country so as to improve the
standard of life the major chunk of the rank and file.
Man is a social creature, which brings some amenities like food, clothing, and shelter mandatory
for his existence. Generally after food and clothing, shelter is an important benchmark for the
existence of the human being. The rate of inflation has played its part in changing the
mindset of people, now not a palatial accommodation but a small house is perhaps the dream of
millions of people. The standard of living can be judged by the adequacy of housing but millions
of people are still vagrant in our country as well as in the world, so there is a very wild housing
problem in our nation and world also. It is well known that the housing problem in India is
alarming problem in both rural and the urban areas. To overcome this problem some financial
institution are coming forward to provide money to public. In present, housing finance
companies provides loans to individual person, association of person, firm, company,

corporations, union or state government and municipal or any local or public authority for
purchase of house or land, construction, maintenance, reconstruction, improvement and
development of house property, building, flat, office, shop, factory and warehouse etc. There
are some housing finance companies such as Housing and Urban
Development
Corporation
Limited (HUDCO),
Housing
Development Corporation
Limited (HDFC), Life Insurance Corporation of India (LIC) Housing Finance Limited, Bank of Borada
Housing Finance Limited, Deewan Housing Finance Corporation Limited, State Bank of India
(SBI) Housing Finance, Canara Bank -
INTRODUCTION
Its the serendipity that we are born in the breed that is known to be the most adroit among all
living being. We are known for acumen but are it sufficient. Man is a social creature, which
brings some amenities like food, clothing, and shelter mandatory for his existence. Generally
after food and clothing, shelter is an important benchmark for the existence of the human
being. Shelter is a basic human need next only to food and clothing. The rate of inflation has
played its part in changing the mindset of people. Now not a palatial accommodation but a
small house is perhaps the dream of millions of people. The standard of living can be
judged by the adequacy of housing but millions of people are still vagrant in our country as
well as in the world. So there is a very wild housing problem in our nation and world also. It is
well known that the housing problem in India is alarming problem in both rural and urban areas.
To overcome this problem some financial institution are coming forward to provide money
to public.
The need to have a roof over our heads dates back to the time when our ancestors first left the
shelter of the trees for life on the open areas. They either built a simple shelter or found an
unoccupied caves in which people lived. But unfortunately, life today, is more complicated
than that. In our industrialized urban areas, when it comes to finding somewhere to live,
our choices are limited to renting a dwelling or buying one, more often than not with the help
of a housing loan. After this they lived in huts. For making dwelling units people took loans. For
this purpose in previous century, there was housing finance provided by mahajans, sahukars
and moneylenders. But unfortunately, today taking loans is more complicated than it was
during our past time. In recent years we have banks and corporate HFCs for this purpose.
Against the milieu of rapid urbanization and a changing socio-economic scenario, the demand
for housing has grown explosively. The importance of the housing sector in the economy can be
illustrated by a few key statistics. Housing property forms an important share of the total
wealth of households in India and an estimate made put it to be as high as
28% of the household property.
A study made by the United Nations reveals that developing countries like India should go in
for the annual construction rate of least 8 to 10 dwelling units per thousand populations
in the ensuing 2-3 decades to prevent further deterioration of housing situation. The
observation deserves greater attention in the context that at present only 2 or 3 dwelling units
is being constructed for a population of 1,000 per year. It has been estimated that as against
the requirement of 5 dwelling units per one thousand populations per year due to growth of
population along, the net addition to the housing stock was only 2-3 dwelling units per
thousand per year up to 1971. Between 1971- 1981 this rate increased to 4 dwelling per
thousand per year. The need for improvement in the existing standards and replacement of old
stock further adds to the housing shortage.
IDENTIFICATION OF THE PROBLEM

We dream of living in an affluent society, to take the first step towards achieving it, proper
accommodation is mandatory. Which in turn is a behemoth problem in Indian scenario? The
problem of housing is not unique for India alone but it is pandemic. This problem has led to
large scale housing shortage both in the rural and urban areas especially among the poor and
miserable communities. The housing problem has been further accentuated with the increase in
population in the country. The shortage of housing in India persists since independence. Against
the milieu of rapid urbanization and a changing socio economic scenario the demand for
housing has grownup explosively. According to the National Building Organization the total
demand for housing is estimated at 2 million units per year and total housing shortfall is
estimated to be 19.4 million units in both the rural and urban areas.
OBJECTIVES OF THE STUDY

1.
To study the net resources invested by housing finance company in India since their
incorporation.
2.
To find the area where efficiency can be improved.
3.
To locate the area where cost reduction is possible.
4.
To make possible the efficient and effective utilization of resources.
RESEARCH METHODOLOGY
The proposed study, "Growth of Housing Requirements and Housing Finance in India" will be
based both on primary and secondary data. The primary data will be collected through
questionnaire and personal interviews with the official of the housing finance companies
concerned. The secondary data will be collected through published financial. The data
thus collected will be tabulated, classified and grouped for the purpose of interpretation,
analysis, finding and conclusions.
HYPOTHESIS
In the course of study the following hypotheses will be tested:a.
The positive growth is registered by housing finance industry in India. b. There is no
significant difference between the growth and requirement
of housing finance companies in India.
c.
The efficient working of the housing finance companies will have common men to
have confidence in the housing finance industry.
d. The trend has moved in favor of the private sector with regards to the total resources
investment by the housing finance companies.
LIMITATION OF THE STUDY

The proposed study is bound to have a few limitations. Firstly, the analysis and measurement of
growth of housing requirements would be based on primary and secondary data so the
limitations or shortcoming of primary and secondary data affects the conclusion and results of
the study. Secondly the study is subjected to general human limitations.
HOUSING POLICIES
With a view to solve this problem of housing there was a need of a well-organized National
Housing Policy. It is encouraging to note that efforts have been made to establish housing
enterprises and institutions at the national and state levels such as the Central Building
Research Institution and the National Building Organization and State Housing Boards. The
major financial institutions in the area of housing, operating either directly or through agencies
dealing with the housing sector, can be broadly classified into two groups, depending upon
whether housing finance is their primary field of operation or a secondary or incidental
function.
The formal sources of housing finance in gist comprise (1) budgetary allocations by the
Central and State Government, including market borrowings, (2) general financial institutions
namely the Life Insurance Corporation, the General Insurance Corporation and its four
subsidiaries, the Provident Fund, National and State Municipal Finance Corporations, and the
Commercial Banks & Credit Institutions. The involvement of these in housing finance is rather
incidental or secondary and hence they keep aside a specified portion of their funds at the
disposal of the housing sector, (3) specialized housing finance institutions as the name
suggests include mainly the NHB, the HUDCO, Apex and Cooperative Finance Institutions,
in the public sector HDFC and few other housing finance companies set up in the private
sector.
Although housing is primarily a State subject, the Central Government has been formulating
National Housing Policies to provide guidance to the State Government to meet the growing
housing shortage. The GOI has had schemes and projects for the housing problem in every five
years plan but there was no such housing policy for the country as a whole before 1988. This
process started in 1986. As a follow-up of the Global Shelter Strategy, NHP was announced in
1988. The long term goal of the NHP was to eradicate house-lessens, improve the housing
conditions of the inadequately housed and provide a minimum level of basic services and
amenities to all. The role of government was conceived, as a provider for the poorest and
vulnerable sections and as a facilitator for other income groups and private sector by the
removal of constraints and the increased supply of land and services.
In 1991, India adopted a more growth oriented view of economic development by emphasizing
that it must integrate with the global economy. In pursuance of this, it reduced custom duties
and welcomed FDI in several sectors of the economy. The NHP
1994 was a product of this economic point of view. The 1994 Policy sought to increase
supply of land serviced by basic minimum services with a view to promoting a healthy
environment.
The National Housing & Habitat Policy, 1998 laid greater emphasis on the aspect of Habitat as a
supplementary focus to housing. The emphasis on providing housing continued in this
policy with emphasis on both quality and cost-effectiveness especially to vulnerable sections of
society. The policy envisages a shift in the governments role from a builder to an enabler, with
the government committed to remove barriers like access to land, finance and technology and
forging strong public-private partnerships to accelerate the pace of house construction mainly
for the disadvantaged sections.
NRIs/PIOs are permitted to invest up to 100% in the following housing and real estate
development projects:
Development of serviced plots and construction of built up residential

premises.
Real estate covering construction of residential and commercial premises

including business enterprise centers and offices.
Development of townships.
City and regional level urban infrastructure facilities, including both roads and bridges.
Manufacture of building materials.
Preparatory ventures in these above and
Investment in housing finance institutions.
It means, 100% FDIs permitted to development of integrated townships (Including housing,

commercial premises, hotels, resorts etc) requires prior government approval.
The National Urban Housing & Habitat Policy 2007, has been formulated keeping in view
the
changing
socio-economic parameters of the urban areas and growing
requirement of shelter and related infrastructure. The policy seeks to promote various types
of public-private partnerships for realizing the goal of Affordable Housing for all with special
emphasis on the urban poor. The National Urban Housing & Habitat Policy, 2007 seeks to
enhance the spotlight on habitat with a regional planning approach as well as further
deepens the role of government as a facilitator and regulator. Moreover, the new policy
lays emphasis on earmarking of land for the EWS/LIG groups in new housing projects. The policy
lays emphasis on Government, retaining its role in social housing, so that affordable housing is
made available to EWS and LIG of the population.
The Policy envisages specific roles for the Central Government, State Governments, local
bodies, banks & HFCs, public agencies. The housing problem has been viewed as a serious
issue. It is also a fact that housing cannot be considered in an isolated sector and therefore,
there is an urgent need to co-ordinate action by different ministries viz. Works and Housing
Industrial Development. Finance and Labour and other related departments to solve the
problem of housing in an integrated way.
In India there was no such problem as housing till 1941. It was only after in 1951 when the
deficit trend was started and which is continuing with an escalating magnitude. As per the
estimate of National Building Organization there has been a deficit of 2.11 crore houses in our
country during the year 1981 and the deficit increased to 2.47 crore (1.88 crore in rural area
and 0.59 crore in urban area) by the end of March 31, 1985. The deficit is increased to
3.13 crore in urban area) the end of 1991 and likely to increase
4.16 crore units by 2000 AD (1.61 crore in urban areas and 2.55 crore in the rural
areas).
The Policies of Urban Development and Housing in India have come a long way since
1950s. The pressure of urban population and lack of housing and basic services were
very much evident in the early 1950s. The positive aspects of cities as engines of
economic growth in the context of national economic policies were not much
appreciated and, therefore, the problems of urban areas were treated more as welfare
problems and sectors of residual investment rather than as issues of national economic
importance.
ROLE AND OBJECTIVES OF NATIONAL HOUSING POLICY

The basic role, objectives of the NHP are:
To assist all people and in particular the houseless and inadequately house and
vulnerable sections, to secure for themselves affordable shelter through access to developed
land, building materials, finance and technology.
To create an enabling environment for housing activity by eliminating

constraints and the developing an efficient system for delivery of housing inputs.
To expand infrastructure facilities in rural and urban areas in order to improve the
environment of human settlement, increase the access of poorer households to basic services
and to increase the supply of developed land for housing.
To undertake, within the overall context of policies for poverty alleviation and
employment, steps for improving the housing situation of the poorest sections and vulnerable
groups by direct initiative and financial support of the state.
To help mobiles resources and facilitate expansion of investment in housing in order

to meet the needs of housing construction, up-gradation and augmentation of infrastructure,
and

To promote a more equal distribution of land and houses in urban and rural areas
and to curb speculation in land and housing in consonance with the macro-economic
policies for efficient and equitable growth.
Though the draft NHP is yet to take a final shape, the shelter sector has been
recognized as an important vehicle for economic activity and provides the most direct and
indirect employment in the semi urban and urban areas. For achieving the basic objectives of
NHP, the government should take initiative for directing the activities of public agencies
towards increasing the supply of serviced land for various groups and
essential purposes with the preponderant proportion for the poor sections. The major weakness
of the national housing policy, however, lies in the fact that the policy does not set any time
bound targets owing to resource constraints. But without commitment, the policies remain only
on paper. Various tax incentives proposed in the draft policy for private sector and NRI
investment in the housing sector that cannot solve the problem to any significant extent.
Table: Plan Outlay in Housing and Urban Development Sector

