Implications of the new national measures on housing in Mumbai
Despite the Ministry of Housing revising the categories of urban poor (EWS) and low income (LIG) groups with annual incomes up to Rs 100,000 (USD 1800) and Rs 200,000 (USD 3600) per year respectively, the new estimates will still leave out 60% of Mumbai’s population from accessing the national government affordable housing programs.
That is a hard measure to accept when the reality in Mumbai is that 2 in 3 people (or about 60%) live in substandard housing or lack security of tenure in current housing arrangements. What the policy measure doesn’t take into account the drastic economic differences between a city such as Mumbai where the policy has an exclusionary impact to a city such as Ludhiana, where over 60% of the population are included as they earn less than Rs 15,000 (USD 275) per month.
Mumbai's household monthly income by percentile; Indian Rupees /US Dollars
90th earns Rs 60,000/USD 1050
65th earn Rs 30,000/USD 525
35th earns Rs 15,000/USD 275 (current government benchmark)
20th earns Rs 10,000/USD 185
Source: Centre for Monitoring the Indian Economy (CMIE) 2011-12
mHS website to download the white paper
Let’s see what a household in the 65th percentile earning Rs 30,000 ( USD 525) can afford on housing. International standards advise that one should not be paying more than 30% of household income on housing expenses (for monthly mortgage installments and even less for renters). This equates to less than Rs 9000 (USD 165) per month for renters. For homebuyers the maximum price of a house that they could afford is Rs 7.6 lakhs (USD 14,000)(assumes the household is taking a loan with a tenure of 12 years, and interest of 12% per annum from a housing finance company with subsidy).
Clearly in a context of Mumbai, there is no housing supply at sub Rs 8 lakhs that I know of and I assume you would have to go further outside the city to access housing. For renters in this income bracket a household would have more options although it would probably easier for those looking for shared accommodation. For those in the bottom 20% with ability to give less than Rs 3000 (USD55) for rent, finding housing means moving to informal settlements in the heart of cities, and owning a home in not really an option. Many complex questions need to be discussed and answered. Is an absolute national measure fair? Where should we objectively set the bar on access to safe and quality housing. Which income groups should India’s affordable housing policy target in Mumbai to make it more inclusive? Which segments should the private sector target?
The second question on what incentives the governments’ affordable housing program should offer to different income groups in the underserved housing population is the topic of another debate!