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Only 11% of private capital in the residential sector goes to affordable housing, study finds

The Indian affordable housing segment has attracted just 11% of total private equity (PE) investment in the residential sector since 2011, according to a report by Knight Frank India. These investments, according to the real estate consultant, total around $ 2.6 billion, further noting that affordable housing has “not yet become a major theme for funds in the country.”

The report noted that the gap in affordable housing finance comes at a time when India accounts for 11 percent of global affordable housing need. This demand translates into a figure of 35 million homes, which only amplifies the fact that few private equity funds are dedicated to investing in affordable housing.

What is more worrying for the Indian affordable housing segment is the fact that PE investments in low cost residential projects have been declining since 2018. The decline is manifested both in terms of the number of investments. absolute and the share of these PT investments in affordable housing. occupies in relation to all investments in residential real estate.

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In 2018, $ 831 million was invested in affordable housing in India via the PE route, accounting for 40% of the total residential sector investment, which stood at $ 2.1 billion. In 2019, that share fell sharply to just 25% – just $ 343 million was spent on the sector of the $ 1.37 billion spent on the residential sector. In 2020, just $ 86 million out of $ 717 million was spent on affordable housing in India, which is an abysmal 12%.

Through initiatives such as PM Awas Yojana (PMAY), there is a potential PE investment totaling $ 620 billion in affordable Indian housing, according to Knight Frank India. Additionally, the government’s focus on affordable housing – a target of building 11.22 million homes under PMAY has been set – has also given the sector a much needed boost.

In fact, the first three months of 2021 have already seen an improvement in PE investments in affordable housing. Of the $ 368 million invested in Indian housing, $ 107 million (29%) has been earmarked for the affordable segment.

“Private equity in affordable housing has increased since the introduction of reforms in the sector, and the presence of a few large funds that finance such projects signifies the potential of the segment,” said Gulam Zia, senior executive director (Research ), Knight Frank India, “However, a significant part of this investment in affordable housing segments is in projects for the middle income segment and very little has been invested in the construction of the EWS and LIG segments, where the real lack of housing. “

Some of the notable private investors in Indian affordable housing are HDFC Capital Advisors, Actis and the CDC Group.

(Edited by : Jomy Jos Pullokaran)


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