(Rs. in crore)
Percentage share in
the total
2.36
Five Years Plan

First Plan
Total Outlay
2,068.80
Housing & Urban

Development
48.80
Second Plan
4,800.00
120.00
2.50
Third Plan
7,500.00
127.60
1.70
Annual Plan 1966-69
6,625.40
73.30
1.11
Fourth Plan
15,900.00
2700.20
1.70
Fifth Plan
37,250.00
1150.00
3.09
Annual Plan 1977-80
12,176.50
368.80
3.03
Sixth Plan
97,500.00
2488.40
2.55
Seventh Plan
180,000.00
4229.50
2.35
Annual Plan 1990-92
133,835.00
3000.10
2.24
Eighth Plan
434,100.00
10500.00
2.42
Ninth Plan
859,200.00
15880.00
1.85
Tenth Plan
Eleventh Plan
1,525,639.00
3,644,718.00
40500.00
36870.00
2.65
1.01
Sources-mhupa.gov.in (modified)
Table shows there is a fluctuation in the sanctioned amount of plans. In the First Five Year Plan
(1951-56), the emphasis was given on institution building and on construction of
houses for Government employees and weaker sections. The Ministry of Works & Housing was
constituted and National Building Organization and Town & Country Planning Organization
were set up. A sizeable part of the plan outlay was
spent for rehabilitation of the refugees from Pakistan and on building the new city of
Chandigarh. An Industrial Housing Scheme was also initiated. The GOI had introduced
the Centre Subsidy Scheme to the extent of 50% towards the cost of land and construction.
The scope of housing program for the poor was expanded in the Second Plan (1956-61). The
Industrial Housing Scheme was widened to cover all workers. Three new schemes were
introduced, namely, Rural Housing, Slum Clearance and Sweepers Housing. Town & Country
Planning Legislations were enacted in many states and necessary enterprises were also set up for
preparation of master plans for important towns. Government had earmarked in the second five
years plan, substantial portion of its funds towards expansion of infrastructure, which had
resulted in development of housing sector.
The general directions for housing programs in the Third Plan (1961-66) were coordination of
efforts of all agencies and orienting the programs to the needs of the LIGs A Scheme was
introduced in 1959 to give loans to State Governments, for a period of 10 years for
acquisition and development of land in order to make available building sites in sufficient
numbers. Master Plans for major cities were prepared and the State capitals of Gandhi
Nagar and Bhubaneswar were developed. During the period from 1966 to 1969 owing to
unstable Government, there had occurred a plan holiday, which had affected the growth of
housing sector.
The balanced urban growth was accorded high priority in the Fourth Plan (1969-74). The Plan
stressed the need to prevent further growth of population in large cities and need for
decongestion or dispersal of population. This was envisaged to be achieved by creation of
smaller towns and by planning the spatial location of economic activity. HUDCO was established
to fund the remunerative housing and urban development programs, promising a quick
turnover. A Scheme for Environmental Improvement or Urban Slums was undertaken in the
central sector from 1972-73 with a view to provide a minimum level of services, like, water
supply, sewerage, drainage, street pavements in 11 cities with a population of 8 lakh and above.
The scheme was later extended to 9 more cities.
The Fifth Plan (1974-79) reiterated the policies of the preceding plans to promote smaller
towns in new urban centers, in order to ease the increasing pressure on urbanization. This was
to be supplemented by efforts to augment civic services in urban areas with particular
emphasis on a comprehensive and regional approach to problems in metropolitan cities. A task
force was set up for development of small and medium towns. The Urban Land (Ceiling &
Regulation) Act was enacted to prevent concentration of land holding in urban areas and to
make available urban land for construction of houses for the MIG and LIGs.
The thrust of the planning in the Sixth Plan (1980-85) was on integrated provision of services
along with shelter, particularly for the poor. The Integrated Development of Small and Medium
Towns was launched in towns with population below one lakh for provision of roads,
pavements, minor civic works, bus stands, markets, shopping complex etc. Positive
inducements were proposed for setting up new industries,
commercial and professional establishments in small, medium and intermediate towns. The
sixth five years plan clearly states that the provision of shelter is a basic need. The objectives in
respect of housing in the plan were; (1) Provision of house sites and assistance for the
construction of dwelling for rural landless laborers. (2) In view of the severe constraints of public
resources, public sector social housing schemes have been designed to benefit the maximum
number of people. (3) Specific efforts must be made to secure reduction in cost in public
housing schemes by using cheap and alternative building materials.
The Seventh Plan (1985-90) stressed on the need to entrust major responsibility of
housing construction on the private sector. A three-fold role was assigned to the public sector,
namely, mobilization for resources for housing, provision for subsidized housing for the
poor and acquisition and development of land. The NHB was set up to expand the base of
housing finance. NBO was reconstituted and a new enterprise called Building Material
Technology Promotion Council was set up for promoting commercial production of innovative
building materials. A network of building centers was also set up during this plan period. The
Seventh Plan explicitly recognized the problems of the urban poor and for the first time an
Urban Poverty Alleviation Scheme known as Urban Basic Services for the Poor was launched.
During the year 1990-91 there was a plan disturb because of shortage of funds.
In the backdrop of this report the Eighth Plan (1992-97) for the first time explicitly recognized
the role and importance of urban sector for the national economy. While growth rate of
employment in the urban areas averaged around 3.8% per annum, it dropped to about 1.6% in
the rural areas. The Plan identified the key issues in the emerging urban scenario:
The widening gap between demand and supply of infrastructural services badly
hitting the poor, whose access to the basic services like drinking water, sanitation, education
and basic health services is shrinking.
Unabated growth of urban population aggravated the accumulated backlog of housing

shortages, resulting in proliferation of slums and squatter settlement and decay of city
environment, and
High incidence of marginal employment and urban poverty as reflected in NSS
43rd round that 4.18 crore urban people lived below the poverty line.
The Planning Commission suggested modification of the Housing policy to incorporate
affordable housing program for the BPL category. Considerable efforts were made during Ninth
and Tenth Five Year Plans to enlarge the resource base and initiate innovative institutional
mechanisms to augment housing delivery in urban areas. Focused efforts were also initiated to
cover the poor and vulnerable groups of society to enable them to access basic shelter related
services. Fiscal concessions coupled with legislative measures were also initiated to encourage
increased investments in housing by individuals and corporate.
The National Common Minimum Program has stated that housing for weaker sections in rural
areas extended on a large scale. The Tenth Plan, therefore, had suggested
provision of free housing only to the landless SC/ST families and shift to a credit-cum subsidy
scheme for the other BPL families. The repeal of the Urban Land (Ceiling and Regulation) Act,
1976 has been a significant step towards reform in the urban land market. Following the repeal
of the central legislation, a number of state governments had also repealed the state-level law.
Having identified housing as a priority in the Ninth Five year plan (1997-2002), the NHP has
envisaged an investment target of Rs. 15880.00 crore for this sector. In order to achieve this
investment target, the Government needs to make low cost funds easily available and enforce
legal and regulatory reforms.
In order to improve the quality of life in urban areas, the Eleventh Five Year Plan (20072012) has stressed the need for improved housing stock through urban renewal, in city
slum improvement and development of new housing stock in existing cities as well as
new townships. Furthermore, the Bharat Nirman Program has also recognized and
accorded due priority to the need to end shelter. The Program has set a target to
construct 60 lakh houses from 2005 to 2009. The housing component under the
Program is being implemented in parallel with Indira Awas Yojana scheme. For the
Eleventh Plan, the focus is on targeting the poorest of the poor.
Till June 1982, the following social housing schemes had been taken up in the country (I)
Integrated Subsidized Housing Scheme for Industrial Workers and EWS of Community 1952, (ii)
Low Income Group Housing Scheme 1954, (iii) Subsidized Housing Scheme for Plantation
Workers 1956, (iv) Middle Income Group Housing Schemes for State Government Employees
1956, (v) Slum Clearance/Improvement Scheme 1956, (vi) Village Housing Projects Scheme 1957,
(vii) Land Acquisition and Development Scheme 1959 and (viii) Provision of House Sites to
Landless Workers in Rural Areas 1971. From July 1982, the existing Social Housing Schemes,
except the subsidized housing scheme for plantation workers, which continue to be in the
central sector and the scheme for provision of houses sites to landless workers have been
reclassified in 4 categories on the basis of income criteria as: (I) Housing Scheme for
Economically Weaker Sections, (ii) Low Income Group Housing Scheme, (iii) Middle Income
Group Housing Scheme and (iv) Rental Housing Scheme for State Government Employees.
In the last four decades, the urban population in India has grown from about 7.00 crore to 60.00
crore. There has been a distinct decline in housing investment in proportion to the total
investment. Around 20% of the population is either houseless or is seriously under-housed. That
is a grim picture indeed, notwithstanding the fact that presently the total number of dwelling
units in the country number about 12.50 crore (as per housing finance an unpublished document
of HDFC). To bridge the current gap of housing alone we need about Rs. 80,000 crore at a
conservative estimate at todays prices. The estimate is only likely to increase with over the
period.
In India, because of the lack of fund mobilization, the system of housing finance has remained
largely undeveloped. In a workshop held under the aegis of the Housing and Public Work
Committee of the FICCI and NHB, it was pointed out that an investment of about Rs. 190,000
crore was required for housing by the end of 2001. A study
conducted by FICCI revealed that an investment of Rs. 51,576 crore at December, 1989 prices
would be needed during the Eight Plan. Financial experts have estimated that the public and
private sectors have to invest an average of Rs. 15,000 crore during 199095 to meet the growing demand. Our endeavor here is to assess the financial measures being
undertaken by the government towards the housing problems. Are these enough to mobilize
the required level of investment, in the housing sector? If not, what new measures could be
undertaken for enhancing the level of investment? With the growing recognition of
housing finance in a developing economy like India, where housing finance industry has
assumed all the more significance and presently over 400 entities, including HFCs and
nationalized banks, foreign as well as co-operative have entered the scene. In the market
situation, there is room for many numbers of players to remain active. But it is important
for a player to fulfill its obligations to its clients both in terms of disbursement made at a
comparatively lower cost and also the quality of service. The HFCs, which are approved by NHB
and are taking NHB refinance, can improve their position of funds through the securitization
route. Besides, though the service quality has improved overall there is need and scope for
further improvement in this field.
The HFC in the country is suffering mainly from the big cost of funds and even after reduction in
rates of interest in the recent year, the rate of interest for the long terms loans is 5-6% more
than rates in USA. The legal system of the country requires strengthening and also streamlining
because this is necessary from the documentation point of view as well as for remedial
actions for foreclosure of the loans in case of default The Apartment Ownership Act, Stamp
Duty Act, Land Acquisition. Act, Transfer of Property Act, Regional Planning & Development
Control Regulation Act, Rent Control Act, Housing Board Act, Urban Land Ceiling Act, Cooperative Act 2006, Negotiable Instrument Act 1881, The Indian Contract Act 1872, The
Companies Act
1956, Code of Civil Procedure 1908, Criminal Procedure Code 1973, Banking
Companies Act 1949, Banker Book Evidence Act and Indian Banking (Regulation) Act
1949 (Revised in September 1956) and Reserve Bank of India Act 1934 etc., which
directly or indirectly have a bearing on the housing sector, needs to be modified and
some sort of uniformity may be introduced.
OVERVIEW
This report provides an overview of the major findings that have emerged out of the third
AHURI-funded National Research Venture (NRV3), Housing Affordability for Lower Income
Australians. It identifies the major risks and challenges in relation to Australias housing
problem in the 21st century, as well as drawing out policy implications.
The major conclusions of the three-year NRV3 research program are as follows:
Housing affordability is a large and widespread problem.
Housing affordability is a structural problem.
Causes of affordability problems are complex and diverse. Major driving factors can be
found both within the housing system and beyond it.
Housing affordability problems are predicted to increase in the first half of the 21st century as
a result of anticipated demographic and housing market changes.
Affordability problems have specific spatial and cyclical dimensions.
Households most at risk of facing the multiple problems that arise from a lack of affordable
housing are lower-income households in the private rental market.
Housing markets have failed to provide an adequate supply of affordable housing for lower-
income households.
Individual households experience and address housing affordability problems in different
ways.
While housing provides shelter, it also influences a raft of non-shelter outcomes for
individual households, such as workforce participation, access to jobs and services, family
stability and educational attainment.
Declining affordability has implications for economic performance and labour market
efficiency, social cohesion and polarisation of cities, environmental considerations and

the creation and distribution of wealth through home ownership.
Together these conclusions explain the title given to this report: housing affordability is a 21st
century problem.
Figure 2.5: Determinants of housing affordability

