housing

Urban housing demand estimated to grow at a faster pace as compared to rural demand

Published Date: 04-09-2013

Over the next 5 years, overall potential demand for housing (measured against the total number of households) is expected to increase in line with the trend in the past. CRISIL Research projects higher growth in demand for housing in urban areas as compared to rural areas. The number of households is likely to increase on account of the growing number of nuclear families, continuing urbanisation and migration from rural areas. With the increase in nuclear families, the average household size in urban areas is also expected to decline in the future.

Key issues answered through this analysis:

How is the potential demand expected to grow over the next 5 years?

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IntroductionThepotential demandin the housing industry is measuredagainstthe total number of households in urban and rural areas. (A household isa group of persons who normally live together andconsume food from a common kitchen.) This demand also takes intoaccountthe households whichdo not need a house. Thus, itis differentfromactualdemand.Actual demandis thenumber of householdswhich actually require a house and are in search of one. However,the estimation of actual demand cannot be done at an overall rural and urban level. Actual demanddepends on the need for a house.If this need exists,the actual demand will dependonincome andaffordability.So, potential demandhas been used as an indicator of the growth indemand for housing.Urban demand growth to outpace rural growthCRISIL Research estimates that from 2013 to 2017, the number of households will grow at a CAGR of2.3 per centsimilar to theCAGR growth seenbetween 2001 and 2012. Urban households are estimated togrow at a higher rate of3.3 per cent (CAGR) during2013 to 2017as compared to1.8 per centfor rural households.Urban households (million units)P: ProjectedSource: CRISIL Research

The housing industry hasshown strong growth inthe past few years with growing population, urbanisation, rising incomes and the increasing trend of nuclear families. Between 2006 and 2008,thedemand in major urban areas accelerated due to employment opportunities created by the information technology (IT) / information technology enabled services (ITeS) industry.The economic downturn of 2008 led to a sharp fall in demand, resulting in developers holding huge inventories. However,a sizeable pent-up demand for affordable housingstill remained. Thisled to a substantial shortage in the middle and low income categories.Whiledemand has improved from levels seen in 2008, housing demand growth still remains sluggish. We expect demand to remain subdued for the next two years,owing to highinterest rates and a slowdown in the economy. However, thereafter, we expect housingdemand to pick up and the industry to consolidate its position. Inthe urban areas, bulk of the incremental demand is expected to come from the lower income group (LIG), middle income group (MIG) and economically weaker sections (EWS) for affordable housing. The government has launched various programmes to cater to the housing needs of these sections. Private real estate developers are alsolaunching affordable residential projects in tier-II and tier-III cities as land is available at affordable prices in these cities.Rural households (million units) P: ProjectedSource: CRISIL ResearchMethodology for estimating demandThe overall demand for rural and urban houses is estimatedagainstthe total number of householdsin rural and urban areas.The number of households for the pasthas been taken fromdata provided in the Census of India. For future years,thenumber of households has been estimatedwith: population projection for the next 5 years based on data in the Census of India an estimate of the average household size over the next 5 years, where the declining trend seen in the past has been maintained for the future years

Urban housing stock expected to grow faster than rural stock

Published Date: 15-Jul-2013

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CRISIL Research expects the share of rural housing stock to decrease in the overall housing stock over the next 5 years (2013-17). Our estimates indicate that urban housing stock will grow at a higher average annual rate as compared to rural housing stock due to increasing urbanisation and higher demand on account of rising income levels and migration.


What is the trend in rural and urban housing stock in India?

What is the expected annual housing stock addition in rural and urban areas over the medium term?

What is the trend in the proportion of pucca, semi-pucca and katcha houses in the overall housing stock?



