India’s Urban Housing Shortage

The Wall Street Journal’s India RealTime reported on the statistical decrease of India’s housing shortage after a new report from the GOI was released.

Excerpts from the WSJ:

According to the report, which provides fairly broad estimates, Indian cities are short 18.8 million homes. That’s an improvement over 2007, when a report prepared by the same group put the national urban housing shortage at 24.7 million.

“It should really have gone down much faster,” said Amitabh Kundu, dean of the School of Social Sciences at Delhi’s Jawaharlal Nehru University, in an interview with India Real Time Monday. “Housing growth has been phenomenal.”

The problem is that although Indian cities witness a great deal of residential construction, much of this building creates homes that are affordable only for upper-middle-class or wealthy families.

A shortage of nearly 19 million homes means there isn’t adequate housing for about a quarter of the households that live in urban India. The report puts the number of these households at 81 million as of March 2012.

In some cases this means families are homeless; in most cases it means families are living in shabby, makeshift or ancient dwellings.

The report throws up some puzzles as well, as many Indian statistical reports often do.

Although Indian real estate industry watchers back Mr. Kundu’s assertion that there is a huge gap between the demand and supply of cheap housing, and that very few developers build units under 500 square feet, the report suggests that the need for cheap housing in Indian cities has shrunk more than for housing that is more expensive.

The 2007 report prepared by Mr. Kundu’s group showed that households living on 5,000 rupees (about $90) or less a month accounted for most of the shortage – about 21.7 million homes.

This time around, this category is only short 10.6 million homes, which is odd, since it hardly seems likely that this amount of housing has been constructed for the poorest households in the last five years.

But the shortage experienced by people who live on 5,000 rupees to 10,000 rupees a month has gone up, from 2.9 million homes to 7.4 million homes.

Mr. Kundu says he believe part of the decline in the housing shortage comes from the fact that migration to cities is changing, and that more skilled and better-off migrants are coming to the cities. Conversely, the difficulty for the poorest families to find housing may be a deterrent to these migrants.

“Cities have become exclusionary,” said Mr. Kundu. “Labor market demands are different.”

It’s also worth noting that while the overall urban housing shortage seems to have shrunk by nearly six million compared to five years ago, that’s deceptive because the methodology of calculating the scarcity has changed.

If you want to know more, the full report can be accessed here.

WSJ 25SEP12

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