Nano Housing: How a Small House Can Teach the World to Think BIG

By Suresh Haware

Think big, act small… Act now…

Many of us think big but fail to micro plan. Others get stuck at micro-planning, missing the 'big picture' of what impacts us nationally and globally. Housing is a basic necessity of human beings across the globe, and not just in India. Affordable housing for the masses is a key challenge for governments and policy makers. In Nano Housing, Dr Suresh Haware brings out a detailed study and offers solutions for the housing needs of India and its states and cities.

A path-breaking and time-tested concept, nano housing is the outcome of an in-depth practical research which has the potential to fulfill the dream of the common man-an affordable house at an affordable price. Further, the book addresses the impact of GST, RERA and demonetisation on real estate; analyses REIT, home finance and rental housing; and voices the concern of homeless people, unauthorised housing, redevelopment and many other aspects of housing.

An innovative and revolutionary idea, Nano Housing is a must-read for all businessmen in general and professionals, economists, sociologists, officials and policy makers engaged in the housing industry in particular.

• Language: English
• Publisher: Bloomsbury Publishing
• Release date: Mar 18, 2019
• ISBN: 9789388271769

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1. Global Housing Need

‘Much of India that we dream of still lies ahead of us: housing, power, water and sanitation for all; bank accounts and insurance for every citizen; connected and prosperous villages; and smart and sustainable cities.’

—Narendra Modi³

The current world population of 7.6 billion (760 crore) as on June 2017, according to estimates by the United Nations (UN), will further increase to 11.8 billion (1180 crore) by the year 2100. Every week, more than a million (10 lakh) people are born in, or move to, cities in the developing world. A billion (100 crore) people—which is 32% of urban population—live in urban slums. If no serious action is taken, the number of slum dwellers worldwide will increase to 2 billion (200 crore) in the next 30 years, as per the UN estimates.

Today, around six billion (600 crore) people are residing in our cities globally. There are more than 500 plus cities that are regularly getting converted to metros and megacities such as Shanghai with a population of 80 million (8 crore) plus. When a family is distressed without a home, researchers have observed⁴ that this has a negative effect on the overall health of a community.

As per a 2015 global survey by UN-Habitat, the global number of people living in substandard housing, i.e. those who lack access to secure, adequate and affordable housing, is 1.6 billion (160 crore). And about 100 million (10 crore) people are homeless. Thus, there is a global need of houses for 1.7 billion (170 crore) people which is around one-fifth of the population.

Everyone has a right to a standard of living adequate for their and their families’ health and well-being, including food, clothing, housing, medical care and necessary social services (UN 1949).

Housing is essential to meet basic needs such as shelter, but it is not just a question of four walls and a roof. Housing should offer a place to sleep and rest as well as a place to feel safe, have privacy and personal space. A place where people can raise their families and fulfil their aspirations. All these elements help make a house a home.

Global housing scenario presents a picture where availability of housing stock for consumption of the prospective customers is seen, but arithmetic of the same with aspirations and finances is not.

A look at the data of European Union (EU) with 29 countries can be informative.

In 2011, around 40.9% of the population of theEU lived in flats, 34.7% in detached houses and 23.6% in semi-detached houses. The highest share of persons living in flats was in Latvia (65.3%), Spain (64.9%) and Estonia (64.5%). The share of people living in detached houses peaked in Croatia (71.7%), Slovenia (66.8%), Hungary (64.7%), Romania (60.8%) and Denmark (59.2%). The highest inclination to live in semi-detached houses was reported from the Netherlands (61.2%), Ireland (59.9%) and United Kingdom (UK) (58.9%).⁵

International Monetary Fund (IMF) working paper on global housing cycles states that housing construction measures such as permit, start and completion has a correlation coefficient of 0.6 with each other on an average.⁶ Housing markets around the world are usually prone to boom-bust cycles due to certain aspects such as rigid supply, sporadic movement, opaqueness, short-term financing for construction and with long-term financing for occupancy. While empirical studies documenting the cyclical behaviour of housing market developments abound, there is a relative scarcity of theoretical models of real-estate cycles. Most of these rely on supply rigidity and uncertainty about long-term returns on housing to generate strong and persistent cyclical movements. This cyclical behaviour of real-estate business is explained in one of the later chapters.

As per UN Statistics, there are four essential features of a conventional dwelling unit:

it is a room or suite of rooms;

it is located in a permanent building;

it has separate access to a street or to a common space; and

it is intended to be occupied by one household.

Due to growing incomes in Europe in the last decade, the importance of housing has increased, making housing the most relevant item in increasing number of EU member states. The housing consumption was not reduced during the financial and economic crisis in contrast to other components of consumption and to the GDP development.⁷

Housing continued to be better at Organization for Economic Cooperation and Development (OECD) nations, with Canada ranking first with 2.6 rooms per person of the household. Australia stood second, US came fourth with 2.3 rooms per person, UK 14th, Germany in the middle with 1.8 rooms per person and Turkey last at the 36th position. It must be stated here that the OECD average is 97.8% people with access to indoor flush toilet facilities and many countries are above this level.

