An analysis of demand and supply of housing in India

with special reference to Mumbai market

MASTER OF BUSINESS ADMINISTRATION (MBA)

2020 - 2022

ICFAI BUSINESS SCHOOL (IBS)

Shankarapalli, Hyderabad, Telangana- 501203

25 SEPTEMBER 2020

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 Table of Content

S.no. Content Page no.

1 Introduction 3
2 Bibliography annexure Allignment
3
4
5
6

2
Introduction

Economics:
Economics is a social science concerned with the production, distribution, and consumption of
goods and services. It studies how individuals, businesses, governments, and nations make
choices about how to allocate resources.

Economics can further be broken down into macroeconomics, which concentrates on the
behavior of the economy as a whole, and microeconomics, which focuses on individual people
and businesses.

Managerial Economics:

Managerial economics is a stream of management studies that emphasizes solving business

problems and decision-making by applying the theories and principles of microeconomics and
macroeconomics. It is a specialized stream dealing with the organization’s internal issues by
using various economic theories.

Housing in India:

The housing industry of India is one of the fastest-growing sectors. A large population base,
rising income level, and rapid urbanization lead to growth in this sector. In the Federal structure
of the Indian polity, the matters pertaining to the housing and urban development have been
assigned by the Constitution of India to the State Governments.

Housing in India is dominated by low-rise apartment buildings, houses with high land coverage
(back-to-back terraced-like houses), and slums. Some houses are inner lots, access being via 1.5-
meter wide passages under other houses, and ventilated only by small stairwells). All of them
being mostly gray and ugly. 

Most houses are being built over many years by multiple family generations, adding extra floors
over time, with no architects and engineers. Multi-generation families, 10+ people sharing the
same house, are common, each floor belonging to another branch of the family, or sometimes
each family branch having just one room.

Mumbai:

Mumbai (previously known as Bombay) is the capital city of Maharashtra located on the West
coast of India, which is also the home to the well-known, Bollywood. Bollywood, which has
become a thriving multi-million-dollar industry producing more movies than anywhere else in
the world, including Hollywood. Along with a thriving film industry, Mumbai is also a leading
commercial, financial and industrial Megacity. It has the highest GDP (Gross Domestic Product)
in the South, West, and Central Asian regions. It is also the wealthiest city in India which is due
to Mumbai being the home to multiple, high-income financial institutions, increasing the poor
living standards of Mumbai inhabitants by offering higher-paying jobs.
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Mumbai the megacity and is as important as huge it is and a megacity is a city with a population
of 10 million or more,

Some of the reasons for housing problem in Mumbai -

1 Megacity 

2 Finance capital 

3 Bollywood 

4 Dharavi slum

5 Population 

6 Pricing 

1.Megacity – 

A megacity is a city that has a population of 10 million or more inhabitants. Some examples of
these cities are New York, Tokyo, Beijing, Sao Paulo, and many other cities, mostly located in
Asia. Some megacities combine to create megaregions. They are linked by transportation routes;
this makes it easy for citizens to move from each city. 

2. Finance Capital-

Mumbai is one of the most rapidly developing regions in India. The capital city of the Indian
state of Maharashtra, Mumbai is spread out over 603 square kilometres of archipelagic land
mass.

Mumbai stands tall as the hub of economic development, contributing to as much as 5% of

India's GDP and it also finds its name amongst the top 10 commercial centres across the globe. It
is also India's most populous city, as it attracts people from across the nation with its endless
avenues of employment in all fields ranging from financial services and information technology
to the multi-million dollar Bollywood film industry.

3. Bollywood –

Mumbai, India’s entertainment capital and home to Bollywood, is one of the most prolific
centres of film production in the world. Yet there are so many misconceptions about the industry
in the minds of even hardcore cinephiles that before describing what Bollywood is, it becomes an
imperative to describe what not Bollywood is. Bollywood is not a name for the Indian
filmmaking industry; it is a name for the country’s Hindi film industry. Films are made in
various other languages in India, and each language’s industry carries its own name (such as
“Tollywood” and “Ollywood”).