Supply of
housing
Dwelling
prices/rents
Affordability
Interest
rates
Household
income
Demand for
housing
Demographic
factors
2.3.2 Risk factors that can affect affordability outcomes
In addition to the underlying structural issues affecting housing affordability, which have been
the focus of this chapter, a number of relatively recent changes have taken place that increase the
systemic risk that affordability problems may be even greater in the future than they have
been in the past, particularly for lower-income households. These relate to the greater
flexibility that has been the hallmark of the new economy and to the economic, social and
structural changes that have been associated with it.
Labour markets are less regulated than they were in the past. There is greater reliance on
fixed-term contracts, part-time work and a casualised workforce, all of which put incomes of the
working poor at risk. The steady growth experienced over the past decade has provided a strong
element of protection against the risks that such changes impose on individual workers but there is
no guarantee that the economic boom will continue or that it will continue to benefit all workers,
including the low-skilled.
A downturn will affect purchasers who depend on overtime or
additional part-time work to pay their mortgage and aspirant purchasers who rely on this to help
save a deposit.
Structural change has contributed to a reduction in the high rates of inflation and an associated
nominal wage growth that dominated the economic environment in the 1970s and 1980s. In
turn, this means that marginal home purchasers undertaking mortgages at the limit of what
they can afford no longer can rely on inflation to reduce their repayment burden.
Household relationships are more flexible than they have been in the past and single-person
households are becoming increasingly dominant.
Any transition from a household with
more than one income earner to one with one or no earners increases the risk that contractual
housing costs will become unaffordable. Transactions costs can make it difficult for
households to adjust to changed circumstances.
Part of the rise in single person households is associated with the ageing of the population.
Demographic change creates the additional risk that the existing dwelling stock does
not reflect the needs of smaller and older households in relation to both form and location.
Mismatches between what is appropriate and what is available can contribute to affordability
pressures if households are unable to choose the type of housing that best suits their current
needs. The ageing of the population brings with it a further risk associated with the pressures that
arise if the current generation of workers are not outright owners by the time they reach retirement
age.
The move from collective to individualised provision for retirement incomes via contributory
superannuation schemes where payouts depend on fund earnings means households bear the
risk of their retirement incomes being inadequate to meet both their housing and non-housing
needs. Households constrained from gaining access to owner-occupation face the risk of higher
housing costs in their retirement years than those faced by previous generations of retirees for
whom home ownership has provided considerable protection from housing stress.
Tax incentives designed to encourage personal superannuation benefit high- income and highwealth households and run the risk of creating an economy in which income and wealth are
even more unevenly distributed than at present. Such inequalities may impose greater pressures
on the housing market than have been felt in the past and create additional affordability problems
for those whose incomes and wealth have not kept pace with the national average.
Incentives designed to encourage investment in superannuation may also have the unintended
consequence of reducing individual investment in the private rental market. Any reduction in such
investment either will add to pressures on rents or will result in a reduction in the supply of
rental dwellings at a time when an increasing proportion of the population are being discouraged
from entering home ownership for either lifestyle or affordability reasons.
More generally, moves from collective to individual responsibility for health, education and
retirement provision, to name just a few of the services that were centrally provided in the
past, have meant that households face increased demands on budgets already squeezed by
rising housing costs.
Lower-income households seeking to avoid the burdens imposed by high housing cost ratios are
forced to relocate to regions where housing costs are lower and where, in many cases, there is a
general lack of services and where they may lose the support provided by family and community
networks.
India
According to the last census conducted in India in 1991, the country had a population of 846.3
million out of which 217.6 million lived in cities and towns. The total number of households
was estimated at 153.2 million for the same year. As against this figure, the housing stock in the
country was of the order of 148 million 39.3 million units in urban areas (26.6%) and 108.7
million in rural areas (73.4%). During the period 1971-1991, while the number of households
increased by 58%, the number of housing units went up by about 59%. Although India has been
facing the problem of housing shortage for a long time, the increase in housing stock in recent
decades has been more than that in the number of households. Table 1 portrays some salient
data regarding the housing situation in India at the 1991 Census.
Approximately 40% of households in 1991 were in single room tenaments; about 30% lived in tworoom units. Only about 15% of households had four or more rooms. Table 2 shows the
percentage break-up of households by the number of rooms occupied.
Table 1
Housing Situation in India: 1971, 1981 & 1991

Population & Households:
Total Population (Million)
Rural Population (Million)
Urban Population (Million)
Slum Population (Million)
Total Households (Million)
Rural Households (Million)
Urban Households (Million)
Household Size: Total
Household Size: Rural
Household Size: Urban
Households per Dwelling
Persons per Dwelling
Housing Units (Million):
Housing Stock: Total
Housing Stock: Rural
Housing Stock Urban
Housing Shortage: Total
Housing Shortage: Rural
Housing Shortage: Urban
1971
1981
1991
548.20
439.10
109.10
97.10
78.00
19.10
5.65
5.63
5.71
1.04
5.89
683.30
523.80
159.50
27.91
123.40
94.10
29.30
5.54
5.57
5.44
1.06
5.86
846.30
628.70
217.60
46.73
153.20
112.50
40.70
5.52
5.59
5.35
1.03
5.72
93.00
74.50
18.50
14.60
11.60
3.00
116.70
88.70
28.00
23.30
16.30
7.00
148.00
108.70
39.30
23.90
14.67
8.23
Source: Government of India National Buildings Organisation, Ministry of Urban

Affairs & Employment: Prominent Facts on Housing 1997.
Table 2
Distribution of Households by Number of Rooms Occupied
(Percent)
One Room:
Rural
Urban
Two Rooms:
Rural
Urban
Three Rooms:
Rural
Urban
Four or More Rooms:
Rural
Urban
No Exclusive Room and
Unspecified Rooms
Rural
Urban
1971
1981
1991
47.3
50.0
44.3
45.8
40.8
39.6
28.5
27.0
28.9
27.8
30.6
30.4
12.1
11.4
12.3
12.2
13.5
14.8
12.0
11.4
12.1
12.1
14.0
14.7
0.1
0.2
2.4
2.1
1.1
0.5

At the 1991 Census, more than 95% of the households living in rural areas had
buildings of their own whereas the figure for urban areas was much lower at 63.1%.
However, over the period 1971-91 though the percentage of households owning
buildings rose in both rural and urban areas, the rise in case of the latter was
impressive the figure going up from 47.1% in 1971 to 63.1% in 1991. In addition to
improvement in ownership status, there has also been a steady upward trend in the
quality of housing units in the country. During the decade 1981-91, the number of
pucca (permanent) housing units increased by 64.64%, which is much higher than the
growth of 53.39% occurring during the decade 1971-81. Over the period 1981-91, the
number of semi-pucca houses declined by about 8% (from 6.80 million in 1981 to
6.23 million in 1991), while the number of kutcha (thatched, huts, etc.) houses
showed only a marginal increase of about 6% (from 3.1 million in 1981 to 3.2 million
in 1991). Table 3 provides some important information regarding the housing
conditions in the country.
Insofar as the provision of civic amenities is concerned, there have been considerable
improvements in the access of people to such amenities over the years although
shortages in housing and infrastructure do continue. Table 4 shows the percentage of
households in the country as a whole having access to safe drinking water, toilet
facilities and supply of electricity during the decade 1981-1991.
Table 3
Housing Conditions in India: 1971, 1981 & 1991

Tenure Status of Households (%)
Owned:
Rural
Urban
Rented:
Rural
Urban
Type of Structure (%)
Pucca:
Rural
Urban
Semi Pucca:
Rural
Urban
Kutcha: (Serviceable):
Rural
Urban
Kutcha: (Unserviceable):
Rural
Urban
1971
1981
1991
93.8
47.1
93.0
53.5
94.5
63.1
6.2
52.9
7.0
46.5
5.5
36.9
19.0
63.8
21.1
64.6
33.0
75.8
37.0
23.5
37.6
24.3
34.2
15.8
32.0
12.7
29.0
11.1
22.8
8.4
12.0
-
12.3
-
10.0
-

Table 4
Access of Households to Basic Amenities: 1981-1991
Households having Safe
Drinking Water
Households having Toilet
Facility
Households with Electricity
1981
74.14%
1991
81.59%
57.4%
63.58%
61.6%
75.93%

Affairs & Employment: Prominent Facts on Housing 1997
Housing Shortage
Housing shortage is estimated in terms of excess households over houses including
houseless households, congestion (number of married couples requiring separate
room/house), replacement/upgradation of kutcha/unserviceable kutcha houses and
obsolescence/replacement of old houses. Table 5 shows the components of housing
shortage in the country at the beginning of 1991. Table 6 shows the estimates of
housing shortage in urban areas based on the Report of the Ninth Plan Working Group
of the Government of India, Ministry of Urban Affairs & Employment
Table 5
Components of Housing Shortage: 1991
Million Units
Excess of Households over

Houses including Houseless
Households
Congestion (No. of Married
couples requiring separate
Room/House)
Replacement/Upgradation
of Kutcha/Unserviceable
Kutcha Houses
Obsolescence/Replacement
of Old Houses
Total
Total
5.16
Rural
3.76
Urban
1.40
1.91
1.91
14.20
10.91
3.29
1.63
1.63
22.90
14.67
8.63

Affairs & Employment: Prominent Facts on Housing 1997
Table 6
Projected Housing Shortage in Indias Urban Areas, 1997-2001
Million Units
Item
1997
1998
1999
2000
2001
Pucca
40.08
42.13
44.29
46.56
48.94
Semi-pucca
6.65
6.73
6.81
6.88
6.97
Kutcha
3.35
3.38
3.40
3.43
3.45
Households (No.)
50.09
51.85
53.68
55.56
57.52
Housing Shortage
7.57
7.36
7.18
6.93
6.64
Note: The housing shortage estimates also account for congestion and obsolescence of
existing units
Source: Ministry of Urban Affairs & Employment 1996. Report of the Working
Group on Urban Housing for the Ninth Five-year Plan. Government of India, Delhi.
Indias National Report for Habitat II Conference in Istanbul estimates that by 2021,
the country would face a housing shortage of 44.9 million units and that the
investment required for tackling this shortage over a period of 25 years at 1991 prices
would be of the order of Rs.6580 billion. The Ninth Plan Working Group of the
Government of India, Ministry of Urban Affairs & Employment estimated the new
housing/old housing upgradation requirement at 16.76 million units for the 9th plan
period (1997-2002). About 70% of the units are estimated to be required for the
urban poor/economically weaker sections of society while about 20% is for lowincome groups. About 10% of the urban requirement is for addressing the middle and
higher income group segments. It is estimated that for urban housing alone, the total
requirement of investment would be of the order of Rs.1213.7 billion for 1997-2002
to address the housing shortage of 7.57 million, upgradation of 0.32 million semipucca Economically Weaker Sections (EWS) units and the additional construction of
8.67 million units. The total requirement of funds for urban and rural housing put
together for 1997-2002 was estimated to be of the order of Rs.1500 billion (see Table
7). Against this amount, about Rs.520 billion is likely to be available if the past
trends of housing finance are assumed to continue.
Table 7
Investment Requirement for Housing: Ninth Five Year Plan
(1997-2002)
Segment
Rural
Urban
Total
No of Units to be
Constructed
(Million)
162.5
176.6
330.1
Fund Requirement
(Rs. Billion)
Likely Availability
290
1,214
1,504
180
340
520
Source: Government of India, Ministry of Urban Affairs & Employment: Ninth Plan
Working Group on Housing (1996)
Shortage in Civic Services
In addition to shortage in housing, India is faced with the problem of inadequate civic
services. The coverage in terms of organised sewerage systems ranges from 35% in
small towns to 75% in large cities. According to estimates prepared by the Ministry of
Urban Affairs and Employment, Government of India, only about 50% of the urban
population had access to sanitation facilities in 1997-98. Approximately one third of the
urban centres are not covered by proper drainage systems; storm-water drainage
facilities are estimated to cover no more than 66% of the urban population. The National
Sample Survey Organisation (NSSO) 44th round Survey (1988-89) reveals that 31.08%
of the urban population does not posses any latrine/toilet facility. Only 66% of the
urbanites have access to toilet facilities within their premises. Out of those urban
residents having toilets, only 39.06% have a flush system, 37.49% a septic tank system
and the rest service latrines. As estimated under the Low Cost Sanitation Programme of
the Government of India, there are about 3.3 million dry latrines yet to be converted into
water-borne toilets in the towns with a population of less than 500,000.
It is estimated that 28% of the urban population do not have access to refuse
collection and disposal services. A study in 1989 shows that the solid wastes
collection efficiency (solid wastes collected as percentage of solid wastes generated)
ranged from 82.8% in 6 metropolitan cities to 63.5% in 19 cities with population
ranging from 0.1 to 1 million, 55.5% in 6 towns with population between 50,000 and
100,000 and 50.0% in 5 towns with population between 20,000 and 50,000.
Approach to Housing Development
After independence, housing was accorded a relatively low priority in the national
development programme in India, presumably with the objective of keeping it
basically a private sector activity. The low budgetary support given to the housing
sector is evident from the fact that the First Five Year Plan of India allocated 7.4% of
the total plan resources for housing; the share of housing in the subsequent plan
resources ranged between 1.2% and 4.9%. The governmental agencies, however,
played a strong supporting role for the provision of housing for the poorer sections of
society, including allocation of land. Over the years there has been a gradual shift in
the role of the Government from a provider to a facilitator, ensuring access to

developed land, basic services, building materials, technology, construction skills and
finance so that housing can be undertaken as a people's programme. The facilitating
approach aims at fostering strong public-private partnerships with the provision of
appropriate incentives to the private sector, promotion of housing finance institutions,
propagation of alternate building materials and technologies and extension of support to
NGOs, CBOs, co-operatives and the private sector.
The Government of India and State Governments have adopted a two-pronged
approach to housing development for the poor in the past, i. e., sites and services and
permanent housing. Under sites and services, basic infrastructure facilities like
drinking water, internal roads, approach roads, drainage, community toilet, etc., were
provided to develop layouts. The beneficiaries were also given construction
assistance for erecting a small shelter. The permanent housing programme, which has
replaced sites and services, was initially confined to those beneficiaries who could avail
loan facility. Later, several modifications have come up in the programme to address
the housing needs of different target groups.
The broad elements of the
approach of the Government of India to tackle the problem of housing the poor are:
special programmes/targeted subsidy to the poor and vulnerable groups, loan
assistance to governmental agencies/beneficiaries at below-market interest rate for
housing and at normal rate for infrastructure through the Housing and Urban
Development Corporation (HUDCO), creation of housing assets as part of
employment and income generation programmes, promotion of cost-effective and ecofriendly building materials and technologies and creation of an enabling
environment for private sector initiative. Indira Awas Yojana (IAY) is an example of
housing for targeted groups in rural areas through employment creation.
Indira Awaas Yojana (IAY)
Indira Awas Yojana (IAY) intends to assist certain vulnerable target groups in
housing activities. The programme applies to categories such as Scheduled Caste
(SC)/Scheduled Tribe (ST) households who are victims of social atrocities, SC/ST
households headed by widows and unmarried women, SC/ST households affected by
flood, fire accident, earthquake, cyclone and similar natural calamities, freed bonded
labourers, families/widows of personnel from defence services/para-military forces killed
in action, ex-servicemen and retired members of para-military forces, persons displaced
on account of developmental projects, nomadic, semi-nomadic and de- notified tribals
and families with disabled members, subject to the conditions that these households
belong to below poverty line category. As per the Government of India guidelines, IAY
houses are being allotted in the name of the female member of family or alternatively in
the joint name of both wife and husband. The programme is fully subsidised by the
Government of India.
Housing Programmes: Unit Costs
The contents and unit costs adopted for various types of housing programmes differ
between States and have been revised from time to time. Table 8 depicts the latest unit
costs adopted by the State of Andhra Pradesh for the programmes implemented by it.
Table 8
Unit Cost Particulars of Housing Schemes: Andhra Pradesh
(In Rupees)
Scheme
Year
Unit
Cost
(1)
(2)
(3)
Beneficiary
Contribution
(4)
1981
1000
1998-99
1998-99
Sites & Services