Mexico has a major challenge with the housing deficit for lower-income households. Following the recommendations of Washington Consensus, the Mexican government liberalised emerging housing sector in the 1990s. The low-interest-rate housing credit was provided based upon contributions of workforce, public housing funds and construction by the private sector.

It is to be noted that the large population in the world do not dwell in livable houses. They dwell in substandard houses. According to McKinsey, this figure in 2012 was 330 million urban households. They were financially stretched because of housing costs. This amounts to 1.2 billion people and it is likely to reach 1.7 billion in 2030 and 1.8 billion in 2035.

According to McKinsey, about 400 million (40 crore) households will not be able to afford formal housing at market rates. This is because their household income is less. There is something wrong if about one-sixth of the world lives in substandard houses (see Figure 1.1).

About 60% of the housing shortage is concentrated in 10 countries.⁸ According to McKinsey, China has 52 million substandard houses in urban areas while India has 28 million such houses. Nigeria and Brazil have 11 million each. Lagos, for example, added about 1.3 million urban households to cities. Because of lack of opportunities and lack of infrastructure in villages, urbanisation is peaking up in India and much of the substandard housing in India is likely to be found in cities.

Figure 1.1: Substandard Housing Units in Urban Areas (in million)

Source: McKinsey Global Institute, 2014

To begin with, China and India are the most populated countries in the world. This itself is a reason the housing shortage seems large in absolute numbers. Both are rapidly urbanising countries, though income levels are not high. Even though China has done a much better job than most countries in alleviating housing shortage, 29% of houses in urban areas of China are substandard. In urban areas of India, 33% of houses are substandard and this number is only moderately higher than that of China.

Though better than homeless, substandard housing causes stressful living for the dwellers. This will be reflected in their overall performance and the country’s progress. Countries like Nigeria and Bangladesh are a different story altogether. In Nigeria, 63% of houses in urban areas are substandard. While in Bangladesh, it is 62%. Nigeria and Bangladesh are, to put it plainly, underdeveloped countries. Pakistan and Philippines come close too with 47% and 42% substandard houses in urban areas, respectively. Iran also has 30% substandard houses in urban areas. In many such countries, the absolute number of substandard houses cannot be attributed to a vast population.

Prosperous countries do a lot better comparatively, but even there, a large number of people live in substandard housing. In Japan, for example, four million households live in poor quality houses, while in the US, this number is two million. But two million households constitute only about 2% of the total households in the country.

Urban population growth is happening at a faster pace in developing countries than in developed countries. Urban population is almost at saturation level in countries like the US. This is not true for India, China, Nigeria or Brazil. The number of low-income households in large cities in these countries is growing. There were always such low-income households, but it is only in the recent past that they have started moving to cities.

1.1 National Housing Need

According to a report submitted by a technical committee to the Ministry of Housing and Urban Poverty Alleviation (MHUPA), India’s urban-housing shortage is estimated to be nearly 18.78 million (1.878 crore) households in 2012.

According to a report by the Working Group on Rural Housing for the Twelfth Five Year Plan, published by the Ministry of Rural Development (MRD) in 2011, the rural-housing shortage is estimated to be nearly 43.6 million (4.36 crore) households in 2017. The details of the factors for this estimation are given in Table 1.1.

Table 1.1: Rural-Housing Shortage, Working Group Method 1, 2012–17 (in million)

Source: Projections for 2012 based on intercensal growth rates between the Censuses of 1991 and 2001

As per the National Sample Survey (NSS) data from 2002, about 7 out of 10 families in India lived in rural areas. The average number of family members was 5.15 in rural areas and 4.47 in urban areas. More than 70% of the expenses were on materials in all types of structures. Another 21% of the expenses were for the labour involved in construction.⁹

The amount to be spent on housing is a major expense. Housing has been a basic need of human beings along with food and clothing. It is a common scenario that the affordability of a house is so low that people spent their lifetime and also future earnings to own a home of their own. However, it has to be a customer choice for residence or an investment in a free-market system of the present day. It has been shown that housing policy of government is a litmus test for good governance, seldom addressing the issues of housing the lower class and middle class, leaving them at the mercy of private real-estate enterprises. It is, however, heartening to note that the government of India has recently been emphasising on housing for all.

Housing costs everywhere in the global arena are driven by certain major factors such as:

demography;

growth in density convergence;

declining number of people per apartment;

regional urbanisation;

supply and demand;

strong psychological desire for home ownership;

land use zones; and

availability of suitable patches of land.

According to Census 2011 data, there are more than 23 million (2.3 crore) urban families in India within an annual income bracket of ₹80,000–₹2,00,000. If we consider a captive clientele with an income bracket of ₹1,00,000–₹3,00,000 per annum, we have an even greater market with around 200 million (2 crore) families within this bracket across the