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Invisible, but not forgotten

Of the 10 million shortage in urban homes sought to be bridged by 2022, only around 800,000 'affordable' homes have since been built in urban centres.

Arvind Subramanian        Last Updated: February 22, 2019  | 22:45 IST
Invisible, but not forgotten

"Appa, what is a dakia?" (Father, who is a postman?). An innocent question from my youngest son about the protagonist of a Hindi story I was reading aloud to him left me deeply disconcerted. No doubt, the march of emails and courier services has delivered a telling blow to the once integral and omnipresent postal service. To the extent that in his six years my son had never encountered a postman. What worries me more deeply, however, is the postman, along with many other similar service professionals, is emblematic of the invisible Next Billion Consumer - collectively a significant underserved market, but individually hard to address. So much so that they are seldom in the cross-hairs of marketers and sales teams.

The Next Billion should as a matter of course have been a major beneficiary of the Housing for All program launched with much fanfare in 2015. The numbers though tell a sorry tale. Of the 10 million shortage in urban homes sought to be bridged by 2022, only around 800,000 'affordable' homes have since been built in urban centres. Home ownership remains one of the most deep-seated aspirations for Indian families. There are several studies that confirm the enormous multipliers - social, economic, health, education, etc - that owning a good-quality home unleashes. Demand is most certainly not the constraint. What then can we do to galvanise supply? Three new lenses could perhaps offer a way to view the Next Billion as an opportunity rather than an obligation.

'Affordable' is a much-abused term in residential real estate. Perhaps on par only with 'luxury'. And the irony is both terms are often used in the same breath! At the outset, it is important to delineate social housing from affordable housing. Social housing should be targeted at those that don't have the means, and for whom therefore some form of social spending or public intervention is needed. Affordable Housing on the other hand has an audience with the means but, for various reasons, lacking the access. For them, commercial solutions can bridge the access deficit.

Affordability is a layered term. At its surface, it is signalled by the per square foot rate or the ticket size of an apartment. Dig deeper and you find that most customers in fact take decisions on the monthly outgo and not the total value. Depending on the tenure, structure and price of the home loan the same monthly outgo can be made to span a wide band of apartment values. Given the unpredictable income patterns of many of the Next Billion Consumers, access to credit and the flexibility in payment terms are often far more important than the cost of that credit. These customers are sometimes willing and able to stretch their monthly instalments by a few hundred rupees if the product enables them to skip an instalment during a lean earning period. Unlike for premium housing, credit availability is a precursor to the home purchase decision, and not a second step. This requires developers and mortgage companies to come together in new and innovative partnerships to bring these customers into the home buying fold.

Affordability is designed, not discovered. Nobody wants a 'cheap' home. It is above all the pride of the family. They value both functionality and aesthetics and make conscious trade offs between the two in different elements of their home. I have found textured wall finishes in the more public living areas of many small apartments. The kitchen, on the other hand, often has appliances operated atop a stack of storage containers. Cubic feet are as important as square feet, with shelving and lofts making up for the inadequacy of floor space. Durability and low maintenance are essential attributes that make or mar the living experience.

Developers, and indeed businesses in other categories desirous of serving the Next Billion Consumers, would do well to review their offerings with these three lenses. Those that reorient will likely steal a march in what is perhaps the largest underserved market in our country today, and in doing so could upend the existing league tables in their industry.

(The author is the Chief Executive of Mahindra Happinest, Mahindra Group.)

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