Semi Permanent
Rural Housing
Rural Permanent
Housing
Government Subsidy
Loan
State
Central
Total
(5)
(6)
(7)
(8)
1000
1000
7500
500
7000
7000
17500
500
10000
7000
7000
Urban Permanent
Housing
Weavers Housing:
(i) House-cum
Workshed (Rural)
(ii)House-cum
Workshed (Urban)
(iii) Exclusive
Worksheds
Workshed (Rural)
Workshed (Urban)
Rural Landless
Employment
Guarantee
(RLEGP) Housing
Beedi Workers
Housing
Fishermen
Housing
Indira Awas
Yojana Housing:
In Plain Areas
In Black Cotton
Soils
Special Housing
Cyclone Housing
(i) By APSHCL
(ii) By NGOs
a) 0-5 Kms. From
Sea Coast
b) In Other Areas
Economically
Weaker Sections
(EWS) Housing
Scheme for
1986-87
12,000
300
10700
1000
1000
1998-99
35000
4000
8000
5000
18000
23000
1998-99
45000
6000
14000
5000
20000
25000
1996-97
1998-99
1998-99
6000
9000
14000
500
2000
1500
2000
2000
4000
7000
10000
5500
9000
12000
1987-88
10200
2040
8160
10200
1998-99
18000
1000
6500
1500
9000
9000
1998-99
20000
1250
7000
11750
1996-97
16500
3300
13200
16500
1998-99
1998-99
20000
20000
500
12500
4000
7000
16000
20000
7000
1996-97
16500
10000
6500
6500
1996-97
1996-97
30000
20000
15000
10000
15000
10000
15000
10000
1998-99
1991-92
25000
4000
2000
-
20000
3000
3000
400
600
3000
1000
CGG Working Papers4/2003

Housing & Shelter
Upgradation
EWS (Special
Cyclone)
EWS (Special)
Township Housing
Source: Andhra
Corporation Ltd.
to
1996-97
1996-97
1998-99
1998-99
30000
30000
50000
Pradesh
State
4500
2000
2000
25500
25000
43000
3000
5000
3000
5000
Housing
Housing and Urban Development

Corporation
The Housing and Urban Development Corporation (HUDCO) was established as a
fully- owned enterprise of the Government of India in 1970 with an equity
base of Rs.20 million to function as a national techno-financial institution to
promote housing and urban development. The objectives of HUDCO include the
following:
To finance and undertake housing and urban development programmes in

urban and rural areas;
To finance and undertake either wholly or partly, the setting up of new towns or
satellite towns covering infrastructure needs in urban and rural
areas;
To finance and undertake the setting up of building material industries;
To provide consultancy services for projects of housing and urban development
within the country and
abroad.
At present HUDCO has an authorised capital base of Rs.12.50 billion ($297
million), paid-up equity of Rs.8.98 billion ($213 million), reserve of Rs.5.75
billion ($136 million) and net worth of Rs.14.83 billion ($349 million).
The total borrowings by
HUDCO stand at Rs.121.68 billion ($2897 million). Thus the debt-equity
ratio of HUDCO works out to 7.77.
The key activities of HUDCO
include:
Lending for housing programmes through various schemes such as
urban housing, rural housing, staff rental housing, cooperative
housing, working women's housing, housing schemes through NGOs
and CBOs and housing through private builders;
Lending for urban infrastructure, including land acquisition for projects,
integrated land acquisition and development, city level infrastructure water supply
(rehabilitation,
augmentation,
new
source
development/transmission
projects),
sanitation
(rehabilitation,
augmentation, new sewerage and drainage projects, conversion of dry
latrines, construction of individual and community toilets), solid waste
management (collection, conveyance, treatment and disposal, energy
recovery), transportation (roads, bridges, rail and road transport terminals,
airports, ports), etc., social infrastructure (health, education, parks,
playgrounds), commercial infrastructure (shopping centres, commercial
complexes, office complexes), and integrated area development/new
township projects, etc.;
Consultancy services in the field of housing, township development and
infrastructure
development;
Promotion of Building Centres for technology transfer and support to building
material
industries; and
Training in human settlements and technical assistance to borrowing agencies.
The borrowers of HUDCO are: State Urban Infrastructure Finance and Development
Corporations, Water Supply and Sewerage Boards, Urban Development Authorities,
State Housing Boards, National Capital Region Planning Board (NCRPB), New Town
Development Agencies like City and Industrial Development Corporation (CIDCO),
Mumbai, Municipal Corporations/Municipalities, Improvement Trusts, and private
companies and agencies.
Since its inception, HUDCO has so far sanctioned 14821 projects with a project cost of
Rs.48.51 billion ($11.54 billion). The amount of loan sanctioned is Rs.31.66 billion
($7.53 billion) against which Rs.17.82 billion ($4.24 billion) is already released.
Housing loans approved amount to Rs.19.42 billion ($4.6 billion) against which
Rs.12.30 billion ($2.9 billion) has been disbursed. HUDCO has so far contributed to the
development of 10.14 million dwelling units and 4.7 million low-cost sanitation units.
HUDCOs infrastructure financing portfolio is growing at a phenomenal rate. During
the last 10 years HUDCO has sanctioned Rs.12.24 billion ($2.9 billion) for infrastructure
projects covering water supply, sewerage, drainage, solid waste management, low cost
sanitation, etc. HUDCOs operations extend over 1,760 towns and thousands of villages
in the country.
Cost-effective & Eco-friendly Technologies
Building materials account for about 60% of basic inputs in any housing programme
and their costs can go as much as 75% of the cost of a house for low-income groups.
There is a growing concern that persisting shortage of cost-effective building
materials for the vast majority of population is a serious impediment to improving the
housing conditions of the people. While popular traditional materials are short in
supply, high demand for them has resulted in their high prices and taking them out of
the reach of the poor. Most of the new alternate materials developed in recent past are
cost-effective and environment-friendly. But they are yet to be translated into
marketable products for mass application. Excepting cement and steel, all other
materials required for housing are likely to have constraints of supply.
Keeping the above aspects in view, the Government of India and State Governments
have been promoting research in the fields housing and construction activities. This
has led to a number of new alternative building materials and techniques aimed at
reducing the cost of house construction and improving the performance of
conventional building materials and techniques. Energy-efficient manufacturing
processes and use of renewable raw material resources of wastes and byproducts of
industry, agriculture and forestry, etc., have resulted in Cost-Effective and EcoFriendly (CEEF) products. As it was seen that the use of CEEF building materials
and techniques was hampered by the general lack of understanding on part of
beneficiaries due to ignorance and illiteracy, the Government has initiated a massive
programme of demonstration, education and counseling for the poor. Rural masons
are considered as the rural housing engineers by the beneficiaries and therefore,
care is being taken to train and motivate masons in addition to beneficiaries.
Building Centres Movement
Recognising that the propagation and extension of new cost-effective, energyefficient and eco-friendly building technologies to the grassroots level require a
focused approach, a Centrally-sponsored scheme for setting up a national network of

Building Centres (Nirmithi Kendras) was initiated in different States. Over 350 such
centres have already become fully operational. These Building Centres are promoting
use of cost-effective building materials based on locally available raw materials and
wastes. They provide a variety of services such as practical demonstration and
propagation of new technologies, training of artisans, entrepreneurs and small
contractors, counseling of householders and production of low-cost materials and
components to meet the local housing construction needs. A large number of centres
are also undertaking construction of housing projects and other public buildings.
HUDCO provides funding support to Building Centres for setting up production units
of new building materials and components. To encourage Building Centres in
technology extension activities, the Government of India has exempted the levy of
excise duty on materials and components produced by these Centres. The training to
entrepreneurs in several States has led to setting up of their production units for lowcost building materials and components to cater to the local needs.
National Housing and Habitat Policy 1998
In 1994, India adopted the National Housing Policy (NHP), which recognises the key
role of the Government as facilitator rather than provider of housing services. The
National Housing & Habitat Policy-1988 (NH&HP) is a continuation of the NHP. It
calls for a housing revolution in the country and focuses on the changed roles of
various stakeholders in the housing development process in the new economic
environment of liberalisation and globalisation. The policy emphasises the need to
persuade the private and cooperative sectors to take greater initiatives in the
promotion and development of housing through fiscal concessions and other
incentives. Though the move towards disassociation of governmental agencies from
direct construction is being witnessed since the early 70s, the NH&HP calls for a
continued positive role by the Government in housing of the poor. Rapid growth of
population and increased urbanisation on one hand and escalating land prices on the
other are responsible for widening the gap between demand for and supply of housing
units. These factors squeeze the poor off land and marginalise them in urban housing
markets. Recognising this, the NH&HP suggests a number of areas of intervention
for governmental agencies to promote affordable housing for the poor, including
availability of sites, housing loans at below-market rates, low-cost building materials
and civic services.
The broad aims of the National Habitat and Housing Policy-1998 (NH&HP) are:
Creation of surpluses in housing stock either on rental or ownership basis;
Providing quality and cost-effective housing and shelter options to the citizens,
especially the vulnerable groups and the poor;
Guiding urban and rural settlements to ensure planned and balanced growth and
a healthy environment;
Making urban transport as an integral part of the urban Master Plan;
Using the housing sector to generate more employment and to achieve skill
upgradation in housing and building activities;
Promoting accessibility of dwelling units to basic facilities like sanitation and
drinking water;
Removing legal, financial and administrative barriers for accessing land, finance
and technology for housing;
Forging strong partnerships between private, public and co-operative sectors in
housing and habitat projects.
The NH&HP envisages a key role for the Government of India in promoting policy
and legal reforms, facilitating flow of resources to housing and infrastructure through
measures such as fiscal concessions to investors and promoting the creation of a
secondary mortgage market. The State Governments are expected to gradually
withdraw from direct construction of houses, liberalise legal and regulatory regime to
give a boost to housing and support infrastructure, promote private sector and cooperatives, and facilitate access of the poor to land, finance, low-cost and locallysuited engineering solutions and participatory designs.
Two Million Housing Programme
The National Agenda for Governancethe election manifesto of the present
Government recognises Housing for All as a national priority. It has set a target for
the construction of 2 million additional houses every year 0.7 million in urban areas
and 1.3 million in rural areas. A programme of this magnitude is expected to result in
an investment of about Rs.80 billion in housing construction activity. This would also
facilitate cement, steel and other building materials industries in addition to creating
substantial employment in this sector. Every million of rupees spent by the
construction industry generates about 75 man-years of employment.
Recent Budgetary Initiatives
In recent years, housing and construction have emerged as top priority sectors for
policy-makers. Faced with recession and slow-down of economic activities, the
Government of India has realised the key role that construction Industry can play in
jump-starting the economy and provide gainful employment to people. Housing
construction has many forward and backward linkages and about 280 industries are
directly or indirectly linked to housing activities. Moreover, construction is the
second largest employment-generating sector in the country, next only to agriculture.
Considering these, the Union Budgets of 1998-99 and 1999-2000 have laid a great
deal of emphasis on creating an enabling environment for housing activities in the
country through the private sector.
The measures initiated by the Union Budgets to boost up housing activities include:
Additional equity support to HUDCO to the tune of Rs.1.92 billion in the 1998-99
budget and Rs.2.71 billion in the 1999-2000 budget of the Ministry of Urban
Affairs and Employment and Rs.0.5 billion in the1998-99 budget of the Ministry
of Rural Affairs and Employment. These measures augmented the equity base of
HUDCO by Rs.5.13 billion in a period of just two years as against the infusion of
Rs.3.85 billion by the Government of India over a period of 27 years from the
creation of HUDCO. The addition of Rs.5.13 billion of equity would enable
HUDCO to leverage about Rs.42 billion from the market for housing and urban
infrastructure activities. HUDCO would be in a position to support the creation of
1.5 million houses each year out of which 1 million will be towards achieving the
target under the Two Million Housing Programme;
Extension of tax holidays for approved housing projects allowing a deduction of
100% of the profits for the first five assessment years and 30% deduction for
another five years. This was made applicable to housing units upto 1500 sq. ft. in
the budget of 1999-2000. The facility will promote private sector participation in
housing activities;
Increase in deduction against income from house property for repairs and
collection charges from 1/5th to 1/4th and increase in the deduction for interest on
borrowed capital in the case of self-occupied property from Rs.15,000 to
Rs.30,000 in 1998-99 budget. The latter figure was revised drastically to

