Understanding Affordability In Real Estate!

“If we don't figure out a way to create equity, real equity, of opportunity and access, to good schools, housing & health care we're not going to survive as a productive and healthy society”… Tim Wise.

Timothy Jacob "Tim" Wise is an American anti-racism activist and writer. Since 1995, he has given speeches at over 600 college campuses across the USA. And his above quote indicates very clearly that even in a country like USA which is dream destination for most people in the world to settle down; yet affordable housing remains a problem for USA too! By now affordable housing is buzz word for every person not just related to the real estate in our country but our Prime Minister’s office also has taken it as their main agenda. The reason is twofold giving due respect to Hon PM’s intentions towards the need of affordable housing, central elections are due in next two years & by then nearly fifty percent voters will be staying in cities & it’s here where the problem of housing is grave! And if the Hon. PM wants to continue his party to win then he can't afford to keep these fifty percent voters unhappy just because they won't be having a decent home of their own as the unhappiness will be reflected directly in voting against the ruling Govt! Right from Pradhan Mantri Aawas Yojana by virtue of which nearly Rs 2.5 lcs gets deposited in the account of a first home buyer to RERA to making real estate policies more flexible, everything is being tried by the central govt to make more & more homes available to masses! But the problem is, still somewhere something is missing & if on one side supply of housing is increasing then yet on other side people are crying that the homes are not in their budget i.e. homes are non-affordable commodity to most classes of the society! Result is real estate is in dilemma as product’s inventory is increasing along with the production cost yet the end user as well govt wants real estate to reduce the home rates further down! I think high time to understand the concept of the term affordable when it’s applied to real estate & then only we can decide fate of affordable housing!

Like Tim Wise said in his quote, "equity, real equity in giving access to good homes" (don’t forget good schools as well health care) means there are different classes in the society & every class has their own set of limitations especially in term of earnings as well life style. And what we need is making a home which will be available to every class so that they can own a home which suits to their life style & live at peace. This last part of live at peace is very important as or else when one puts all his money in a single commodity like home then we can’t expect his or his family to give away every other smallest pleasure of life like going to movie once in a while or dine out or sending their kids to decent school & many such & just keep saving to pay their EMI’s! No sir, no sane person will buy such affordable home as it’s no more an affordable home in first place which makes you restless with constant stress of paying installments for the same. At the same time affordable is not a home which because of just cheap land rates has been build far away from every civilization! One more popular concept is affordable is smaller which has defeated the very purpose of home as you can’t have a bedroom that of a size of larger toilet & label the home affordable! Every such attempt to pack a home under name affordable & deliver with above flaws has been failed miserably & still large number of city population seeks for real affordable home is a fact.

Here I will give example of next in need or popular or dream commodity after the home, in Indian families; that is an automobile! I remember first automobile in our family, I was in school, it was a Luna & I ran along with my father driving it from show-room to our home for two reasons. One is sheer excitement of having Luna in our home which was first in our locality & second is my father wasn’t confident of driving the new Luna double seat & more than me getting an injury he was worried about the Luna getting damaged! Luna was the first vehicle which in every term was affordable & started a new era in auto industry & second such entrant years after that was Maroti Suzuki, popularly known as just Maroti! Till these two came in market having a four wheeler was only in capacity of riches & two-wheeler wasn’t a need in first place then, as distances required to travel were very much in walking or paddling limits! But look at today’s life, people in cities needs to travel all around for their work, education, meeting relatives, buying grocery & what not; thus having a vehicle of their own a basic necessity & yes absence of a proper public transport system is main reason for that barring a few cities like Mumbai. Just look at the options it provides to the end user; in four wheeler range you have Porsche, BMW, Audi ,Merc ranging from some Two crores & the you have good old Maroti, Tata, Hyundai where you can get a decent car in just four lacs also with all need base features! And same is in two wheeler market, right from Ducati, Harley Davidson super bikes to Honda, Hero Motors fuel saving bikes, every possible option is in market & yes there are for ladies also like Honda’s Deo or Activa! Entire markets’ needs considered & taken care & that’s why no one cries for not having affordable car or bike, as every segment in the society has some option of owing a vehicle for them as per their needs, which includes budget aspect too! Even the finances have been worked out by the institutes & auto finance was first to reduce their interest rates as well come up with zero interest schemes types option. This further reduced the burden on the buyers’ pocket. One more thing understood & acted by the auto industry is an affordable vehicle for all classes means lesser maintenance vehicles & especially with the Indian road conditions it was a challenge which they faced successfully. Look at today’s bikes with puncture resistant tube less tires & the good old days of carrying your bike to puncturewala seems from different planet!

So no more owning a vehicle is a luxury but its need of every household & here is where automobile industry scored over real estate. As it meticulously identified needs of every individual customer & designed the product accordingly. Today you want a luxury sedan you have it, you want a sports SUV you have it, you want a low maintenance bike you have it, you want fuel efficient bike you have it, you want a super bike you have, every choice & option is available in auto industry. And this is what I call affordable automobile as each segment of society has different concept criteria for affordable & having a product available as per these variants is affordable!

