Affordable Housing Offers US$ 0.62 Trillion Investment Opportunities: Knight Frank

Knight Frank, India's leading real estate consultancy, in its latest report "Brick by Brick - Long term capital to fund affordable housing for all" - observes that India's affordable housing offers US$ 0.62 trillion of funding opportunities for private funds in the backdrop of the government's push for this segment.

The affordable housing sector in India has witnessed private equity (PE) investments to the tune of US$ 2,597 mn since 2011, Knight Frank has said. The investment in affordable housing has been 17% of the total PE investment in the residential segment in India in the last 10 years (since 2011), mentioned the report. However, it is yet to become a major theme for the funds in the country with a very few private equity funds dedicated to funding affordable homes.

India constitutes 11% of the world's housing need gap, translating to 35 mn homes

The Ministry of Housing and Urban Affairs demand based assessment, which is based on an assessment of the number of houses which the households will choose to occupy given their preferences and ability to pay (at given prices), has pegged the affordable housing demand at approximately 11.22 million houses. Urban India comprises 35% of the country's population and is witnessing unprecedented rates of migration leading to rapid urbanisation resulting in demand preceding the supply.

"57% (4.5 bn) of the world's total population lives in urban areas and almost a third of this population (1.3 bn) lives in substandard housing. This has translated to a housing need-gap of 325 mn homes globally, of which India contributes to 11%. It's estimated that by the year 2030 more than 40% of the Indian population will live in urban India as against the current figure of 35%, which will create additional demand for affordable units with huge investment opportunities for private equity players," Knight Frank has said in a release.

Nearly US$1, 662mn worth of funds are invested with a focus on development of affordable homes in India in last 3 years

To address this housing crisis, various funds and institutes have stepped into affordable housing segment. These funds have focused their entire investments into development of affordable housing, while providing liquidity/credit to credible developers, while using asset management to hedge risks. The largest of these funds operational in India is the HDFC Capital Advisors (HCARE fund) which has raised USD 1.1 billion which is primarily used for long term financing of affordable housing projects across 20 cities India. The fund is committed to finance 1,71,000 homes in India and develop 180 mn sq.ft.

Gulam Zia, Senior Executive Director - Research, Advisory, Infrastructure and Valuation, Knight Frank India said, "The PE investments into affordable homes has increased since the introduction of reforms in the sector. The presence of a few large funds dedicated to financing the affordable housing projects signifies the potential of the segment. However, a significant portion of this investment into affordable housing segments is in projects for the mid-income segment and very little has been invested in constructing of the EWS and LIG segments, where the actual housing shortfall is."