Why Affordable Housing Merely A Statement and Far Fetched

This blog has been written by Mukul Bhartiya. He is inbound marketing consultant for Ethical Consulting Pvt. Ltd.(www.ethicalwealth.in). His other blogs can be found on http://www.digi-age.in.


According to Central Statistics Office, Ministry of Statistics and Programme Implementation, Government of India, national per capita income in real terms ( at 2004-05 prices )  2012-13 is expected to attain a level of Rs.39, 143 as compared to the First Revised Estimate for the year 2011-12 of Rs.38,037. At current prices, per capita income is estimated at Rs.68,747 (http://pib.nic.in/newsite/erelease.aspx?relid=92062).

Another report from National Housing Bank says that Technical Group of Housing Shortage (TGHS) has estimated the housing shortage in Urban India at 18.78million with 95% shortage in Economic Weaker Section(EWS)/Lower Income Group(LIG) segment in 2012. Further, according to TGHS’s definition, housing for EWS should have carpet area of 21-27 square meters and housing for LIG should have carpet area of 28-60 square meter area. By government’s definition, EWS housing falls between the price range of Rs.4-10 Lakh.  

Taking a cue from my earlier blog(http://digi-age.in/2013/11/19/why-real-estate-prices-in-bigger-cities-are-high-an-outsiders-view/) and if my assessment holds any ground, then major expenditures of a household falls in following category:

1)      Accommodation  

2)      Food & Clothing

3)      Education

4)      Health; and

5)      Social Security (near future and post retirement expenditure)

So, a household should spend a maximum of 6 years total income on housing and if it goes beyond that then it will have to compromise on other prominent heads of expenditure.

I love mathematics and that’s why I recite numbers in most of my blogs. Let’s take this love of mine a little further and find out whether affordable housing in tier- I urban area is possible in India within the pricing scope provided by government as well as the per capita income at current prices.

According to Ethical Consulting Pvt. Ltd. (www.ethicalwealth.in), a leading wealth managers in real estate based out of Gurgaon, price of residential land in Delhi-NCR ranges between Rs.1.75-15 lakh per square meter.  Please note that this price is mentioned for the areas, which are connected with basic amenities and agricultural or non-developed area may have different pricing than what is mentioned above.

Now let’s do the mathematics:

Minimum price of land per square meter: Rs.1.75 Lakh

Minimum Carpet Area for EWS Housing: 21-27 Square Meter

Minimum Carpet Area for LIG Housing : 28-60 Square Meter


Then, what the cost of land alone at lowest price will be:

For EWS: Rs. 1.75 Lakh X 21- 27 Square Meter = Rs.36.75-47.25 Lakh

For LIG: Rs. 1.75 Lakh X 28-60 Square Meter = Rs.49-105 Lakh

Further, in the household with two adult members, per household income at current prices would be

Rs.68,747 X 2 = Rs.1,37,494/- .

So, a household should spend somewhere around Rs.8-9 lakh on housing.

Now, correlate these costs, household income with price band given by government (Rs. 4-10 lakh for EWS Housing) and see the gap yourself.

Now, let’s bring on few more numbers. Delhi’s area is 1484 sq. km and population according to 2011 census is 1.68 crore, which means there is only 88.33 square meter space for each individual for everything; housing, profession, road, medical facility, park etc. I am not seeing any sense in these numbers; if you are seeing any sense then good for you.

I am not a town planner, I am not an architect, I am not a real estate developer, I am only a common man who is trying to understand whether two plus two is equal to four or not and here I am not seeing that happening in Indian housing scenario. I am seeing the following challenges in affordable housing segment:

1)      Affordable housing can’t see any growth unless government steps in a big way.

2)      Land Acquisition Bill 2014 to benefit the land owners is alright, but land has to come for affordable housing.

3)      Urbanization, infrastructure development and economic activity have to move towards smaller cities. According to UNESCO reports internal immigration in India accounts for a large population of 309 million, which is nearly 30% of total population (http://www.unesco.org/new/en/newdelhi/about-this-office/single-view/news/internal_migrants_in_india_the_millions_who_cannot_exercise_their_rights/#.Ur3YHfRDtXY) .