Housing stock estimated to growin line with past yearsAs per CRISIL Research, housing stock is estimated to grow at2.5 per cent(CAGR) over thenext5 years (2013-2017)with a higher growth expected in the urban segment as compared to the ruralsegment.This growth in housing stock is similar tothe estimated average annual growthfrom 2002 to 2012. The share of rural housing stock, as a percentage of total housing stock, is estimated to fall to about 66 per cent by 2017as compared to about68 per cent in2012 on account of increasing migration from rural to urban areasbecause ofbetter job opportunities in cities andrising urbanisation.Proportionof housing stock over the yearsSource: CRISIL ResearchHousing stock is every structure considered as a house irrespective of its use.It might be used for residential or non-residential purposes or both or might even be vacant. It takes into account pucca, semi-pucca and katcha houses.Faster growth expected in urban housing stockUrban stockBetterjob prospects andeconomic conditions have increased the demand for housing in urban areas.Urban housingstock has been growing at a steady pace on account of the increasing demand. However,since 2009-10, demand forhousinghasbeenweakbecause of the impact of the economic slowdown.We expect demandfor housing in major urban areas to remain subdued in the coming two years and to pick up thereafter.Thus,over the next5 years, CRISIL Research expects urban housing stockto grow, on an average, by3.6 per cent CAGR. This is slightly lower than the CAGR of 4.1 per cent recorded during 2002-12.Urban housing stockP: ProjectedSource: CRISIL Research Rural stockFrom 2002 to 2012, rural housing stock has grown at a slower pace than urban housing stock. But,in absolute terms, the rural stock additions have been higher than urban stock additions.Rural housing stock grew at 2 per cent (CAGR) during the period. CRISIL Research projectsrural housing stock to show a similar growth of1.9 per cent (CAGR)overthe next5 years.Rural housing stockP: ProjectedSource: CRISIL Research Proportion of pucca houses to increase in both, rural and urbanareasUrban housing stock is predominantly pucca in nature with semi-pucca and katcha houses making up a marginal percentage of the total. The proportion of pucca housesis likelyto increase in both, rural and urban areas. The shiftto pucca houseswill be throughboth - the construction ofnew puccahouses and conversion of semi-pucca and katcha housesto pucca houses.Urban housing stockSource: CRISIL Research Rural housing stockSource: CRISIL ResearchPucca houses: A pucca structureis one whose walls and roofs are made of pucca materials such as cement, concrete, oven-burnt bricks, hollow cement/ash bricks, stone, stone blocks, jack boards (cement plastered reeds), iron, zinc or other metal sheets, timber, tiles,slate, corrugated iron, asbestos cement sheet, veneer, plywood, artificial wood of synthetic material and poly vinyl chloride (PVC) material.Katchahouses: A structure which has walls and roofs made of non-pucca materialsis regardedas a katcha structure. Non-pucca materials include unburnt bricks, bamboo, mud, grass, leaves, reeds, thatch, etc. Katcha structures could be of the following two types: Unserviceable katcha structure includes all structures with thatched walls and thatched roofs (made of grass, leaves, reeds, etc) Serviceable katcha structure, including all katcha structures other than unserviceable katcha structures.Semi-pucca houses: A structure whichcannot be classified as a pucca or a katcha structure as per the above definitionsis a semi-pucca structure. Such a structureeither hasa pucca wall orroof, but not both made of pucca materials.Methodology to calculate housing stockHousing stock data is taken from the Census of India, which is carried out at an interval of 10 years. In this analysis, we have taken thelatest data from Census 2011, for which provisional tables have been published.CRISIL Research has estimated the future growth in housing stock based on the following parameters: Overall GDP growth: The construction of houses depends on economic growth andconsequent rise in demandforhouses. Thus, GDP growth in the past and aGDP growthestimate for the future have been usedto estimate the growth in housing stock in the future. GDP of dwellings growth: The growth in GDP ofdwellings has been considered as an indication of the contribution of the housing sector to the economy. This data was available till 2003-04 from the Planning Commission and has been extrapolated for future years. Housing stock growth in the past: The growth in housing stock in the past has been looked at in relation with the overall GDP growth and the growth in the GDP of dwellings.

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Policies formulated by Central and State level ministries to promote housing in India

Published Date: 15-Oct-2013


The Central and state governments play an active role in development of the housing industry. The extent of control the Central government has on states depends on the level authorised by the state legislature. Following section provides a snapshot of functions of housing development authorities at central and state level.


Which are the different central and state level authorities regulating the housing industry?

What is the role of the central and state governments in shaping the housing industry in India?