Claims are often made that Bollywood is the biggest filmmaking industry in the world, which is
4
incorrect. The Indian film industry is the biggest in the world, with the American counterpart
placing third behind Nollywood, Nigeria’s equivalent. According to India’s censor board, more
than 1600 films were produced in the country in 2012. Even in India, Bollywood is not the
biggest industry in terms of output. Last year, more films were produced in Tamil and Telugu
than in Hindi. Today, every major American studio from Walt Disney to 20th Century Fox has a
presence in India, either by itself or via partnership. This has been a two-way exchange: the
Mumbai-based Reliance group is now the parent company of Steven Spielberg’s DreamWorks.
Post 2001, the budgets of films have increased, as have the frequency of their worldwide releases
and the scale of their grosses.

Dharavi Slum-

Dharavi Slum is the largest slum in Asia and is home to more than a million inhabitants. This is
due to rent being as low as $4 a month, in some areas, compared to house rents in the city being
among the highest rent in the world. Many buy cheap shelters to earn their living at first but there
are some second or third-generation residents living there today.

Located in the center of the city, the Dharavi Slum used to be inhabited by fishermen who moved
away after the site became too overcrowded with pollution. Soon after, rural migrants began to
inhabit the slums as it was cheap and available.

Tourism

The Gateway of India (left) is one of the main tourist sites in Mumbai, Maharashtra. It is over 90
years old, since its first opening, and took 13 years to build. Some other tourist sites include
Chowpatty Beach, Siddhivinayak Temple, Sanjay Gandhi National Park, the Elephanta Caves,
and Island, and Essel World.

Mumbai, the biggest metropolis of this state. It is also popular as the entertainment and financial
capital. It is the largest city of India and fondly called as the city of dreams. It is a place filled
with dreamers and people who work hard day and night to achieve their dreams. From struggling
actors, labourers, Bollywood stars to gangsters, Mumbai has a lot. A lot that can be written about
and talked about! Mumbai is also home to one of the biggest slum areas as well as home to the
richest and thus it is only fair to describe Mumbai as a city for all. The majorly spoken language
is definitely Hindi, but this city has welcomed people from all faiths and religion warmly. If you
want to know and experience diversity, visit Mumbai. This city also has its very own language
that is the Bambaiya Hindi. Known to be a city filled with warm and friendly people, we believe
that anything written about Mumbai is never enough. 

Literature review 5

Demand and Supply

The law of supply and demand may be a basic economic principle that explains the connection
between supply and demand for an honest or service, and the way that interaction affects the
worth of that good or service. When there's a high demand for an honest or service, its price
rises. If there's an outsized supply of an honest or service but not enough demand for it, the
worth falls. The rationale is that folks will bid up the costs when there's relative scarcity, and
there'll be unsold items when there's an oversupply. The idea of supply and demand is one
among the foremost basic principles in economics. Supply and demand work against one another
until the purpose at which the equilibrium price is achieved—that is that the price where supply
is adequate to demand within the market. That happens, of course, when all other factors remain
equal.

Demand
The law of demand dictates that folks will have lower and lower demand for an honest as its
price rises ever higher. Similarly, lower prices drive demand, meaning consumer’s value and buy
something more when it's cheaper.

Shift in Demand

When we draw a requirement curve, we are varying the worth but holding everything else fixed.
Especially, we hold fixed the extent of income, the costs of other goods and services within the
economy, and therefore the tastes of households. If these other factors change, then the market
demand curve will shift—that is, the number demanded will change at each price.

A leftward shift of the market demand curve for houses could be caused by many factors,
including the following:

 A decrease in the incomes of households in the market

 Concerns about the future health of the economy
 A reduction in the price of a typical apartment rental
 An increase in the interest rates for mortgages
 A change in social tastes so that buying a house is no longer viewed as a status symbol
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Supply
The law of supply says that a better price will induce producers to provide a better quantity to the
market. Likewise, when supply is low, prices will rise as people will scramble to shop for up
scarce resources

Shift in Supply

When we draw a supply curve, we again vary the worth but hold everything else fixed. A change
in the other factor will cause the market supply curve to shift. A leftward shift of the market
supply curve for houses might be caused by many factors, including the following: 

 Increases in the costs of production, such as wages, the cost of borrowing, or the price of
oil
 Bad weather that delays or damages construction in process
 Changes in regulations that make it harder to build

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Market Equilibrium: What Determines the Price of Housing?