4)      Since land is scarce, to bring down the cost of housing, technology has to play a role and seeing the huge cost to expected realization gap, I don’t see any private builder spending so much on technology. Here also, government needs to focus on it.

5)      Price o raw material also has to go down, which can either be through government subsidy or technological development and who else can do it other than the government.

So far I have not come across any piece of news of this magnitude which can give impetus to affordable housing. Till then, I am considering media reports about market tendency towards affordable housing as statements only and nothing else.

In reality, housing sector in India will continue to consume around 12-15 years of income of middle class and upper middle class population. With good inventory level in Tier-I markets, there will be lot of activity in the real estate market, with little bit correction upward and downward in different phases, but there will not be any drastic price cut or dynamic shift in pricing structure in near future.

This is my individual opinion and does not represent the industry’s point of view. Experts may differ from what I have mentioned here and they are more than welcome to correct me….


Is it the right time to buy a property? May be….

This blog first appeared on http://www.digi-age.in and has been written by Mukul Bhartiya. He is inbound marketing consultant of Ethical Consulting Pvt. Ltd.


1) Reuters news: Qatar Fund in talks to invest $200 million in Indian properties

2)      Financial Express News: Canadian pension funds bullish on India for real estate and infrastructure…..

These some of the news published in different news sites two days back. What is so special in them; these types of news keep coming. If you are an old hand in investment market, then you know the rule of money making; either buys when market is down and sale when market is up or sale when market is up and buy when market is down. Even if you are not an investor, you know that buying price plus margin should be your sales price.

Now, I am recounting some of the points from our earlier blog:

1)      Except Bengaluru, all Tier-I real estate market of India is having good housing inventory; Delhi-NCR and Mumbai has inventory of more than 41 month.

2)      Housing prices are down by 1.7% in January to June 2013 period.

3)      GDP of India has grown 4.8% in the second quarter of 2013-14.

Now correlate all the points mentioned above. Do these points say something; of course yes. Another six month is right time make a buy decision in real estate. Why I am saying so; look at the following points:

1)      A major political party backed out of forming the government in national capital, because it was four members short of majority.

2)      125 year old political party routed in recently help assembly elections of four states supporting the one year old party which was the major cause of its loss of power in election in national capital.

3)      Main opposition party changes the chief ministerial candidate of one state during almost last phase of planning of candidates.

4)      NOTA (None of the above) votes in all the states where assembly elections were held were between 1% to 18% in the different constituencies.

5)      In an assumed attempt to wriggle out the responsibility of forming the government, one political party threw the ball in voter’s court once again and asked for their response via Facebook comments and SMS and voters forced them to honor their mandate and form the government.

6)      Two top level politicians were jailed and striped off their respective parliamentary seats for frauds committed during their respective regimes.

7)      People’s anger and agitation, which followed a barbaric incident of crime against 23 year old girl forced government of bring out legislation for better safety and security of women. This agitation was not engineered or led by any political party or any group; this was sudden anger and movement by common person of India.

8)      A legislation to create a structure of anti-corruption ombudsman, which was pending since last forty-five years, was pushed to pass by political party which was delaying it two year back. A frail man on his early 80’s, supported by smartphone, Facebook and Twitter addicted generation forced government to pass this legislation in flat two and half year’s time.  

These are just few of the points of changing social and political scenario of the country. Experts used to show the fear of hung house after 2014 elections and its pitfalls to bring about positive changes in Indian economy, but as a man who acts mostly on guts, I see nothing wrong happening after 2014 elections and things will move towards only for better from here. And for the property buyers; rising market may not be as fruitful as they think which will come after 2014 elections.

 So, I think this is the right time to make a purchase decision of real estate. What is your opinion??? I am also eager to know your point of view….

Wishing you all happy new year 2014………..

Year End Housing Sector Review: 2103 and Outlook 2014

Yesterday we came out with the piece of news that prices of housing has fallen down by 1.7% in January-June 2013 period and what could be the reasons behind it. This time, we are trying to deep dive see few more things, which has impacted the housing sector which contributes more than 5% of total employment of the country. I am not talking here about real estate sector, whose contribution in employment may be even more.  