Now on this back ground look at real estate or housing; what we saw is options are available but they are not in tune with what all segments wants, they are designed for a particular segment. In real estate if you study the pattern, then most of the time the end product is as per developers whim as he feels there is more money so he decides to come up with a high end township under the tag of “Dream Township or Heavenly Homes” or so called affordable homes which are way away from any civilized infrastructure & of size which he thinks is cost effective. But have we ever thought what type of home we can call as affordable, the answer is every type of home is affordable as per earning capacity & life style of the people but one thing remains common & that is bare minimum space essential for comfortable living & physical as well social infrastructure of the home as well mental peace it brings along to the home buyer! For e.g. take an example of an auto rickshaw driver with earnings may be Rs 20,000/pm & if his wife is also working the make it total Rs 30,000/pm. Now with all the EMI’s & loans available to this category if you ask him to go some thirty kilometer out of the main Pune city center then he won’t ever go & will consider this home as non-affordable, why? Because affordability don’t have just budget or money aspect but if he is an auto rickshawala then his day starts may be at five am in morning at railway station or bus station & for that he has to start from his home half hour before that & then he carries his auto rickshaw to his home at night, so if you ask him to stay in a home thirty km away from his work place, how he is going to carry his rickshaw to his home? And if he has to use public transport then first it’s not in place & second where he will park his rickshaw safely for the night, as this city doesn’t have parking places for even PMPML’s own busses! Same is the story with thousands of small businessmen as well people working in service industry in the central part of the city!

Even for higher middle class situation isn’t different, an engineer with IT or MNC earns lot more than an engineer working in a small builder’s firm or small work shop so though by qualification both are equal yet their earnings as well life style is totally different. In a city like Pune the major real estate market is driven by migrants & these people don’t have needs like proper city based native clients has. For e.g. if some local IT engineer is looking for a flat in western suburb then he will think of how his parents, friends or other relatives will be coming to meet him so he will chose a home where public transport as well private means of conveyance is easily available. Where as  a person coming from Nagpur/Amravati who doesn’t have any relative here won’t be taking this aspect that seriously as he has to think of his own work place as well his kid’s schools distance, that’s all! Here again the affordability concept changes as per the means of transportation & distances from the said home.

Then comes the life style as an IT or MNC engineer won’t mind living a bit away from normal city hotspots like Lakshmi road or FC road but he will like to hang out at night happening spots for his weekends with friends & if they are not available nearby then the home will be considered as non-affordable by him on life style scale. Here one more aspect is very interesting, when we say physical infrastructure then take example of very basic thing like water; if I say to a IT engineer from Pune or Mumbai that there is no PMC water & he will have to buy water tanker as the project is out of PMC limit then he will think its non-affordable on infrastructure basis. But the very same home some IT engineer in very same firm won’t mind if he is coming from Vidarbha or Marathwada as he is born & bought up drinking tanker water since childhood in his town & won’t consider tanker water as an obstacle in buying a home!

One major aspect apart from all these factors is deciding affordability on life style basis on budget scale. I had an interesting experience when I was talking to group of some young IT engineers who has come for group booking. They were all working in MNC’s with good package, which I wouldn’t dreamed off in their age yet they readily settled for an option which is way away from happening spot suburb just as they were saving some twenty lacs per two bhk unit. I asked they can afford this closer to city option yet why they are opting to live away, the reply was today most of us are bachelors or just couple but tomorrow when we will have kids then their education as well other need will reduce our spending limits & we don’t want to give up our routine luxuries like occasional dining out or shopping in malls & for that from right now we should control our EMI; & any way we all are not from Pune so we are not specific about being that close to the city or any particular suburb, just nearby vicinity of our work place is enough for us if we are saving on base price of the home! It was an eye opener reply for me as when we call something of high maintenance then the term includes both, physical as well social maintenance! Also important is understanding social standards of living as you can’t expect normal middle class family living in neighborhood of slum dwellers homes of size 300sq ft & even neither they can live in that size of home. Another aspect is designing these houses as per the needs of family size & use of spaces. As if you go to any so called affordable houses for e.g. slum redevelopment homes after few years then they are unable to maintain the services. Recently there was accident in one of the buildings in Mumbai in affordable housing as the lift was not in condition & a small girl died in it. Such examples must be studied as a case study for working on affordable housing.

Here is why repeatedly we in totality along with Govt have failed on giving affordable houses as we haven’t understood what affordable houses are! And then it’s not responsibility of one single entity named developer of the Govt to provide affordable but it’s a joint effort! As the Govt can’t give some two or three lacs rupees subsidy to home buyers & then held developers responsible to deliver affordable homes. Neither the real estate industry can cry that Govt should give everything on platter & then we will make affordable homes & still have high profit margins! Do mind it’s a joint venture morally as well physically of both parties as both are beneficiary of housing industry! There are three segments of society largely, super rich, super poor & semi rich or semi poor. The issue is not with first two categories as super rich can chose his home anywhere as per his wish & super poor has no choice so gets settled even on footpath or in slum; it’s the last category which we call middle class, it may be higher middle calls or lower middle class who needs a home but have thousands of limitations & here is where affordable term counts most! Affordable housing is not just need but its right of every citizen who in his or her way contributing for the growth of the country & it should be treated with highest priority. The solution needs to be done systematically & not by age old whims or formulas of so called affordable homes & we need to do it fast as it’s not about winning elections or making real estate stable but if we want peace in the society as no country can afford more numbers of homeless people & yet thrive to become as super power!

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Sanjay Deshpande 

Sanjeevani Dev.

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