Institutional framework of Housing Industry

Source:CRISIL ResearchHousing for All -is one of the broad objectives specified by the government for development of the country.The governmenthas launched various schemes likeTwo Million Programme, Valmiki Ambedkar Awas Yojana(VAMBAY), Rajiv Awas Yojana (RAY), Indira Awas Yojana (IAY) tofacilitate construction of houses, particularlywith emphasis on Economically Weaker Section (EWS), Low Income Groups (LIG) and other vulnerable groups.Sincelandis astate subject, implementation of many such policies and programmes isundertaken by State Governments. They play the primary role in formulating action plans and programmes suited to local needs and conditions duly involving local bodies and citizen groups. The extent of controlof central government over planningatstate level, depends uponthe extent authorized by the State Legislature.Role of central governmentThe central government plays the role of a regulator and facilitator by planning & devising national policies and reforming existing policies. These policies build the framework and set the objectives for state governments. Central governmentfunds some development schemesfor states andalso allocates resources to the state governments.The two apex bodies responsible for thesefunctions atan urban level are:Ministry of Urban Development (MoUD)and Ministry of Housing and Urban Poverty Alleviation (MHUPA).Mattersrelated to rural housing are under the purview of the Department of Rural Development.Ministry of Urban Development (MoUD)It is the apex authority of Government of India at the national level to formulate policies, sponsor, support and monitorprogrammesfor urban development.It also coordinates the activities of various Central Ministries, State Governments and other nodal authoritiesconcerning issues of urban development in the country.Organizationsassociated withMoUD and their functions:Source: CRISILResearchMinistry of Housing and Urban Poverty Alleviation (MHUPA)The ministry formulates national policies and various schemes and programmes focused on urban employment, housing and poverty alleviation.It is also responsible for implementation & review of the plannedschemes and collection& dissemination ofdata on housing. Itis the nodal ministry to monitor: Economically weaker section (EWS) housing Low income group (LIG) housing Environment improvement of urban slums (EIUS) Housing settlementsOrganizationsunder MHUPA and their functions:Source: CRISILResearchMinistry of Rural Development (MoRD)MoRD is divided into two divisions: Department of Rural Development and Department of Land Resources. Department of Land Resources doesn't have any direct policy implicationon housing. Department of Rural Development:It isthe apex body for implementing the programmes aimed at poverty alleviation, employment generation, infrastructure development and social security. It launched a programme calledIndira Awaas Yojana(Rural Housing) to facilitate better rural housing for poor by providing themgrant for constructing the houses. Department of Land Resources: The main objective of this department is managing land reforns, land tenures, land records, consolidation of holding and other related matters. The two major programmes under its purview are- National Land Record Modernization Programme and Integrated Watershed Management ProgrammeMajor government housing finance bodiesThere are two key housing finance bodiesset up by the Central Government at the national level. These bodies financeprojects undertaken by both public entitiesand public private partnership projects.Theyprovide loans for land acquisition, land development, slum redevelopment, group housing andtownship development.Government-promoted Housing Finance InstitutionsSource: CRISILResearchRole of state governmentsAll state governments formulate legislation, as per recommendations of the central government policies, to monitor development of housing in the respective states.They undertakehousing development through state-level development authorities, state-level housing boards, city-level development authorities and other agencies. These city-level authorities and agencies follow and implement the policies so formed to promote development ofhousing and industrial estates. These agenciesarealso involved inbuildinginfrastructure services including roads, water supply, sanitation systems, public transport, power supply, health, educational and recreational facilities.State and city level authoritiesAt the state level, organizations likeState Urban Development Authority (SUDA)develop, promote and regulate housing in the respective state.Each state authoritybroadlyperforms the followingfunctions relevant to housing sector: Preparation of development plans for the state Creating and enhancing social and physical infrastructure withinstate Implementationand monitoring ofcentrally sponsoredplans Providingevery necessarysupportto local bodies for developmentAt the city level, there are municipal corporations and development agencies. Municipal corporations are formed for cities having a population of more than 20,000. The major functions which are performed by these agencies include: Allocationof landfordeveloping housesand Industrial areas Drafting of master plans for development of the cityand implementation Developing andenhancing city infrastructure Housingfor Lower Income Group (LIG) and Economically Weaker Section (EWS) Slum rehabilitation and improvement Repairs and construction of dilapidated buildings Redressal of housing grievances in a time bound manner

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Definitions of certain key terms used in the housing sector

Published Date: 09-Oct-2013


Certain key terms are used frequently in the housing industry. Each of these key terms has been defined by some concerned government agencies. In the following section, we have listed these terms and offered a brief explanation.


Define the common terms used in the housing industry.