India’s GDP Growth in Q2, 2013-14: 4.8% (http://currentaffairs-businessnews.com/2013/11/29/indias-quarterly-gdp-growth-fy13-and-fy14-q1/)

Industrial Production Index in October: -1.8%(http://www.tradingeconomics.com/india/industrial-production)

Inflation at Consumer Price Index: 11.060% (http://www.global-rates.com/economic-indicators/inflation/consumer-prices/cpi/india.aspx

Does above figures sound alarm bell in your mind; probably yes. Unemployment rate has gone up, inflation at consumer price index has gown up, GDP, though has been better than first quarter of this financial year, but far less than what it was last year, industrial production has nose dived.

That’s why we saw decrease in prices of housing in January-June 2013. But with all these figures, one thing is also true that we are surviving and we are growing; in fact real estate sector growth rate in Q2 of 2013 was at 10%. 

If we have to make an assessment of the outlook of 2014, we will give following points to ponder:

1) Affordable housing will be flavor of 2014. According to a report published in http://www.moneycontrol.com, as of date, shortage of housing units stands at 19 million and 95% out of that are in Economically Weaker Section and Low Income Group. In India, housing for EWS is defined by the Technical Group on Estimation of Housing Shortage as having a carpet area of 21-27 square meters; LIG housing includes units of 28-60 square meter carpet area. By the government’s definition, EWS housing falls in the range of INR 4-10 lakh. This means that development of affordable housing will have to penetrate into the deeper suburbs of our cities, where such price points are feasible. ( http://www.moneycontrol.com/news/real-estate/real-estate-year-end-reviewthe-outlook-for-2014_1011238.html?utm_source=ref_article)

2) Due to impending parliamentary elections in April 2014, any commercial property decision will wait till the new government is formed.

3) According to reports, Delhi-NCR, Mumbai and other Tier-I market except Bengaluru is having very high inventory level. In fact, Delhi-NCR and Mumbai is having inventory level as high as of 41 months (http://www.firstpost.com/business/dlf-prestige-are-a-buy-even-with-inventories-at-6-year-high-1172721.html). This will have a serious impact on the prices, because with slowing economy, growing inflation and impending election, major capital expenditure will definitely wait. If will remain a question whether real estate developers in these two tier-I market are having so much cash to afford the high prices.    

We will see how this market responds to the challenges posed by micro and macro economic factors. 

Housing Prices Fall in April-June 2013 Due to Poor Demand

Economic slowdown and slow movement on policy decision front in India saw 1.7% fall in housing prices during April-June 2013; as reported by Sahara Samay. Though housing prices fell by 0.1% in the January-June 2013 period, but it was by 5.9% for a 12 month period ending June; according to Knight Frank House Price Index, which tracks the mainstream residential prices in 53 countries. (http://www.saharasamay.com/lifestyle/real-estate/676544690/india-housing-prices-fall-1-7-pc-april-june-poor-demand.html)

Though fall in the prices may be attributed to different factors prevailing in the economy, but important out of them are as follows:

1) Increase in unemployment rate in India; 2% in rural areas and 3% in urban areas (http://articles.timesofindia.indiatimes.com/2013-06-23/india/40146190_1_urban-india-urban-women-rural-women

2) Lower GDP growth rate

3) Major economic policy decisions pending for decision making

4) Less disposable income in the hands of buyers due to high inflation rate ( Retail Price Index has remained in 10% range for a long time)

But out of all these points, one points is very crucial that housing prices has remained firm has seen an increase of 5.9% for 12 month period ending this June. It means that cost and demand-supply ratio is not supporting the expectation of any dramatic price fall.  


Real Estate Investment in changed Political Scenario of India

Winters this year has really become hot because of changed Political scenario in India. With BJP coming to power in 3 out of 4 state’s recently concluded assembly polls, suddenly things have started becoming more clear. The shroud of uncertainty over your Real Estate Investment decisions can finally see the light of day.

Indians have reposed the confidence of Investors that they are still biggest democratic nation and any misdemeanor by any Political Party in future will be meted out with befitting reply by its citizen. Visibility of your Investment and its future growth can only be attained in a politically stable state where the policies of the incumbent government are growth oriented.  With higher probability of BJP sweeping to power in coming National Elections, one can take calculated risks by investing their money in Real Estate at this time when the markets are really soft.