Rs.75,000 in the budget of 1999-2000. This will promote better maintenance of
constructed housing stock in addition to promoting larger individual investments
in housing;
Enhancement in the percentage of incremental deposits into housing activities
from the banking sector from 1.5% to 3% to enable inflow of Rs.3.8 billion for
low-cost housing;
Inclusion of micro-credit and tiny sector as part of priority sector lending of banks
to give a fillip to weaker section/low-income housing;
Extension of depreciation benefits in corporate employees housing from 20% to
40% to encourage corporate houses to take up housing for their employees;
Repeal of the Urban Land Ceiling and Regulation Act in 1998 to free the supply
of land for housing in urban areas, especially metropolitan cities.
Andhra Pradesh Model: Self-help & Mutual Help

The State of Andhra Pradesh is a pioneer in India in implementing innovative housing
programmes for the poor on a large scale. Though the A.P. State Housing
Corporation Limited (APSHCL) was established in 1979 to formulate, promote and
execute housing schemes for the weaker sections of society, the Corporation has
constructed about 3.62 million houses by 31.03.2000 out of which 2.4 million are in
rural areas. It ranked first in the country in the implementation of housing for the
poor in rural areas from the year 199192 onwards. Households with an annual
income of Rs.13,000 or less are eligible for sanction of houses under various schemes
from 199697 onwards. 50% of the houses are earmarked for Scheduled Castes and
Scheduled Tribes, 33% for Backward Castes, 7% for Minorities and the remaining
10% for other Economically Weaker Sections.
The funding of the housing
programme includes subsidy from the Government and loan from various financial
institutions for the repayment of which the Government stands guarantee irrespective
of the ultimate recovery from beneficiaries. Loans are mobilised from HUDCO, Life
Insurance Corporation, General Insurance Corporation and Commercial Banks.
The basic concepts and features based on which the entire Weaker Sections Housing
Programme is being implemented in the State of Andhra Pradesh are:
Self-help and Mutual help by the beneficiaries and their full participation in
decision-making and implementation, consequently resulting in their capacity
building;
The concept of Core House which is easily expandable depending upon the
improvement in the economic position of the beneficiary and his need. The
adequacy of the accommodation is not relevant and it does not come in the way of
implementation of the housing programme. The issue of adequacy of subsidycum-loan assistance is also irrelevant as the Government gives only a fixed
financial assistance to the beneficiary;
Cost-Effective and Eco-Friendly (CEEF) building materials and construction
technologies;
Principal Bank Branch System (PBBS) in handling of finances. Amount due the
beneficiary is directly credited to individual bank accounts of beneficiaries. One
bank is designated as the nodal or principal bank for each scheme. The nodal
bank promotes banking habit and thrift and credit among beneficiaries.
Some Directions for Future

Although the National Housing and Habitat Policy emphasises the facilitating role of the
Government in housing, the public sector agencies are not absolved of the responsibility
of providing housing to those segments of the people who cannot be served by the
market. However, a new approach is called for issues such as beneficiary consultations
on the location, design and cost aspects of shelter, affordable shelter options for the very
poor, integration of income generation and housing, eligibility criteria for availing
housing finance and providing a collateral for the same, easier availability of plots and
houses from public and private providers, assistance for house construction, speedy
approvals for construction of infrastructural services, simplification of documentation
and procedures, etc. Housing subsidies often benefit the salaried employees of the
organised sector including the Government and the recipients of tax concessions for
housing investment. Implicit subsidies to beneficiaries of social housing schemes arise
from loan waivers, low cost recovery rate, concessional interest and inefficiencies
absorbed by the agencies. The schemes involving a combination of concessional loan
and subsidy affect the extension of viable finance on non-subsidised terms, based on
rigorously enforced cost recovery. These issues need to be re-examined.
Part of the resources needed for the shelter of the urban poor could be diverted from
current outlays by an objective review of all subsidies and mis-applied resources, and by
channelling institutional finance. Additional resource mobilisation could be by a
combination of measures to activate beneficiary savings and channelling loans on viable
terms by financial institutions. These measures could be catalysed and leveraged by
budget provisions for land and services, equity for housing agencies and support to open
market lending on credit-rated terms. Steps are needed for avoiding the dispensation of
ex-post and implicit subsidies, to provide for transparent and well-targeted subsidies, and
to prevent the leakages of subsidies under government programmes and unwarranted
fiscal concessions to better-off sections. Subsidies may perhaps be administered in the
form of subventions through credible NGOs for group shelter activity and savings effort.
The State governments need to adopt a state-wide policy on the regularisation of
tenure and conferment of leasehold or occupancy rights to slum-dwellers at least in
areas not needed by public agencies. The National Housing and Habitat Policy
emphasises the grant of occupancy rights to slum-dwellers and providing support for
progressive slum redevelopment and upgradation schemes. The slums and squatter
settlements could be categorised as those needing urgent relocation, those that can be
considered for conferment of occupancy rights/title and upgradation or redevelopment in
situ, and those which can be provided with basic services without conferment of title.
This categorisation process should be dovetailed with the process of Master Plan
revision and formulation of flexible development planning norms. It would enable the
relocation of slum-dwellers and change in land use plans to incorporate the regularised
slums into the plan-scape of the city. Also, physical and social planning should be on
city-wide basis so as to integrate the informal sector in the city's economy and social life.
The State and city agencies need to be encouraged to formulate city plans for developing
varied shelter options for the urban poor, such as the provision of essential services,
shelter upgradation and extension including toilets, renewal of congested inner city
chawls, serviced sites for the poor, in situ redevelopment of slums with assistance of the
private sector and co-operative involvement, night-shelter and sanitation facilities for the
new migrant landless persons, relocation of families from sites urgently required for
public purposes, and financial and technical assistance on a group or individual basis for
incremental construction.
In order to facilitate greater private and co-operative sector participation in housing
activity, as well as public-private partnership, there is the need to: first, undertake legal
reforms; second, to undertake land policy reform to provide easier access to developed
land; third, provide suitable fiscal measures and incentives to encourage investment of
household savings in home ownership and to induce the corporate sector to invest in
employee housing; fourth, carefully assign property rights and make them legally
enforceable; fifth, create enabling institutions for providing an enabling environment by
restructuring existing institutions and by creating new ones, if required; and sixth,
widen the existing database for strategic planning to cover aspects relating to ownership
of land and property, housing starts and completions, etc.
With the Union Budgets for 1998-1999 and 1999-2000 according a new thrust to
housing in the National Agenda for Governance, the Central and State Governments
have initiated a reform agenda for housing sector reforms. The reform areas include the
following:
Public-Private Partnerships to ensure a fair return on investment to the private

land owners/developers through guided development and availability of serviced
sites for allotment to low income families at affordable prices. Fiscal incentives
and provision of infrastructure can induce private sector entrepreneurs to housing
including that for the poor;
Measures to control the continuing spiral of land prices, speculation, shortage of
developed land, and increasing pace of unregulated and environmentally damaging
land development;
Increased availability of developed land through measures such as reservation of
5% of the land in larger layouts as land bank for economically weaker sections
and low-income groups, land pooling, land readjustment, etc., steep vacant land
tax, etc.;
Restructuring of Housing Finance Institutions (HFIs) to meet the housing finance
needs of the formal sector as well as the poor and the informal sector. A revision of
current eligibility norms that inhibit the flow of a significant proportion of funds
from the formal sector to the poorer sections of the population is called for;
Establishment of linkage with informal credit systems along with grant of security of
tenure to slum-dwellers and reforms related to land title, building regulations, etc.,
with a view to assisting the poor with access to institutional finance for housing;
Community resource mobilisation through schemes such as Insurance-Linked
Savings-cum-Loan-cum-Subsidy scheme for shelter for the poor engaged in
informal sector activities. Under the scheme for a nominal one-time premium of
Rs.150 per house, the houses are insured for Rs.25,000 against damages due to
fire, lightning, flood, storms, tempests, cyclones, etc.;
Increased involvement of NGOs/CBOs/Cooperatives to promote self-help,
mutual-help, thrift and credit, self-management, community empowerment, etc.
There is a need for shifting to community-based non-subsidised loan mechanism, as
adopted by Self Employed Womens Association (SEWA) in Gujarat State, targeted

at poor and sustained by beneficiary savings for shelter and group guarantee;
Promotion of high density housing in selected areas in cities through appropriate
amendments to zoning and land use regulations to obviate the necessity of costly
land acquisition and to avoid high infrastructure costs;
Adoption of small lot zoning in parts of large lot layouts making it mandatory on
the part of developers to divide part of the lands being developed into small plots
to make them available to poor beneficiaries;
Promotion of rental housing through the balancing of landowner and tenant
interest so that supply of rental housing at affordable rents is ensured and there is
an incentive for people to build houses for themselves and for others;
Propagation of cost-effective and eco-friendly building materials and technologies
and up-scaling of innovative products to make them marketable and amenable for
mass application;
Municipalisation of programmes of poverty alleviation and slum-upgradation in
urban areas to make elected Municipalities responsible for these functions and
mobilise local support and effort.
WHO
IS AT RISK AND HOW DOES IT AFFECT
THEM?
Much of the research undertaken for the NRV3 focused on identifying households that
face unacceptably and unsustainably high housing costs in relation to their household
incomes, and on determining how they are affected. This chapter covers research
reported in more detail in RP1, RP3, RP6, RP9 and RP10. It indicates the extent of
potential affordability problems, identifies households at risk and describes how

housing affordability problems are manifest. The evidence generated provides a clear
rationale for why housing affordability is a concern. A further rationale is provided by
consideration of the likelihood that affordability problems will continue and of the
impact that poor affordability outcomes have on society as a whole.
This
complementary evidence is covered in the following chapter.
3.1 How big is the problem?

3.1.1 Measurement issues
Determining just how much can be spent on housing costs before such costs impose
an unacceptable and unsustainable burden on the household is contestable, not least
because a household's ability to bear the burden of high housing costs is affected by
a complex array of factors. (RP1) Foremost among these is household income. The
complex array of demands made upon the budgets of a diverse range of households
comes a close second.
High housing costs in relation to income are less likely to leave high-income
households with inadequate resources to meet their non-housing needs than is the
case for lower-income households. They are also more likely to reflect choices made
by the households incurring them. An obvious example of over-consumption of
housing among higher-income households is the increased demand for McMansions.
In such cases, the impact of high housing costs on individual households is of
relatively little concern, although the impact they have in creating pressures on the
housing market and the environmental impact of excessive consumption of housing
may well contribute to broader concerns about affordability (covered in the following
chapter).
High housing costs experienced by lower-income households are more problematic
for a number of reasons. First, it is more difficult to determine whether high housing
costs reflect a choice on the part of the household or whether the high housing costs
arise because there is no alternative. Costs associated with choice might arise if a
lower-income household chooses to purchase rather than rent or to live in a high-cost
location rather than in a location where housing is more affordable. Costs associated
with constraint might arise because of the household's need to live close to work or
transport or simply because there is no housing available that is both affordable and
adequate for their needs. Secondly, housing costs might be high in relation to income
simply because income is too low. Thirdly, the question of whether a household will
have adequate resources to meet non-housing needs after paying for their housing
costs will depend on household type and size, as well as household circumstances.
(RP1, RP3)
This chapter uses the 30/40 rule to indicate how many and which households are in
housing stress and, therefore, at risk of experiencing housing affordability problems.
It uses both quantitative and qualitative data to indicate what these affordability
problems are and to provide estimates of the numbers and characteristics of
households that actually experience them.
17
3.1.2 Housing stress estimates

The 30/40 benchmark was selected as a robust indicator of the potential scale of
affordability problems. NRV3 research on alternative measures showed that it was
also a conservative measure with a tendency to under-estimate rather than overestimate the extent of the problem. (RP3) It is also conservative for a second reason.
It takes no account of households whose housing cost burden is below 30 per cent
but who live in housing which may be inadequate because it is overcrowded, of a
standard below community norms, or located far from work, transport, services and
family or other social networks. Such households are also likely to experience
hardship as a result of poor housing affordability even though they are not included in
the indicators reported here. A housing cost ratio of 30 per cent of income is more
than double the Australia-wide average (of 15 percent).
In 2002-03, the latest year for which data were available when this research was
undertaken, of the 7.6 million households in Australia, just under 1.2 million (16
per cent of all households) paid 30 per cent or more of gross household income in
meeting their housing costs. 10 Of these, 862,000 were lower-income households,
defined as being in housing stress. A further 164,000 were moderate-income
households. (RP3)
Figure 3.1: Proportion of households with unacceptably high housing cost ratios
Unacceptable housing costs
16% = 1.2 m households
Housing stress
= 862,000 households
Acceptable housing costs

84% = 6.5m households
This proportion has remained remarkably stable for the past 10 years despite the
obvious price pressures in housing markets highlighted in Chapter 2. (RP3) There
are a number of reasons for this. Households make trade-offs to avoid increasing
the proportion of their income spent in housing. For younger households, these
can include renting instead of buying, remaining for longer in the parental home,
sharing instead of forming independent households. Older households who are
established home owners are less likely to have their housing costs affected by
housing market changes.
A critical explanation, however, is that the aggregate measure disguises

considerable variation in the incidence of housing stress at a disaggregate level.
(RP8) The proportion of households with high housing costs in relation to their
income is polarised and polarising.
3.2 Who is at risk?