Major definitionsOnce in every decade,the Ministry of Home Affairs conducts the Census andcollects datarelated to population, housing and households in India.Similardata is collectedby theMinistry of Housing and Poverty Alleviation(MHUPA), Ministry of UrbanDevelopment(MoUD)andMinistry of Statistics and Programme Implementation (MOSPI) to assess housing conditionsand amenities.A definitionof and brief explanation to some of the key terms used in the housing sectorhave beengiven below.Urban areaAn area is classified as 'urban', if it meets the following criteria:1. All places with a municipality, corporation, cantonment board or notified town area committee, etc.2. A place satisfying all the following three criteria: Minimum population of 5,000 At least 75 per cent of male working population engaged in non-agricultural pursuits Population densityof at least 400 per square kilometerRural areaAll areas other than urban areas are considered asrural areas.HouseholdA 'household' is a group of related or unrelated persons who are livingtogether for more than six monthsandhave their meals from a common kitchen.People living together but havingmeals from separate kitchens are considered as separate households.If a personeats with his/her family but sleeps elsewhere due to shortage of space,he/she and his/her familyare believed to constitute a single household.Institutional householdsA group of unrelated personsthat lives in an institution and takesmeals from a common kitchen is called an institutional household. Examples of institutional households are boarding houses, messes, hostels, hotels, rescue homes, jails, ashrams, orphanages, etc.When unrelated people stay together in a house, not necessarily having meals from a common kitchen, each person is considered as a separate household. For e.g. each person livinginhostel, mess, hotel, boarding and lodging house, residential institutions for disabled, etc. constitute a single memberhousehold if they are not related and don't havemeals from a common kitchen.Housing stockHousing stock refers to the total number of housingunitsavailableoroccupied. Everyhouse structure, such asbungalow, plotted development, building, tent or shelteretc,is considered to bepart of housing stockirrespective of its use. It might be used for residential or residential-cum-commercialpurpose. Structures used for non-residential purposes don't form a part ofhousing stock.However, ahouseholdis different fromhousing stock.Housing stockisthe sum of all the housing units in an area/country. But ahousing unit can occupy more than one household (family or group of related/unrelated people),such thateach household takes its meals from separate kitchens.Monthly per capita consumer expenditure (MPCE)It refers to the average monthlyconsumer expenditure per person in a household.Consumer expenditure includes a household'sspendingon food, fuel and light, education, clothing, rent, non-institutional medical bills, durable goods,and miscellaneous goods& services. It excludes ad hoc expenditures likepurchase of new house, institutional medical bills etc.MPCE = (Monthly consumer expenditure in a particular household) / (Number of persons in that household)Pucca houseA structure whose walls and roofare made of pucca material such as cement, concrete, oven burnt bricks, hollow cement/ash bricks, stone, stone blocks, metals, asbestos cement, wood, plywood etc.Kutcha houseAstructurewhose walls and roof are made of non-pucca materials like unburnt bricks, bamboo, mud, grass, leaves, reeds, thatch, etc.Kutcha houses could be of the following two types:(a) Unserviceable kutcha house: All structures with thatch walls and thatch roof, i.e., walls made of grass, leaves, reeds, etc. and roof of a similar material; and(b) Serviceable kutcha house:All kutcha structures other than unserviceable kutchastructures.Semi pucca houseA structure whichcould notbe classified as a pucca or a kutcha structure as per definition is semi-pucca. Such a structure either hada wall orroof(but not both) made of pucca material.Dwelling unitItrefers toaccommodation availed of by a household for residential or residential-cum-commercial purpose in pucca, semi-pucca and katcha structures. In general, a dwelling unit consistsof a living room, kitchen, store, bath, latrine, garage, open and closed veranda etc. It might be an entire structure or a part thereof.If a single family occupies more than one house(i.e. detached structures for sitting, sleeping, cooking, bathing, etc), itaccounts for only one dwelling unit.On the contrary,more than one household occupying a single structure would account for as many dwelling units as number of households.Condition of structureItrefers to the physical condition of the house. In this context,the houses are classified as: Good:Structures not requiring any immediate repairs, major or minor, are regardedto bein `good` condition. Satisfactory (livable):Structures requiring immediate minor repairs but not major repairs, are regardedto bein `satisfactory` condition. Bad (dilapidated):Structures which need immediate major repairs, without whichtheymight be unsafe for habitation or required to be demolished and rebuilt,areregardedto bein `bad` condition.Repairs toa structureAny workwhich increases the usefulness of the structure by making provision for additional floor space and/ or amenities or extend the life of the structures,is referred to as repairs tothat structure. Major repairs: Any type of remodeling or renovation i.e. addition, alteration and improvement in the existing structure. Minor repairs: Routine maintenance and upkeep work to maintain the existing condition of structure.Obsolescence factorHouses which are notfit tobe occupied are known as obsolete.Such houses areassumed to require replacement and thus formapartof thepotential demand for houses. The obsolescence factor is calculated as the sum of the following: Percentage of households living in the dwelling unitsthat are40-80 years old and in bad condition. Percentage of households living in all structures aged 80+ years, irrespective of the condition of structure.Obsolescence factor is calculated as a percentage of the total number of households.Congestion factorHouseholds where each married couple does not have a separate room are considered as congested households. Such households are assumed to require a separate housing unit and thusform a part of the potential demand for houses - since each married couple is considered to require a separate room.Congestion factor helps to determine such demand. It is calculated asa percentage of households in which at leastone coupleis sharing the room with 10+ age member of the household.

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