What Constitutes Affordable Housing?

If we made a list of the most-used words in India's real estate lingo at present, the term affordable will certainly top the list. And why not. The government is going all guns blazing to achieve its Housing for all 2022 target. While doing so, affordable housing remains the focus area. Subsequent reports by PropTiger DataLabs show the affordable housing segment has remained the biggest contributor to home sales in the past five years. However, despite all the noise around the term, not many of us are aware what the term actually stands for. According to a universally accepted definition, affordable units are those which could be afforded by a country's population that earns less than that country's average household income. In other words, houses that the low-income households and economically weaker sections (EWS) can afford are termed affordable housing. However, this definition changes according to the context.

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In that case, what does affordable housing mean when we speak of India's real estate?

The Ministry of Housing and Urban Poverty Alleviation defines affordable housing on the basis of size, price, affordable and income.

For the EWS, for instance, an affordable house would mean a unit measuring between 300 and 500 sqft, prices below Rs 5 lakh for which a household has to pay Rs 4,000-5,000 in EMI (equated monthly installment) . The income ratios, in this case, should be of 2:3.

For low-income groups or LIG, an affordable house would mean a unit measuring between 500 and 600 sq ft, priced between Rs 7 lakh and Rs 12 lakh for which a household has to pay Rs 5,000-10,000 in EMI. The income ratios, in this case, should be of 3:4.

For mid-income groups, an affordable house would mean a unit measuring between 600 and 1,200 sq ft, priced between Rs 12 lakh and Rs 50 lakh for which a household has to pay Rs 10,000-30,000 in EMI. The income ratios, in this case, should be of 4:5.

On the other hand, according to the Reserve Bank of India (RBI) , the cost of affordable residential property should be less than Rs 65 lakh in metro cities and Rs 50 lakh in non-metros. Prior to 2014, the limit was up to Rs 25 lakh for metros and Rs 15 lakh for non-metros. The central bank's definition is based on the loans given by banks to people for building a house and buying flats.

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