Apply Now


Knowledge At MET

Knowledge At MET

Affordable Housing and Indian Realty Sector

The concept of affordable housing is now going to lead from the front. In fact this is a sunshine industry for the next ten years giving stabilisation to Indian economy. After a wait of several years, the government has finally awarded infrastructural status to this largely-neglected affordable housing sector, which is encouraging for developers. Infrastructure status will ensure easier access to institutional credit and help in reducing developers’ cost of borrowing for affordable projects. There will be technological investments in CRM technology but it also needs investments in human talent through a role of relationship marketing is the belief of this research team. And this goes beyond the needs of just CRM technology. Further the Union Budget 2017-18 was also announced with the theme of Transform, Energise and Clean India (TEC), but this can be a reality in the affordable housing segment only with planning for structured rural growth, and urbanisation is an important thought that the authors will like to convey to the readers which in turn point towards conducting engaging conversations across stakeholders which this relationship marketing role can easily implement.

In order to make this a reality, the sector needs few relationship marketing skills sets that will galvanise this domain by contributing to the seamless operations between developers, financial institutions, policy makers and the market. The common thread that runs through these stakeholders would be professionalism and a strong belief in the concept of affordable housing and nation building.


Relationship Marketing, Affordable housing, Urbanisation, Finance, home economics and reasons for home purchase.


“The Indian Realty Sector has seen the below major developments in the recent past.

  1. Government Initiatives in affordable housing: The mandate is housing for all by 2022 and creation of 100 smart cities in
  2. Infusion of Private equity: There are a lot of foreign investors who are showing interest in the Indian reality sector and additionally it is also observed that the private sector builders are looking at this sector with greater
  3. Emergence of the Real Estate (Regulation and Development) Act, 2016: This is focused on registration and But in the process the endeavour is to bring in transparency so that the market is benefitted.
  4. Emergence of REIT – Real estate Investment Trust: This too is an initiative to build transparency in information about projects that the builder has taken

The above factors will be contributing to the expansion of scope and opportunity for the real estate players and are also contributing to an organized approach for conducting business in this sector”.

It is also felt that adherence to law and corporate ethics will be the order of the day and customer centricity and project execution efficiencies will only be improving in the sector. These observations are mentioned in the paper Trends in Indian Realty Sector: A CRM Framework for a Real Estate Entities in the Changing Environment written by Ramprakash Kona Deputy Vice President, Lodha Group, Mumbai, Maharashtra, India, S. S. Prasada Rao Professor, Dean and Director, HBS, GITAM University, Telangana, India, Dr. U. Devi Prasad Associate Professor, HBS, GITAM University, Telangana, India ISSN 2278 – 0211 (Online).

Housing, Rural growth and Urbanisation reveal a nation’s economic growth and social wellbeing. India’s urban population is steadily growing at an average 2.1% every year since 2015. It is likely to reach 60 crore by 2031 (up from

37.7 crore today). But the growth in housing has been unable to keep pace. Currently, the housing shortage in India is close to 1.9 crore units. The economically weaker sections (EWSs) and lower-income groups (LIGs) account for 96% of the urban shortage when it comes to housing and living solutions

(Source: housing/articleshow/57768759.cms).

The rural economies are also moving from only farm dependent incomes to non-farm incomes leading to a growth in rural consumer’s aspirations. It is here that the concept of affordable housing started playing a sensitive role in Indian economy.

The Government of India has recognised this need and has decided to actively fill the gap in urban and rural housing. Large-scale housing projects that are affordable are therefore sure to get help from government. To that effect the government has announced an ambitious project that seeks to provide ‘Housing for All by 2020’. There were many initiatives in the past around this idea but this time round the government has actively taken many structural initiatives to make this a reality. For example:

  • It facilitated a 4% interest rate rebate on housing loans of up to Rs 9 The rebate stands at 3% on loans up to Rs 12 lakh.
  • Developers will also get a year’s time to pay tax on notional rental income on completed but unsold
  • The tenure for long-term capital gains for affordable housing has come down too. The new tenure is two years, as against the earlier
  • Besides, the government granted infrastructural status to affordable housing. (Source: housing/articleshow/57768759.cms).

The spate of these initiatives has given the boost to developers and the segment has become interesting and attractive. This segment had been languishing on account of luxury and premium housing for the last few years and there was a lot of negativity around this segment. But these initiatives and a severe blow from demonetisation to the reality sector and the premium housing segment has led to generating interest in affordable housing segment as it was observed that these projects offered stable new source of revenue streams. It has also boosted the confidence and goodwill of real estate developers because they can now participate in the economy by creating stable human communities by providing housing solutions. Many private players therefore are now undertaking affordable projects with a lot of pride and sense of fairness.

This is a move away and complete departure from the year 2009 (post the global economic crisis). Back then, developers had no choice but to turn to cheaper housing because financial crisis had confronted a lot of sectors. The reasons then were a severe liquidity crunch and muted demand. The aftermath of the crisis although led to the emergence of the concept of ‘affordable housing’ it did not take the leading position in driving the economy since affordable housing projects had their own set of challenges such as ambiguous rules, EMI DEFAULT, etc. The challenges also included the lack of land and high construction costs making the house economics very challenging. There was also an unfavourable tax environment then. But the recent focus of government on affordable housing is moving these bottlenecks and paving a way for this segment to flourish at least for next decade.

