Is Overpopulation Behind India's Housing Crisis?

Much of India's woes are attributed to its rising population. Urban India faces a shortage of 18.8 million homes. According to official statistics, 249 million Indians are homeless, i.e. close to 20 per cent of the country's population.

The logic seems flawless to most people. The amount of land we have is limited but the country with over 125 crore people is growing at a faster pace. Over a century ago, only 10 per cent Indians were urban but now the figure has gone up threefold. So, it is very tempting to believe that the rise in population has played a major role in the country's housing shortage.

But this is not true. We can't deny the fact that land is a scarce resource but to assume that overpopulation is responsible for India's housing shortage is untrue. Why? The amount of land we have is enough to house 100 times as many people as there are in India right now, even at the existing floor area ratios (FAR is the ratio of the floor area constructed to the size of the plot), so long as we utilize the existing land properly.

On the contrary, China is vastly populated and its housing markets are by no means perfect. China has made many huge blunders in its urban policy. Housing prices in Chinese cities such as Shanghai and Shenzhen are growing, despite the attempts of governments to contain them. According to private surveys, housing prices rose in April more than in any of the previous months. Surprisingly, China does not face many of the problems that large Indian cities face. In small Chinese cities, plummeting property prices have alarmed the government because inequality is growing. But, this perhaps means that people have more of an incentive to live in large Chinese cities now. Housing prices in the largest cities are perhaps growing because people gain more by living in big cities.

In one aspect, Chinese cities are far ahead of Indian cities. Many Chinese cities have raised the amount of floor space consumed by its people. The country's urbanization rate has been growing since 1981, and the consumption of floor space has increased manifold. In Beijing and Shanghai, property is still nearly one-fifth as expensive as in Delhi or Mumbai, relative to income levels.

For example, compare Mumbai to Shanghai. In Mumbai, as of 2009, the living space per person was 4.5 sq mt. Even though people believe that living spaces have become more congested in Mumbai over years, this is not correct. From 1999 to 2009, floor space consumption has risen modestly, even in Mumbai. But, in other major cities, the growth in floor space consumption was higher. Many believe congested living spaces in Mumbai are inevitable because its population grew from 2.96 million in 1951 to over 12 million today. But, there is no reason why living space per person should decline when population rises. In Chinese cities like Shenzhen and Shanghai, real estate developers were allowed to build more floors in apartment buildings. In Shanghai, the most populated Chinese city, in 1984, the floor area per person was merely 3.6 sq mt. But, in 2010, it had risen to 34 sq mt per person. In the same period, Shanghai's population grew from over 12 million to 23 million. This is because the large Chinese cities made raising floor space consumption a priority.

In India, the effect of urbanization on housing was different. The urban population in India was 160 million in 1981, but it is now over 377 million. Even though this is seen as a major cause of housing shortage, such rise in urban population happened across the world. In fact, urbanization rate in India grew only from 25 per cent of the population in 1981 to 32 per cent of the population now, while in the rest of the world the growth was greater. So, why has it led to housing shortage in India and lower consumption of space when it this hasn't happened in more populated and more urbanized countries like China? We should blame the policy, and not the population.