Despite the relative stability of the proportion of those with high housing costs, there
are several important concerns regarding observed housing affordability outcomes.
These concerns include the following:
18
The burden of high housing costs is not borne equally by all households. While
16per cent of all households had high housing cost ratios, over 28 per cent of
lower-income households were in housing stress.
For particular types of
households, the incidence was even higher. For example, the incidence of stress
for private renters was 65 per cent. For purchasers the incidence of stress was 49
per cent. (RP3) The numbers and incidence of stress for broad groups can be
seen in Figure 3.2, with the scale and incidence of affordability problems
increasing from bottom left to top right and with the size of the problem mirrored in
the size of the bubble.
Figure 3.2: Numbers and incidence of households at risk

Lower income
private renters
Incidence of stress (%)
100
Lower income
purchasers
80
60
40 Moderate income
private renters
Moderate income
purchasers
0
0
100
200
300
400
500
600
Numbers in stress ('000s)
In the lowest two quintiles, the greatest numbers in housing stress are private
renters, working households and households with children (both couple and sole
parent households). 11 The incidence of housing stress is highest for lower-income
private renters, single-person households aged less than 65 years and lowerincome home purchasers. Almost half of lower-income households in stress are
working households and over one-third of lower-income working households are in
housing stress. These more detailed estimates for lower-income households are
illustrated in Figure 3.3. (RP3)
By 2045, the incidence of stress is projected to have increased for all of these
households (by 4 percentage points for all lower-income households and by as
much as 13 percentage points for private renters and 10 percentage points for
sole parents). (RP11)
19
Figure 3.3: Characteristics of selected lower-income households at risk

100
Single purchaser, 35-44
Single renter, 25-34
Incidence of stress (%)
80
60
Single renter, 35-44

Single renter, <25
Couple with children

purchaser, 35- 44

purchaser, 25-34
40
purchaser, 45-54
20
Single renter, 65+
0
0
20
40
60
80
Numbers in stress ('000s)

Stress is an enduring problem for many. There is close to a 50 per cent chance
that a person living in a household in housing stress in one year will be living in a
household in stress in the following year and a 60 per cent chance that they will be
living in a household in stress for one of the next two years. (RP3)
In a decade, the proportion of households in housing stress increased from 24 per

cent in the mid-1990s to 28 per cent in 2002-03. This was a period when there
was steady economic growth and an increase in average household incomes,
including those of lower-income households. 12 (RP8)
The total numbers paying a higher proportion of their incomes in meeting their
housing costs has steadily increased as the number of households in Australia
has increased. (RP3)
Under a reasonably conservative set of assumptions about future trends, both the
incidence of housing stress and the total numbers in housing stress are likely to
increase. By 2045, broadly the period covered by the government's two
Intergenerational Reports, there are likely to be at least half a million more
households in housing stress than at present, increasing the number of lowerincome households at risk of facing significant affordability problems to well over
1.5 million households. 13 (RP11)
This increase in numbers arises because of the projected increase in the number
of households into the future, the ageing of the population, a projected increase in
the proportion of households in private rental housing and the higher incidence of
housing stress among households in private rental.
The incidence of housing stress is also expected to increase as demographic

change interacts with tenure change. This anticipated increase in the incidence of
housing stress is particularly significant for lower-income households in the private
rental market as the impact of (i) the current decline in home ownership rates
among younger households and (ii) the contraction of the public housing sector
work their way through the system. (RP11)
20
The polarisation of affordability housing stress (RP8) is anticipated to worsen by
2045, with an increasing proportion of lower-income households both young and

old in the private rental market. (RP11)
3.3 How does it affect them?

The estimates presented above identify households potentially at risk of problems
arising directly from unacceptably high costs. However, they do not provide any
indication of what these problems might be. These implications are covered here.
Unless indicated to the contrary, all of these results are taken from RP9.
Housing affordability problems are assumed to arise when households are forced into
decisions that adversely affect them and which would not have been made had they
not been in housing stress. While some of the experiences are shared across
tenures, some are specific to private renters and others are specific to recent
purchasers.
Common experiences include:
Facing the constant stress of not having enough money to cover rent or mortgage
payments and other necessities of life, particularly utility costs. Living with
constant stress contributes to health problems, as well as placing stress on family
relationships.
An increased probability of financial hardship. (RP6, RP9)
This can result in

households going without meals, their children missing out on school activities and
adequate health and dental care, or in having to pawn possessions for financial
viability.
Experiences for stressed renters include:

The risk of being stigmatised with poor credit histories because of rental arrears
Being forced into frequent moves in their search for affordable rental housing. This
brings with it dislocation and significant search costs, particularly when there few
vacancies in the low-rent segment of the market.
Making trade-offs regarding dwelling quality and location which affect their access
to employment, education and health services
Having their future aspirations for ownership blocked

Fearing that there will be no relief from this stress in the foreseeable future.
Experiences for stressed recent purchasers include:

Fearing that an interest rate rise will mean they may not be able to meet mortgage
repayments and be pushed into foreclosure
Fearing that loss of employment, part-time work or overtime will mean they may
not be able to meet mortgage repayments and be pushed into foreclosure
For those on high loan to valuation ratios, fearing that any downturn in finances
will put them in a position of negative equity
Being unable to undertake essential repairs to their dwelling or to furnish the home
appropriately
Fearing that they have no reserves (in the form of savings) to tide them over any
change in circumstances.
Many stressed renters (particularly those defined below as strugglers or backsliders)

report that they are unlikely to benefit from intergenerational transfers that might help
them gain access to owner-occupation to provide them with long-term relief of their
21
affordability problems. This is in marked contrast with higher-income renters

surveyed, for whom housing stress is a pragmatic choice and one that creates
relatively few problems.
As renters excluded from home ownership reach retirement age, their incidence of
housing stress is likely to increase, as are the problems they face as a result of their
poor affordability outcomes. (RP11)
The dynamic effects of affordability problems faced by lower-income households are
also relevant. Many of the renters surveyed reported that:
They are unlikely to ever achieve home ownership because their current incomes
are too low and unstable and they feel it is unlikely that they will ever get a job that
will pay them an income sufficient to change this.
They had low rates of satisfaction with their current dwelling and a perception of
intergenerational inequity in that they regarded their housing situation as being
worse than that of their parents.
These results highlight the extent to which poor housing affordability outcomes can
exacerbate the already significant inequalities that arise from housing market
outcomes. (RP10)
Stressed lower-income home purchasers face fewer problems. Proportionally, the
greatest difficulties arise for those faced with ongoing costs associated with homeownership such as unexpected maintenance costs that were not budgeted for. Unlike
renters facing high housing cost burdens, however, many home purchasers are able
to adjust the timing of these housing costs so that they have less of an impact on nonhousing outcomes.
There are, however, a small minority of stressed purchasers who face similar housing
affordability problems as those experienced by stressed renters. There are more who
face the prospect of loss of their family home if their economic or personal
circumstances change.
3.4 From housing stress to housing affordability problems

Not all households in housing stress experience the types of problems indicated in the
previous section. One reason is that some households have made a conscious
decision to spend more than 30 per cent of their income on housing because they feel
they can afford to do so. Another reason is that the simple 30/40 measure does not
capture the extent to which many households are paying considerably more than 30
per cent. For example, of the 862,000 lower income households identified as being in
stress, over 400,000 were paying more than 50 per cent of their income for housing.
(RP3) Lower income households with extremely high housing cost ratios are more
likely to experience affordability problems than higher income households with similar
housing cost ratios because they have so little disposable income remaining after they
pay for their housing.
Supplementary quantitative and qualitative research on households in housing stress
undertaken for the NRV provides the key to identifying which households are likely to
be adversely affected by their high housing costs. This section reports on the insights
gained from this research.
This supplementary research was undertaken, very specifically, in the kinds of
suburbs and regional cities in which most low- and moderate-income Australians live.
Details are provided in RP9.
22
3.4.1 Taxonomy of households at risk

Through the surveys, focus groups and interviews, a breadth of experiences, contexts
and outcomes across both renters and recent purchasers was identified. While these
are diverse and cut across the specific socio-demographic and economic
characteristics conventionally used to describe households most likely to be in
housing stress, they are consistent with the broader understanding obtained by more
conventional classifications. They also serve the important role of reiterating the
observation that not all lower-income Australian households in housing stress are
struggling and discontented in the private rental market, and not all are finding it
impossible to overcome significant barriers to home ownership.
In all, seven archetypes have been identified. 14 A broad indication of the extent to
which these were represented among those surveyed is provided in percentage
terms. (RP9) Indicative lower bound estimates of the total numbers involved at a
national level are provided in parentheses. While the survey covered a range of
households, the numbers cover only households in housing stress.
For renters, the four groups identified are described as:
Strugglers 30% (approx 140,000 nationally)
Backsliders 10% (approx 46,000 nationally)
Pragmatists 30% (approx 140,000 nationally)
Aspirant purchasers 30% (approx 140,000 nationally)
Strugglers are those who are having trouble meeting rental payments and who are
suffering high levels of financial stress. They can be of any age group, but are often
single or in lone-parent households. They are often not working. Despite living in
cheaper locations, they are often paying extremely high proportions of their incomes
towards housing (up to 50 or 60 per cent). Strugglers were often found in
neighbourhoods generally regarded as 'affordable' or in those where house price
increases had put pressures on rents. They represent the core group of long-term
renters.
Backsliders are those who at an earlier stage in life had once owned their own home.
They have 'fallen out' of home ownership, usually as a result of a major rupture in life
circumstances such as a loss of earning capacity, health difficulties or in household
circumstances either as a result of loss of a partner through death or relationship
breakdown. Backsliders often sought to retain ties to a particular neighbourhood and
had problems in achieving this. Returning to rental compounds the sense of loss and
strain imposed on this group by their change in circumstances. They need to restart
their lives but lack 'renter knowledge' and the skills required to negotiate the rental
market.
Pragmatists are those who are generally managing and who perceive that there are
benefits of renting as opposed to owning. Many of those surveyed were paying
relatively high proportions of their income towards housing, but were doing so as a
result of trade-offs made to reflect lifestyle and family choices. Pragmatists were
more prevalent in markets that had been relatively stable with little upward pressure
on rents. Many were reconciled to living with life's ups and downs.
Aspirant purchasers are those who still aspire to home ownership and believe that
they are going to make it, although not all of those surveyed thought they would be
able to do so in the short- to mid-term. A common characteristic of aspirant
purchasers was full-time, secure employment and, typically, two incomes. Many of
the older renters who still aspired to home ownership were beginning to recognise that
23
they were no closer to achieving this goal than they were 10 years earlier, and were
exhibiting an increased sense of anxiety about the implications of remaining renters
for the long-term.
Of these renter groups, it is the Strugglers and Backsliders who are of pressing policy
concern in both the short and the long run. They can be regarded as being trapped in
the private rental market and they face immediate housing affordability problems.
Their circumstances also raise important questions about the long-term and the risks
they are likely to face as they age, if they have not had the opportunity to build up
property-based assets. The research reported in RP10 shows the huge divide in
wealth ownership between those who own their own dwelling and those who do not.
To the extent that their numbers are swelled by any increase in the number of
Pragmatists or disillusioned Aspirant purchasers, these long-term concerns are
compounded.
For purchasers, the three groups identified are described as:
Stretched 40% (approx 106,000 nationally)
Focused 20% (approx 23,000 nationally)
Ambivalent 40% (approx 106,000 nationally)
Stretched purchasers are those who had very little slack in their capacity to pay
when they entered home purchase and are now expressing concerns about their
ability to pay their mortgage. 15 Many have young, growing families and had limited
capacity to save before they purchased, which has meant that they have no buffer to
cope with problems as they arise. They have been hit hard by the interest rate
increases that took place prior to being surveyed and they have been forced into a
range of management strategies because of budgetary constraints. For example,
they have worked longer hours or taken on a second job, with the resultant pressures
on family life. They are concerned about the risks to their income if the labour market
softens. Others have not managed. They have increased their mortgage in order to
release funds to accommodate increased interest rates, or have had to approach
welfare agencies. In broad terms, they have limited equity in their property, having
bought with minimal or no deposit. A significant proportion of these purchasers have
been unable to meet their repayments at some time in the past year. Stretched and
Focused recent purchasers were more likely to be found in the outer metropolitan
regions where rising interest rates and stagnating house prices have had the most
impact.
Focused purchasers recognised that mortgaged home ownership is a significant life
changing process that would impose compromises and constraints on their lifestyle.
Although not struggling to meet repayments, a number were paying upward of 50 to
60 per cent of their income to pay off their mortgages. For a significant group, this
overpayment was a clear strategy to pay off the mortgage as quickly as possible.
Despite their belief that home ownership should provide them with long-term security
and despite their risk management strategies to increase the probability that this
would be so, many were insecure and feared that their homes were at risk. This led
them to work more overtime than they wished, to compromise family happiness and to
scrape by on hermit-like lifestyles.
Ambivalent purchasers are those who are not necessarily committed to home
ownership. They ended up purchasing because it seemed the right thing to do at the
time or because on balance it appeared to provide them with a more cost-effective
option than continuing to rent. For some, it was a result of peer pressure or a sense
24
of being left behind. Among these purchasers were those who had a realistic
assessment of the advantages and disadvantages of both renting and owning.
Of these purchaser groups, it is only the small core (around 510 per cent) of
Stretched purchasers who are not coping who are of pressing policy concern in the
short term. However, the highly constrained lifestyles of the Focused purchasers
highlights potential concerns about the long-term risks that access to home ownership
presents in an environment where financial market and labour market flexibility have
become the norm. For many this means that home ownership, instead of being a
symbol of security and stability, has become a risky undertaking contributing to a
sense of insecurity.
3.4.2 Housing stress and housing affordability problems