We now put the market demand and market supply curves together to offer us the supply-and-
demand. The purpose where supply and demand meets is that the equilibrium within the market.
At now, there's an ideal match between the quantities that buyers want to shop for and therefore
the amount that sellers want to sell.

We speak of equilibrium because there's a balancing of the forces of supply and demand within
the market. At the equilibrium price, suppliers of the great can sell the maximum amount as they
want, and demanders of the great can purchase the maximum amount of the great as they want.
There are not any disappointed buyers or sellers. Because the demand curve features a negative
slope and therefore the supply curve features a positive slope, supply and demand will cross
once, and both equilibrium price and equilibrium quantity are going to be positive.

Factors Affecting Supply and Demand of Housing

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1. Affordability. Rising incomes mean that folks are ready to afford to spend more on
housing. During times of economic process, demand for houses tends to rise. Also,
demand for housing tends to be a luxury good. So an increase in income causes a much
bigger the rise in demand.

2. Confidence. Demand for houses depends on consumer confidence. Especially, it depends

on people’s confidence about the longer term of the economy and housing market. If
people expect prices to rise, demand will rise so people can gain from rising wealth. In a
boom, demand for houses rises faster than incomes.

3. Population. The most important factor. It is not just the number of people but also the
demographic changes. e.g. the increase in number of single people living alone has led to
increasing demand for houses. The demand for housing doesn’t just depend on the
population number but also the average size of a household. Certain social and
demographic factors help in a rise in the number of households (faster than the population
increase).
4. Economic growth and real incomes. Rising incomes enable people to afford huge
mortgages and boosts demand for housing. In fine times, demand for housing grows
quickly suggesting demand for houses are income-elastic.
5. Supply of Substitutes. If the supply of substitutes such as rented accommodation
decreases, then there is a gross increase in demand for houses and vice versa. If the
supply of rented accommodation is less, then there is an increase in the price of rented
apartments. Therefore, in the long run people find that it is cheaper to buy houses than to
live in a rented accommodation. Hence, then they will tend to purchase a house. Thereby,
increasing the net demand for houses. 9
6. Availability of Mortgage Finance. If the mortgage finance is available easily then this
results in a net increase in demand and vice versa. This is because it is easier for people
to arrange for funds to finance their houses.
7. Economic Trends. If the economy is booming, then there is a net increase in demand for
 houses. Similarly, in recession, the demand for houses decreases. A booming economy
means a good overall health of the economy which translates into greater demand of all
goods.
8. Interest Rate. If the interest rates are high, then there is a net decrease in demand and
vice versa. This is because at higher interests rates people will have to shell out more
money to repay their loan. As people have a fixed monthly income, a higher interest rate
would mean that the loan installment would form a higher portion of their monthly
income. Thereby, decreasing the demand for houses.
9. Demographic and Inherited wealth factors. As increase in immigration, number of
divorces, life expectancy, results in an increase in demand for houses. An increase in
immigration, number of divorces, life expectancy will result in more people needing
independent houses. An increase in number of people inheriting a huge wealth would
result in an increase in demand of houses. Because these people have more money to
spend on luxury products, such as houses.

Housing system in India:

Housing, a basic need for all the human beings. This gives human beings a sense of
belongingness, shelter and security. It has become a business for many people and many
individuals who want to begin their career made it worse. Rapid industrialisation and increase in
Bollywood demand has made the price to sky rocket. India, as a developing country has been
trying to expand the urban areas which made huge demand for housing. Housing can be of
formal and informal types. National sample survey Organisation (NSSO) states that quality of a
house depicts the formal or informal housing.
Depending on the quality the houses are classified into 3 types:
 Kutcha: House that is built with non-durable materials such as Bamboo, Leaves and
Mud. This refers to the houses that the village people use.
 Pucca: House that is built with the materials such as bricks, Cement and Stones. This
refers to the modern houses that people are using now.
 Semi-Pucca: House that is built with the materials used in both Kutcha and Pucca.
Apart from all these a quality house also have water supply, basic Sanitation, Good Environment
and Electricity that satisfies the basic needs.