Further the availability of cheap finance is also driving demand as well. The home loan market in India consists of 76 lenders. These include state-run banks, private banks, and housing finance companies (HFCs) (Source: housing/articleshow/57768759.cms).

All these are trying to woo the customers across strata of the society. The Indian consumer himself is very conscious about home purchase on ownership. On this backdrop the role of relationship marketer is envisaged.

Relationship Marketing

These contemplations made above and the survey initiated by the researcher team in the Mumbai market points

towards the role of relationship marketing to drive the success story in the realm of affordable housing segment. This role of relationship marketing is in the developers side, making inroads with engaging conversations with other important organisations such as government, utilities providers and especially with the financial institutions whether it is banks or micro finance organizations because these are the organizations that will structure and facilitate the economics of home purchase. The role of relationship marketer is developed on the foundation of primary research data.

The Survey set- up:

The survey was set up in Mumbai since this city is also in the list of top hundred smart cities. The objective was to find out aspirations of the market beyond size, price and affordability of the house purchase which gets broadly defined by income levels. The quantitative survey was set up 2016.

1009 intending home purchasers were met in this research. Out of these 1009 respondents, 245 respondents i.e. 24% own a home and are now intending to buy a new home mostly for own living purpose, so they are second time purchasers of homes in Mumbai.

The Findings:
Here a comparison of reasons/triggers of purchase is presented as the first pointer towards this role of relationship marketing. The top five reasons of these 245 respondents: who have bought the house and again wish to buy new home and all the 1009 respondents who wish to buy new/own house are similar:





Figs in %






Fits into my budget as per my income



Good investment Option for my money



Proximity to my work place



Most affordable option with respect to price



Availability of social amenities such as schools, hospitals



The above mentioned reasons are ranked in the order of the priority giving the importance of the parameters in their lives when buying a home. Most of the parameters have dropped in its importance or are at par barring “Availability of social amenities such as schools, hospitals” where the intensity of prioritisation has gone up significantly by 19 points clearly highlighting the role of education and medical care in the lives of home purchasers making home

purchase a living solution and not just a random purchase. This reality calls for a development of a holistic solution that has not just homes, but also has schools, hospitals, playgrounds etc. which brings in the role of setting up engaging conversations with school authorities, hospitals, municipal council members etc. to help develop the properties on the land parcel.

Further when these 245 respondents were asked about the method of financing their first home purchase following financing structure emerged:



Figs in %




100% own funds


Some own funds and some relatives


Some own funds and about 20% loan from financial institution


Some own funds and about 20-50% loan from financial institution


Some own funds and about 50-80% loan from financial institution


Don’t Know /Can’t Say


But in case of new purchase of homes clearly the intention of 100% of home buyers is to look at mortgage giving way to the role of financial institution. This too is indicative of this new role of Relationship Marketing on the developer’s side given the fact that affordable housing solutions need to be structured and customised for selling to every unique buyer by understanding his true motivations to purchase a new home.




Figs in %




Nationalised banks


Scheduled/cooperative banks


Private Indian banks like HDFC, ICICI


MNC banks like Citi, Standard chartered


NBFC like Tata housing, HDFC, DHFL etc


Your own employer


Private money lender


No, would be using my own funds


Thus role for financial institution is clearly seen as nobody is ready to invest own funds into this buy decision.

To make the situation further complex it is observed that the market has many new entrants who are crowding the financial space, but HFCs are dominating it in Indian financial markets especially in this segment of housing. They continue to score over their traditional banking counterparts. “HFCs are focussing on middle-class and aspiring lower-middle-class borrowers. They lend to people with an annual income that ranges from Rs 2 lakh to Rs 10 lakh. Leading HFCs are now offering tailor-made affordable housing schemes at 8.5–9%. Borrowers can get a higher loan- to-value (LTV) ratio as well. They can avail up to 85% for housing units that are ready or nearing completion”. (Source: housing/articleshow/57768759.cms).

So there is an ecosystem that is getting built and a role of relationship manager can be only more apt at this juncture because market also is looking at dealing with loan financing, looking at living solutions more in their quest of owning their dream homes.

To Conclude:

The role of relationship manager who takes care of customer, business and compliance with regulatory and

authoritative bodies and works for the benefit of the customer is vital since there are many conflicting interests and despite policy frameworks there is a possibility of only vested interests and not customer interests are benefitted.


  • Trends in Indian Realty Sector: A CRM Framework for a Real Estate Entities in the Changing Environment written by Ramprakash Kona Deputy Vice President, Lodha Group, Mumbai, Maharashtra, India, S. Prasada Rao Professor, Dean and Director, HBS, GITAM University, Telangana, India, Dr. U. Devi Prasad Associate Professor, HBS, GITAM University, Telangana, India ISSN 2278 – 0211 (Online)


Authored by

Mr. Sudhir Gururaj Kulkarni

Dr. Ms. Vibha Bhilawadikar The Pearl Collection Foundation


Dr. Nirmala S. Joshi

MET, Mumbai

Tags: MET Institute of Management