India’s affordable housing offers $0.62 trillion of funding opportunities for private equity funds in the backdrop of the government’s push in this segment, real estate consultancy Knight Frank said in its report “Brick by Brick–Long term capital to fund affordable housing for all”.

As per Knight Frank, the affordable housing sector in India has witnessed private equity (PE) investments to the tune of $2,597 million till the March quarter since 2011.

“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). 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,” the real estate consultant noted.

The report was launched during the ongoing APREA- Asia Pacific Real Estate Leaders Congress 2021 currently being held (22-26 November) during the session – Affordable Housing – Long Term investment.

Urban India comprises 35% of the country’s population and is witnessing unprecedented rates of migration leading to rapid urbanization resulting in demand preceding the supply.

The report highlighted 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.

To address this housing crisis, various funds and institutes have stepped into affordable housing segment.

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.”

As per Knight Frank Research, currently, over 50% of all-India residential launches in the top eight cities in the last five years have been in the 5 million segment.

However, Knight Frank, despite the sheer gap in demand-supply, archaic building by laws, stringent licensing norms, delay in project approvals and unfavourable banking policies make affordable housing projects uneconomical for the private equity players and developers.

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