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Many people have seen the potential of housing as it is contributing to rise in national income. It
is not a single system that can be supported on its own, it links the various sectors that provide
goods and services. It is not only contributing to the G.D.P but also contribute towards
employment as it is labour intensive.
Urbanisation:
Urban development also thrusted the economic growth because it attracted many individual
from all over the India. Urbanisation not only is moving towards the housing development but
also it became the root cause for the scarcity of house in many places. Increase in population is
also causing more problems as the number of households in the country are increasing since
Independence. According census 32% of the population in India is in urban cities. Because of
this the cities are becoming crowded which resulted in the significant increase in the slum
proportion which constitute to 35% of urban population.

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Target:
Contractors are targeting high end and luxury segment to get high returns. So, in high end
segment the supply is constant and significant and it provides challenge to the competitors. For
the poor and low end people government provides housing for their welfare. Middle class and
lower income people were mostly neglected and there exists a huge gap in the affordable
housing. They cannot afford high end housing and government policies don’t work for them. So,
we can say that the most affected people are the middle class and lower income people.
Affordable housing system can be explained using three factors:
 Income level: Depending upon the income an individual will select a suitable house for
him.
 Size of house: Size of the house affects the decision because it depends on the need of a
person.
 Affordability: This factor depends upon the above two. He should check whether he can
afford the house depending on his income and the size.
Government has set the policies to support these people, but the major drawback is with the size
rather than on price. Owners, under a certain square foot area size are setting a price a price that
is beneficial to them. This is contradicting the entire meaning of affordable housing policy. Cost
of land is also making it difficult for the government to provide low cost house.

The major impact happened during:

Demonetization: During demonetization there was a huge economic loss, which affected the
housing because there was huge job losses and most of the operations were halted. Due to the
ban of currency the trade was constrained and even stopped in some regions which halted the
resource transport. India, which was completely dependent on liquid cash and because of this
there is less cash flow which in turn caused the scarcity of money. This caused the price of
houses to diminish which benefitted the buyers. Although the price of housing got reduced it was
not able draw the attention of buyers because they are postponing the plans of buying property.
This caused the increased level of inventory of houses.
Labour force in the city was not paid due to the scarcity of money and they were not able to
continue living in cities without liquid cash. This caused the migrant workers to move back to
their places. Many operations came to a standstill due to the lack of resources.

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GST:
Introduction of GST increased accountability and transperancy in housing which attracted the
buyers and 1% GST on affordable housing under the economic segment has become lucrative.
The rental market benefitted more from GST because of tax exemption on the rental hosing
increased its popularity. For constructors completed construction became area of interest because
there was a tax exemption on completed construction that possesed certificares. But this GST
didn’t do all good because there were few who got affected by it. Increased prices caused by the
presence of all other taxes on the materials attracted less investors.

Government intervention:
Government intervention is when the sets a bencmark prcing on housing which is called as price
ceiling. In this government imposes certain regulations and limit for pricing so that it becomes
affordable for the public with low income. This would help public 13 aware about the prices in the
market and help them in having a better understanding about the market. Price ceiling has put a
certain limit in pricing, nut it was not able to cope up with the demand that increased because of
this. This ultimately led to black market and supply shortage. Because of shortage in supply the
time invested in searching house is more and the additional charges such as transportation and
brokerage became relevant. Black market has houses which are priced very high and the extra
chargers are added, which are convenience and brokerage charges.

Covid-19 Impact:
Panic:
Covid-19, the that shook the roots of ecomoies of all the countries in the world made a impact on
indian housing sector. This has affeted both public and suppliers alike. For public who are
involved in construction of own house, had to halt the operations. During corona pandemic
people were reluctant to allow others near them and the workers are also afraid of working.
Because of this there is wastage of time, lose of raw materials and incresed cost due to scarcity
of resources. The contractors whoes main income comes from the construction were also facing
problems as the operations has been halted. There was no revenue generation for them and are
quite reluctant about future investments.
Income:
There is another thing that affected housing is the partial salaries that are paid during this
pandemic. The income is not able to satisfy the requirements to finish a house. It impacted not
only to the people who are into construction but also to the buyers. Buyers who choose
installments for buying a were facing problems as they cannot pay the money in a required
people. People were constantly facing troubles as they had to return to their families during this
pandemic. They had to pay rent irrespective of their stay in the house. In many cities houses
were had been empitied out because of the same reason.