The taxonomy presented above and the estimates of proportions in the various
classifications were derived from the quantitative and qualitative surveys undertaken
for NRV3 (described in RP9). Table 3.1 synthesises some of the quantitative and
qualitative results from these surveys.
Table 3.1: Households-at-risk assessment
Typology
Risk assessment
Normative
measure:
30/40 rule
Subjective
measure:
feel stressed
Duration:
long-term
problems
Renters
Strugglers/
Backsliders
Affordability problems, no
foreseeable way out
Yes
Yes
Yes
Pragmatists
Affordability problems, but short- Yes

term
Yes
Mixed
Aspirant
purchasers
At risk of affordability problems
Yes
No
No
Stretched
Affordability problems, no
foreseeable way out
Yes
Yes
Focused
Affordability problems, but short- Yes

term
Yes
Mixed
Ambivalent
At risk of affordability problems
No
No
Purchasers
Yes
These surveys focused on locations where, according to census data, there are high
proportions of stressed private renters and home purchasers. Although the surveys
cannot claim to be representative, they do provide the basis for determining a lower
bound estimate of the numbers of households in housing stress for whom housing
affordability problems are a reality, not just a risk. 16 This is the focus of this section. It
provides indicative estimates of the extent to which housing stress leads to housing
affordability problems.
The evidence reported in RP9 suggests that the 40 per cent of renters classified as
trapped (made up of 30 per cent of Strugglers and 10 per cent Backsliders)
experienced a number of the problems outlined in section 3.3. Their current housing
circumstances, which they have experienced for some time and perceive as on going,
causes them stress. In Table 3.1, they are described as having no foreseeable way
out of the affordability problems that arise from their being in housing stress. In Figure
3.4 they are grouped with the small core of stretched purchasers (representing 5
25
10per cent of those surveyed) as households with severe housing affordability

problems and, therefore, of immediate policy concern.
The 30 per cent of Pragmatic renters are described in Table 3.1 as having short-term
affordability problems.
This is possibly a sanguine interpretation since their
pragmatism often arises from a sense of resignation and from coming to terms with
trade-offs they are forced to make. They are not in a position to save or to build
assets. Because of the significant trade-offs they are forced to make in order to meet
their high housing costs, Pragmatic renters and Focused purchasers are classified in
Figure 3.4 as experiencing housing affordability problems.
The remaining households the 30 per cent of renters who are Aspirant purchasers
and the 40 per cent of purchasers who are Ambivalent are described in Table 3.1 as
being at risk of experiencing housing affordability problems. They are coping in that
currently they are managing the stresses that high housing costs impose upon their
limited budgets. They are, however, at risk of experiencing the types of affordability
problems that are associated with having no discretionary income, no capacity to save
and inadequate resources to meet unanticipated expenditures.
Figure 3.4 combines the qualitative data reported in RP9 and the quantitative data
reported in RP3 to provide indicative estimates of the number of households in these
three categories. 17
Figure 3.4: Housing stress and housing affordability problems
approx 25%
(200,000 households)
Coping but at risk
approx 50%
Housing affordability
problems
approx 25%
Severe housing
affordability problems
Housing stress
The 200,000 or so households at the bottom of the figure are currently experiencing
severe affordability problems. These are the trapped renters and a small proportion of
stretched purchasers. The 450,000 in the middle group are households whose high
housing costs force them into making trade-offs that place them under considerable
strain. They, and the 200,000 households at the top of the table who are classified as
coping, are at risk of experiencing severe housing affordability problems. They have a
relatively fragile capacity to cope with any future changes that will affect their housing
costs in relation to their capacity to pay. Examples of such changes are increases in
interest rates or rents. A change in household circumstances is another example.
Many of these changes are beyond their control.
A number of these risk factors were highlighted in Chapter 2. Their potential impact
on households currently experiencing or on the threshold of a housing affordability
problem are covered in the following chapter.
26
4 WHY IS HOUSING AFFORDABILITY IMPORTANT?

The results reported in the previous chapter provide evidence of the extent of the
housing affordability problem and the range of effects on households. It concluded
with the claim that the likelihood that households in housing stress will have an
affordability problem is influenced by a number of factors. These were described in
Chapter 2 as factors that increase the systemic risk that affordability problems will be
greater in the future than they have been in the past. In the main, they relate to the
greater flexibility that has been the hallmark of the new economy, and to the
economic, social and structural changes that have been associated with these
changes. This chapter examines the potential impact of some of these changes.
Before doing so, however, it presents a wider assessment of why housing affordability
is important and why it should be viewed as a pressing policy concern.
4.1 Economic and social impact

Housing affordability is important not just because of the costs borne by the individual
households experiencing high housing costs, but also because it imposes costs on
the wider economy and society. The research undertaken by NRV3 focused primarily
on the former, as many of the social outcomes were identified in the systematic review
undertaken for NRV1. However, social outcomes identified by the research were
reported in the previous chapter. For example, some of the coping strategies
employed by those with housing affordability problems (such as frequent moves) can
contribute to a lack of social cohesion. (RP9)
The economic costs that add to the wider explanations of why housing affordability is
important are covered below. These add to the risks associated with failing to
address the problems of affordability as they become increasingly oppressive.
Housing affordability potentially has an impact on economic outcomes in a number of
ways. In the first place, it can affect the macro economy. In the second place, a lack
of affordable housing may affect the efficiency with which labour markets operate at
both a national and regional level, and particularly in the large metropolitan areas in
Australia. Thirdly, it has a very significant impact on wealth distribution in our society
and therefore can contribute to social and economic problems that flow from an
inequitable distribution of resources. In other words, housing affordability affects the
economy through its impact on stability, efficiency and equity.
4.1.1 Impact on the macro economy

Australia as a middle-ranking, open economy is vulnerable to interest and exchange
rate shocks. The operation of the housing market impinges centrally on these
parameters.
Excessive debt burdens undertaken by home purchasers in response to high

house prices can make households more sensitive to interest rate increases. To
meet their increased mortgage payments, households may cut back on
consumption, thus creating a potential for greater economic instability. (RP4)
High house prices that render home ownership unaffordable for many first home
purchasers add to housing wealth for existing home owners and can contribute to
increased aggregate demand both directly and indirectly through providing the
basis for equity withdrawal (which, in turn, adds to increased debt and to the threat
of interest rate changes bringing about a severe credit squeeze). (RP4)
High house prices may also contribute to inflationary pressures. (RP4)
27
All of these make it more difficult to manage the economy.

To the extent that intensifying housing stress increases the risk that house price
movements will increase the overall volatility of the economy, problems of housing
affordability should attract the attention of economic policy makers at the national
level.
4.1.2 Impact on economic efficiency

A lack of affordable housing also can affect the efficiency with which labour markets
operate at both national and regional levels, and particularly in the large metropolitan
areas in Australia. There are a number of ways in which such outcomes might arise.
High housing costs, for example, may be reflected in rising wage levels that feed
back into rising housing prices in a region, although the precise nature of the
causal processes are unclear. If pronounced, this can undercut the competitive
advantage of firms locating in the region. (RP5)
Differentials in affordability between areas may create labour market impediments

by inhibiting migration to high-employment, high-cost locations and, conversely,
encouraging migration to low-employment, low-cost areas. (RP5)
Both of these processes of labour mobility and immobility have the capacity to
contribute to a spatial mismatch between jobs and workers, particularly in relation to
the availability of lower-paid workers in high-cost global cities. They stem from
imperfections in spatial housing markets and can hinder the emergence of an efficient
spatial economy (that is, one where resources are used in ways that would maximise
Australias growth).
While the risks of spatial mismatch are very real, the evidence of the extent to which
there is a mismatch in Australia arising from housing affordability problems remains
inconclusive. It remains an open question as to whether or not a potentially mobile,
mixed and uncertain supply of lower-paid, flexible labour will adequately meet the
functional needs of the globally oriented economy centred in the core areas of the
major cities.
4.1.3 Impact on distributional equity

High housing costs and low affordability have their corollary in substantial increases in
the asset levels of residential property owners and therefore a widening of the wealth
distribution between them and the sizeable minority of non-residential property
owners.
Processes of gentrification that have pushed much affordable housing to the fringe
of urban areas and regions have contributed to a tendency towards spatial
polarisation. (RP5)
Intergenerational equity is compromised by the increasing disparities between

those who gain access to home ownership and those who do not as a result of the
high cost of access to owner occupation. (RP10, RP11)
Increasing disparities in wealth add to the risks of a loss of social cohesion.

Increasingly polarised cities foster defensive behaviours, not just by those in areas of
deprivation, but also by more affluent citizens who may demand housing estates and
building forms constructed on principles of safety and security (eg gated
communities). This in turn can undermine a sense of wider citizenship as people
retreat to, and structure a life around, their own small, gated world and ignore their
broader social obligations.
28
In summary, the evidence presented in Chapter 3 and in this section of Chapter 4

provides a compelling case for suggesting that housing affordability is important
because of:
The known impact it has on individual households and the consequent risk it
imposes on the achievement of social objectives
The risks it imposes on achievement of broader economic goals of stability,
efficiency and equity.
4.2 Risks
4.2.1 Risk as a motivation for concern over housing affordability
The evidence reviewed so far provides a rationale for why high housing stress is
important and should be a matter for concern. It focuses on the risks associated with
the outcomes of poor housing affordability.
Table 4.1 summarises some of the potential risks arising from possible future trends in
relation to affordability outcomes. It focuses on possible outcomes for individual
households in housing stress and at risk of facing resultant housing affordability
problems (as identified in the typology presented in Chapter 3) and the economic and
social system as a whole (as discussed in section 4.1).
Among the systemic risks identified, one key theme included in the table concerns the
risk of increased social polarisation, a situation that might arise if increasing house
prices and interest rate rises were to lock an increasing proportion of households out of
the home ownership market (eg Aspirant purchasers). This in turn could lead to
labour market pressures as these households relocate to other areas. If the social
contract of access to home ownership for a large group of households disappears, the
resultant social polarisation also could lead to increased friction between owners and
non-owners. In turn, this might create a political problem for governments.
A second theme relates to the risk of economic destabilisation arising from the impact of
economic change on purchaser households. In cases where there is a reasonably
sharp increase in interest rates, there could be a tendency for home purchasers to
struggle to retain their home. In addition to the obvious pain for households, this
could also put pressure on financial institutions, particularly those institutions with
large loan books of low-documentation loans.
A third theme focuses specifically on the impact on individual households. The NRV3
research points to a large body of trapped renters. This group would be particularly
vulnerable to increases in rents. Their response to this may lead to increased churn in
the rental market and a desire to seek cheaper housing on the fringe and, therefore, to
additional financial and environmental costs of travel. Increases in fuel costs may also
put more pressure on the financial situation of these low-income households.
POLICY IMPLICATIONS
The findings of this extensive study make a compelling case for the need for
governments to ameliorate the housing affordability stress currently being
experienced by many lower-income renters and, to a lesser extent, marginal home
buyers, and to improve housing affordability conditions in Australia in the long-term.
This chapter draws out the broad principles that follow from the research findings,
provides examples of some illustrative policies that satisfy these principles and signals
some of the wider policy actions needed to promote affordable housing.
5.1 Policy directions

