Affordable Housing in Chennai and Some Notes on Post-Pandemic Prospects


This note outlines the dynamics and determinants of affordable housing in the Chennai Metropolitan Area, drawing on data from a five-year period (2013-2018). It estimates Chennai's housing shortage and affordability line, outlines the role of state and private players in supplying affordable housing, and discusses builders' responses to state incentives aimed at increasing their supply of such housing. It ends with some comments on the post-pandemic market for affordable housing.
By and  |  July 8, 2020

In the pre-covid-19 situation, the affordable housing market in Chennai, according to industry reports, was booming: 49% of the launches in 2018 were in the “Rs 40 lakh and below” category. Private builders echoed this view while emphasising that a major reason for this was saturation in the premium and high-end segments.

However, these prospects appear to be shifting radically due to the pandemic. Developers are now unsure whether the Rs 30-45 lakh housing segment will pick up soon. In the post-covid-19 situation, potential buyers in this segment are likely to be the most affected by the economic downturn, salary cuts, and job uncertainties. This segment has also become more vulnerable in terms of accessing credit.

It is critical to recognise that the private housing market is highly fragmented. The majority of developers supplying housing units at the lower price segment operate in the peri-urban areas. They are highly localised players with limited capital and can undertake only small-scale projects. While access to capital and labour are likely to be challenging in the coming months for all builders, small scale developers will face more severe impacts.

The current uncertainties have placed much higher expectations on government agencies such as TNHB and TNCSB to supply affordable housing. The pandemic has also brought home the pressing need to revisit the designs of public housing. Layout design and individual unit plans have thus far focused on achieving the maximum number of units per site. The current crisis has highlighted the need to focus on aspects of well-being and health. Designs that endow housing areas with good public spaces and amenities that can double up as emergency community shelters would have to be encouraged.

Housing policies in the post-pandemic period may need to turn away from large housing projects and pay closer attention to the small-scale affordable housing sector and its needs as this segment may be where investments and construction activity may be concentrated. For this, the question of urban land, affordability, and effective measures to control speculation, are critical.

This brief draws on the report of a study titled ‘Dynamics and Determinants of Affordable Housing in Chennai’ carried out in 2018-2019 by Karen Coelho and A. Srivathsan, for the Tamil Nadu State Planning Commission. Read the full brief here.

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