By: Sachin Agarwal, CMD, Maple Shelters
Track2Realty: It is usually believed that any sort of affordable housing reduces the property values of the neighboring properties as well. In the Indian market context, however, various studies as well as on-ground experiences in India reveal that this age-old preconception does not hold true.
The reason is simple – property values depend on aspects such as the overall development and prosperity of the area, and the condition of the properties on the market. These factors are not influenced at all by the presence of budget homes projects in the neighborhood. However, property values ARE negatively affected by the presence of old, ill-maintained buildings in the area.
The famous Wisconsin study, which is one of the most authoritative reports on this subject, was carried out on four affordable housing projects in Chicago. It was conducted over the four Low Income Housing projects which were made possible because of tax incentives and subsidies given by the government.
This study showed that a blend of different income groups within a neighbourhood actually worked positively for the area. In fact, overall property values went up and showed great progress. Significantly, these affordable housing projects were part of a redevelopment initiative and replaced several old, dilapidated buildings which WERE responsible for lowering the property values in the area.
In the Indian context, it has been observed that this dynamic holds true across locations and property types. Regardless of whether the area is populated by the homes of affluent people, or whether it is dominated by stand-alone bungalows or high-rises, the availability of good quality affordable housing impacts the overall pricing dynamics of the area favourably rather than negatively.
This may come across as surprising to those who think they know how the real estate market in India functions. Regardless of whether one compares the sale prices before, after and during the construction of an affordable housing project, or traditional statistical techniques like regression analysis to find the effect of affordable housing in the proximity – there are no adverse effects on the values of neighbouring properties.
The assumption that the contrary – namely, that budget housing pulls down neighbouring property value – is solely based on the belief that such projects are unattractive, conspicuous, poorly managed and poorly managed. This assumption does not take into account the fact that affordable housing in India is no longer of the tenement, near-slum typology but in fact involves modern, well-constructed buildings with all facilities.
