Demand for Housing

Amit Sinha

Indicus Analytics
Thursday, 30 October 2008 11:04
The Housing Skyline of India estimates the demand for housing units in the top
30 cities to grow by 6.36 million units during the next 7 years leading up to 2015.
The current stock of housing units in these 30 cities is estimated to be 25 million
units, which implies a growth in housing stock of over 25% within 7 years.
Demand between 2008 and 2015

Demand for
Demand for Demand for
Total Demand Plinth Area
Plinth Area Less Plinth Area More
for Housing Between 500-
than 500 Sq ft than 1000 Sq ft
1000 Sq ft
Top 10 cities
(alpha) 3,548,000 1,212,000 1,151,000 1,186,000
Next 20 cities
(beta) 2,815,000 930,000 921,000 965,000
Top 30 cities
(alpha + beta) 6,363,000 2,142,000 2,072,000 2,151,000
Current Stock
Current Housing Current Housing Current Housing
Current Housing Stock - Plinth Stock - Plinth Stock - Plinth
Stock Area Less than Area Between Area More than
500 Sq ft 500-1000 Sq ft 1000 Sq ft

Top 30 25,037,000 10,008,000 7,482,000 7,547,000

Top 10 14,624,000 5,829,000 4,337,000 4,458,000

Next 20 10,413,000 4,179,000 3,145,000 3,089,000

Whereas most of the attention of the building industry is on the upper segment, it
is middle and lower middle India which is driving demand -
· The demand for housing of size less than 1000 sq ft is 4.2 million units,
which is 2/3rd of the demand
· The anticipated growth in percentage terms in the lower segments (24%
combined) is only marginally lower than the upper segment (28.5%)
· The pattern is similar for the alpha (top 10) and beta (the next 20) cities,
implying a uniform demand for affordable housing.
The above pattern indicates that a renewed focus on affordable housing is in
order. There is plenty of demand out there; supply is more likely to be the
constraint.Alpha cities are - Hyderabad, Delhi, Ahmadabad, Surat, Bangalore,
Mumbai, Pune, Chennai, Coimbatore, KolkataBeta cities are – Asansol, Bhopal,
Faridabad, Indore, Jaipur, Jamshedpur, Kancheepuram, Kanniyakumari, Kanpur,
Kochi, Lucknow, Ludhiana, Madurai, Nagpur, Patna, Salem, Thiruvallur, Urban
Areas in North 24 Parganas, Urban Areas in Thane, Vadodara

The estimation process involved the following steps:

• Demographic parameters such as population across age-groups, change in
household sizes, and family structures were estimated using data from
census and various large scale data surveys.
• This data was used with large scale survey data on housing conditions
(NSSO 49th and 58th rounds) to establish the relationship between housing
demand and demographic parameters.
• Independently the relationship between ownership and income was
established. Estimates of current income and growth from “The Market
Skyline of India” were used to estimate households across income levels
for the two time periods.
• One of the major drivers of housing demand is the current and future
rental markets. This in turn is driven by growth in economy, employment
and migration trends. Estimates of GDP, employment growth and
migration were used from “The District Level GDP 2006-07” to define the
relationship with housing demand.
• Another relationship established was the ease and extent of availability of
finance and housing demand. Data from RBI on housing loans for the last
ten years were used to determine the function.
• All these aspects were then combined to estimate the net demand in
housing during the period 2008-15. They were also used to determine the
demand for housing across various segments including income categories,
plinth area, room size, etc.

The entire exercise was validated at various stages using a primary survey of
households on income, demography, financial habits and housing conditions
conducted in July 2008. Secondary data such as housing stock estimates from
NHB, proposed construction data from various housing boards, etc. were also
used to cross check estimates at various intermediate steps.