You can see hordes of FIIs, DIIs, FDIs and other institutional as well as retail smart money flowing back to India. They would be chasing the asset class which has historically given best returns and Real Estate is one among them. I am of the view that people sitting on pile of liquidity should start thinking in a positive frame of mind and buy some very lucrative deals which are right now available in the market. If things turn in a positive way, your Investments can garner you unthinkable returns in next two and half years time frame. Coincidently the current market has become Buyer’s market and this will not remain forever. So act fast and strike when the opportunity is hot.

Happy Buying !!!

Nitin Kumar

Ethical Consulting Pvt. Ltd.

Elan Mercado: Our Featured Project

Elan Mercado is one shopping cum retail space coming up at NH-8, Gurgaon. Ethical Consulting Pvt. Ltd.(www.ethicalwealth.in/www.facebook.com/EthicalConsulting) is strongly recommending this project to its clients.

Listen the management team of Ethical Consulting Pvt. Ltd. elaborating finer points of this project…You can contact us at nitin@ethicalwealth.in, atul@ethicalwealth.in

5 Questions for Your Real Estate Wealth Managers

This blog first appeared on http://www.digi-age.in and has been written by Mukul Bhartiya. He can be reached at http://www.facebook.com/mukul.bhartiya,


I have always believed that ‘over the counter’ treatment is temporary and one should not often resort to; an expert is an expert and his/her opinion matters, because he/she spends better part of his/her life digging the multi-layered information and mulling, about any particular topic more than others. Here, for the purpose of making it easier for me to write, I will use masculine gender to address the experts. So, when there is any serious decision has to be taken in life, it is better to consult an expert; be it for physical health or financial health. Real estate, one of the most crucial financial decisions of life, is often taken out of emotion or with the help of some quack, who either makes your money stagnate, de-grow or lose value. Before making a buying decision one must consult an expert dealing in real estate. But before doing so, you should look at following points:

1)      Educational Qualification: People may argue that what educational qualification has to do with business acumen, and they are right to certain extent as well. But, there is difference between business tactics and business strategy. Tactics is short term event and strategy is long term phenomena and only education can teach you to think long term. Buying decision is just an event, but investment is a strategy and when your savings of many years is at stake, then it should be strategical decision only. So, always ask for educational credential of your Wealth Managers in the field of real estate.

2)      Projects Handled: When you are investing in real estate in ‘soft launch’ or ‘pre launch’ stage then ask your real estate Wealth Managers about the projects they have handled. Their project selection will give you the insight about their investment preferences and security of client’s investment. It will help you to understand that whether your wealth managers are looking for ‘risk and return’ or ‘safety and return’ and you can make your decision accordingly.

3)      Customer Service: For most of the Indians, buying a house means parting ways with better part of their lifelong earning; so it is sure to give jitters of lifetime as well. So, talk to your wealth managers and pose some of the most complicated but reasonable question to them. If they are patient with you, answer all your questions and accept your rejection with smile, then they are the right person to go back to.

4)      7 Year Itch: Your relationship with your Wealth Manager is also very crucial, but here I am talking about something else. I suggest you should look at the number of years they have spent in this particular field. There are various psychological, mathematical and business explanation of this ‘7 year’ period, and you can choose any explanation according to your own understanding, but this period is somewhat sufficient period to understand anybody’s loyalty to any particular person, business or anything. This time period exposes your Wealth Manager to see and bear the ‘up’ and ‘down’ of the market and anybody who has seen both the phase but is still going strong, then he is the right person to be chosen to be trusted with your money.

5)      Grievance Redressal Mechanism: When two people meet, they are bound to have some difference of opinion in the beginning, which later gets sorted out, as they progresses in their relationship. But what will happen when this difference comes up again after conclusion of the deal; is your Wealth Manager going to stay with you despite differences to see you through the problem or he just wriggles out of it and leaves you in lurch? Ask for the grievance Redressal mechanism of your Wealth Manager, which should contain his legal status, jurisdiction etc. If everything goes wrong, you must have a clear cut roadmap to seek legal help.