5.1.1 Policy principles
A number of general principles to guide a strategic policy response to the challenges
of declining housing affordability can be drawn from the analysis and evidence
presented in this study. The policy principles that derive from the main conclusions of
this study are listed in Box 5.1.
Box 5.1: Research findings and policy principles
Main conclusions
Policy principles
Housing affordability is a large and

widespread problem.
Additional policies and outlays will be needed

to offset housing affordability problems.
Causes of affordability problems are complex

and diverse. Major driving factors can be
found both within the housing system and
beyond it.
An integrated set of policy responses capable

of addressing the range of factors that
contribute to poor affordability will be
required.
Both housing policy action and action in other
policy arenas will be required.
Housing affordability is a structural problem.
While housing assistance can address the

housing stress of individual households and
provide a safety net for those at risk, it will be
insufficient to overcome the underlying
causes of declining affordability.
Housing affordability problems are predicted

to increase in the first half of the 21st century.
Sustained action will be required to prevent

housing affordability problems worsening.
Affordability problems have specific spatial

and cyclical dimensions.
Policy responses need to be tailored to

different local market contexts and to be
responsive to changing economic conditions.
A strategic framework that guides the actions
and priorities of different players will be
required, in order to promote cohesive action
and to avoid fragmentation of policy
responses.
Households most at risk of facing the multiple

problems that arise from a lack of affordable
housing are lower-income households in the
private rental market.
Policy responses to the needs of individual

households should give greatest attention to
those in the private rental market.
37
Main conclusions
Policy principles
Individual households experience and

address housing affordability problems in
different ways.
Providing a range of choices and options is

desirable to meet differing household needs
and aspirations.
Policies that assist households to obtain
affordable housing should as far as possible
be designed to be responsive to their
individual needs and to adjust to changes in
those needs.
Housing markets have failed to provide an

adequate supply of affordable housing for
lower-income households.
Policies to promote efficiency in the housing

market and to support a greater permanent
supply of affordable housing should be given
greater weight than is currently the case.
While housing provides shelter, it also

influences non-shelter outcomes for individual
households, such as workforce participation,
access to jobs and services, family stability
and educational attainment.
The goal of improving housing affordability

needs to be aligned with other relevant
objectives of governments.
Declining affordability has implications for

economic performance and labour market
efficiency, social cohesion and polarisation of
cities, environmental considerations and the
creation and distribution of wealth through
home ownership.
Failure to address housing affordability

problems will jeopardise the achievement of
wider government goals.
5.1.2 Current policy settings

NRV3 research did not include a direct review of how current policy settings affect
housing affordability. However, the findings of the research point to key weaknesses
and limitations in current approaches to assisting households to access and maintain
affordable housing.
For instance, it is apparent from the quantitative and qualitative analysis of
affordability that the current core housing policies that operate to assist lower-income
home buyers and renters are not adequate.
Current forms and levels of government assistance for lower-income aspirant

purchasers and struggling first home buyers are unlikely to provide many in these
groups with a path to affordable and sustainable home ownership.
The large Commonwealth Rent Assistance (CRA) program has alleviated housing
affordability problems for many renters but has not prevented a growth in the
number of private renters in housing stress and leaves hundreds of thousands of
households (comprising both recipients and non-recipients of CRA) with severe
affordability problems. Any pressures on rents could mean that blunt instruments
like this are less effective in the next housing market cycle.
Targeting social housing and other measures of assistance tightly on those with
the highest needs has created a gap in assistance for those households (such as
low-wage workers) for whom a smaller amount of financial support or additional
well-located additional affordable housing could provide housing closer to labour
market opportunities and/or lift them out of housing stress.
As there is insufficient capacity to maintain or expand the provision of social

housing under current funding arrangements, this traditional source of low-cost
supply is retracting. This is leaving many very low income renters who are eligible
38
for social housing stranded in the private rental market, where they face ongoing
unaffordable rents.
Changes to allocation policies, which have reduced access to public housing for
many lower-income families starting out on the housing ladder, have eroded the
capacity of these families to save for home ownership.
The regulatory framework in the private rental market does not address the needs
of long-term renters.
In the broader environment, policies that affect housing have contributed to the
increased risk of affordability problems. For example:
Relaxation of regulation of home lending practices has been one factor

contributing to the growth of heavily indebted marginal home buyers with greater
vulnerability to housing stress.
Current approaches to planning and managing residential development and urban

renewal in our major urban and regional areas are not sufficiently directed to
promoting a wider range of affordable housing options and to generating more
socially mixed communities.24
Tax policies that directly affect demand for and investment in housing (see RP10)
are not geared to protecting or promoting the affordable end of the market. Under
recent market conditions, tax provisions and changes to them have tended to act
against affordability goals by overstimulating housing investment and adding to
the demand for owner-occupied housing.25
Limited coordination between federal, state and local government policies that
affect affordability outcomes weakens overall efforts to address the problem.
5.1.3 A new policy framework

To achieve effective and sustainable improvements in housing affordability for
individual households in stress and for future generations, governments across
Australia now need to adopt a balanced set of policy reforms under a common vision,
purpose and framework for implementation.
A coordinated cross-government response that applies both housing policy tools and
other policy levers will be required, to address the needs of individual households and
to redress systemic housing market problems.
Specific housing policy tools will be appropriate to alleviate housing stress and to help
to offset patterns of social and economic exclusion that are often associated with
situations of unaffordable housing. However, the qualitative research findings of this
study indicate that a more nuanced and flexible housing policy approach than in the
past will be needed, to respond to differing experiences of housing affordability
problems and the diversity of effects these may have on peoples lives and
livelihoods. Accordingly, a variety of new policy options (designed to achieve
improved outcomes for low-income renters and marginal home buyers in housing
stress, as well as those at risk of severe stress) are suggested in section 5.2.
However, a broader set of policy actions (beyond housing) will also be required, for a
more lasting impact on the housing affordability challenge. The complex interactions
between housing policies and macro policy settings provide a strong rationale for
arguing that housing should be a core area of interest for government as a whole. In
particular, policies that influence economic development and labour market
performance, fiscal and monetary policies, transport planning and infrastructure
provision, population policies and settlement planning, income support policies, and
agendas to improve urban and regional sustainability, need to give greater emphasis
39
to addressing housing affordability problems among other goals. It is through

adjustments in these key areas that actions to alleviate housing stress in the shortterm will be buttressed by broader strategies that can address the underlying causes
and wider impact of deteriorating housing affordability.
Figure 5.1: Macro drivers of housing affordability outcomes
Labour market
policies
Fiscal and
monetary policies
Income support & retirement

incomes policies
Regional economic
development
Housing
affordability
outcomes
Urban and regional

planning
Transport
policy
Population policy &

settlement planning
Sustainable
communities & regions
The evidence of the structural nature of the housing affordability problem presented in
RP3 and RP10 (and summarised in Chapter 2) and future projections (RP11) show
that housing affordability problems will continue and deepen. 26 It is only with an
overarching public policy goal of steadily and consistently improving the affordability of
the housing market over time, using both housing policy tools and other policy drivers,
that governments may be able to contain the endemic affordability problem and,
thereby, curtail growth in the need for ever more direct housing assistance measures,
as well as manage the risks to the economy posed by persistent house price inflation.
Thus macro policy settings, in particular, must take greater account of the need to
reduce the pressures on house prices in the medium- and long-term.
Not only are more diverse and proactive strategies required but also these must be
developed and implemented cohesively. Stronger coordination and cooperation
between agencies and spheres of government will be essential, to:
Ensure that actions outside the housing policy arena do not have adverse effects
on housing affordability
Prevent fragmentation of the effort directed towards tackling affordability across

different government bodies
Encourage more integrated approaches to interventions on the supply and

demand side and to the delivery of different forms and mixes of housing
assistance.
40
5.1.4 Specific objectives

Primary and supporting objectives for a new affordable housing policy model were
developed as part of this study (see RP7 and Box 5.2). The proposed objectives
represent a set of broad goals to drive a policy agenda consistent with the policy
principles that have been derived from the research findings. The objectives
recognise the specific purposes and processes behind ways of providing more
affordable housing and also acknowledge a range of other desired economic, social
and spatial outcomes that are potentially affected by how affordable housing is
produced, financed and delivered. Adoption and application of these objectives by
governments as part of a coordinated national approach will lead to specific policies
that can address the housing risks and problems being experienced by individual
households, provide overall improvements in housing affordability and boost the social
and economic benefits to both individual households and the broader community that
arise from having more appropriate and affordable housing.
Box 5.2: Policy objectives for a national affordable housing policy framework
Primary objective
Affordable housing
To improve access to existing housing that is affordable for both lowand moderate-income households and those with specific housing
needs in housing affordability stress (the target groups).
To preserve and add to the supply of affordable housing where it is
needed for the target groups.
Supporting objectives
Appropriate
housing
To ensure that housing provided is appropriate to the needs and

changes in needs of the target groups in response to:
size and type of household
cultural needs of households
occupant circumstances (eg need for support services; stability)
locational needs of households.
To provide well-designed housing and neighbourhoods.
To contribute to the environmental sustainability of dwellings provided to
the target groups.
Participation
To enable the target groups to participate in decisions about affordable

housing policies, products and projects.
Positive non-shelter
outcomes
To ensure that target groups have sufficient residual income after

paying for housing to meet their non-shelter needs at a socially
acceptable standard.
To provide affordable housing in ways that can strengthen the economic
and social position of the target groups. Consideration should be given
to:
incentives for workforce participation
support for family life and work/family balance
ways of supporting the health, wellbeing and education needs of
occupants
enabling ageing in place
development of socially cohesive communities and communitybuilding processes.
41
Choice
To diversify the housing and tenure options available in local housing

markets and to provide the target groups with adequate choice.
Equity
To target any subsidies that are provided to the target groups in

proportion to need.
To give priority of assistance to those most in need.
Long-term benefits
To retain and use any benefits gained from investing in housing for the
target groups to meet the needs of future generations.
To progressively improve the capacity of the private and the not-forprofit sectors to provide affordable housing.
Unintended effects
avoided
To avoid as far as possible any unintended effects of the way in which

initiatives intended to improve the affordability of housing are
implemented. (For example, to avoid measures that contribute to a
sudden surge in demand and a consequential short-term boom in house
prices.)
Efficiency
To use any subsidies that are provided to access, procure, manage and
maintain housing in the most cost-effective way.
To support and contribute to the efficient operation of the housing
market.

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AMITY GLOBAL BUSINESS SCHOOL-MUMBAI

Summer Internship Under

UNDER THE GUIDANCE OF

1st Page: Same as cover page

Introduction to the organization

Introduction to the project

Results and data analysis

Conclusion and recommendations

Transform lives of Indian households by enabling access to home.

Be easily accessible to every Indian who desires to own a home.

Understand our customers inner needs and speak their language.

Go to any length to make sure our customers dont feel intimidated.

Find ways to help our customers tide over difficult times

Spread our network to every corner of India

Respond promptly and courteously to all enquiries.

Treat all our customers with dignity and respect.

Be totally transparent in all our dealings.

Strive to be a learning organization.

Dedicated to team excellence and employee happiness

Be single mindedly committed to the betterment of our society

GROWTH OF HOUSING REQUIREMENTS AND HOUSING FINANCE IN INDIA

companies provides loans to individual person, association of person, firm, company,

IDENTIFICATION OF THE PROBLEM

OBJECTIVES OF THE STUDY

To find the area where efficiency can be improved.

To locate the area where cost reduction is possible.

To make possible the efficient and effective utilization of resources.

LIMITATION OF THE STUDY

Development of serviced plots and construction of built up residential

Real estate covering construction of residential and commercial premises

Manufacture of building materials.

Preparatory ventures in these above and

Investment in housing finance institutions.

It means, 100% FDIs permitted to development of integrated townships (Including housing,

ROLE AND OBJECTIVES OF NATIONAL HOUSING POLICY

To create an enabling environment for housing activity by eliminating

To help mobiles resources and facilitate expansion of investment in housing in order

Table: Plan Outlay in Housing and Urban Development Sector

Five Years Plan

Housing & Urban

Annual Plan 1966-69

Annual Plan 1977-80

Annual Plan 1990-92

Unabated growth of urban population aggravated the accumulated backlog of housing

High incidence of marginal employment and urban poverty as reflected in NSS

Housing affordability is a large and widespread problem.

Housing affordability is a structural problem.

found both within the housing system and beyond it.

a result of anticipated demographic and housing market changes.

Affordability problems have specific spatial and cyclical dimensions.

housing are lower-income households in the private rental market.

Individual households experience and address housing affordability problems in different

efficiency, social cohesion and polarisation of cities, environmental considerations and

Figure 2.5: Determinants of housing affordability

2.3.2 Risk factors that can affect affordability outcomes

Housing Situation in India: 1971, 1981 & 1991

Source: Government of India National Buildings Organisation, Ministry of Urban

Source: Government of India National Buildings Organisation, Ministry of Urban

Housing Conditions in India: 1971, 1981 & 1991

Source: Government of India National Buildings Organisation, Ministry of Urban

Source: Government of India National Buildings Organisation, Ministry of Urban

Excess of Households over

Source: Government of India National Buildings Organisation, Ministry of Urban