Unemployement:
During the pandeamict there was a heavy job loss with lead to increased unempoyement. As
people could not the high rates in cities they were forced to move to their villages. This lead to
the inceased vacancies of houses. Talking about the current demand of housing, it can be said
that the demand has reduced significatly. 14
MUMBAI’S HOUSES CONUNDRUM

15

In India, the top 8 cities, which include NCR

(National Capital Region), MMR (Mumbai
Metropolitan Region), Bengaluru, Chennai and Pune,
have remained the mainstays for economic development for a very long time and still continue to
do so. The migration towards these cities has been growing at a significant pace. Spread across
4,354.50 sq. km, MMR (Mumbai Metropolitan Region), one of the most populous urban regions
in India has seen a 197 per cent population growth during the past 4 decades. The region
supports a population density of 37,000 persons per km which is among the highest in the world.
These numbers are subjected to grow further, if we could take into account the unregistered slum
population. On the other hand, owing to factors such as commercial importance and land crunch,
the real estate prices in Mumbai region have soared aggressively. Hinterland micro markets such
as Badlapur, Ambernath, Virar and Panvel which were once considered affordable are gradually
entering the premium zones. The growing MIG (Middle Income Group), LIG (Lower Income
Group) and EWS (Economically Weaker Sections) population as well the real estate prices have
culminated into a big demand-supply gap
Mumbai has undergone considerable restructuring of its economic and industrial sectors in
recent years. Once famous textile industries in the city have disappeared leaving its labours
astounded and spatially fixed. The industrial use of lands are giving way to financial, trade and
housing sectors. However, the enormous flow of the capital from primary circuit (manufacturing)
to secondary circuit (built environment) is not able to produce housing for all, and shelter in the
city remains a major issue. Although, politics of shelter has been a way to garner the vote from
the marginalised majority (the poor) in the city, nothing significant has been delivered to reduce
the homelessness, enhance affordability among the weaker sections, or decongest the over-
crammed rooms through improved planning. In fact, the market reforms and rising real estate
prices have further increased the vulnerability among the marginalised sections with respect to
housing. Housing affordability has become a key issue in many metropolitan cities. A major
percentage of the society cannot afford decent housing options due to high prices. Unavailability
of land, high constriction costs and many other factors are responsible for the affordable housing
crisis. Buyers have to go away from the main city for good housing solutions. In India, housing
affordable housing has been the exclusive preserve of public sector undertakings such as
Housing Boards or Development Authorities. Private sector, real estate developers have been
historically precluded from affordable housing both structurally and at the level of policy.
Developing affordable housing in Indian cities faces significant challenges due to several
economic, regulatory and urban issues. Whilst the lack of availability of urban land, rising
construction costs and regulatory issues are supply-side constraints, lack of access to home
finance is a serious demand-side constraint, which impacts the ability of low-income groups to
buy housing.

Living Conditions in Households

Lack of affordable housing solutions compels families to reside in congested dwellings. Living
conditions in households can be gauged through the following indicator – the number of
habitable dwelling rooms available to a particular household
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According to Census of India:
A dwelling room may include a living room, bedroom, dining room, drawing room, study room,
servant’s room and other habitable rooms provided they satisfy the criterion of their dimensions.
However dwelling rooms do not include kitchen, bathroom, latrine, store room, passageway and
verandah which are not normally usable for living. A dwelling room shared by more than one
household is not counted for any of them .For instance if two households share a single dwelling
room, then number of exclusive dwellings for each is zero. A household is usually a group of
persons who normally live together and take their meals from a common kitchen unless the
exigencies of work prevent any of them from doing so.
Affordable Housing Crisis

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Housing affordability has become a key issue in many metropolitan cities. A major percentage of
the society cannot afford decent housing options due to high prices. Unavailability of land, high
constriction costs and many other factors are responsible for the affordable housing crisis.
Buyers have to go away from the main city for good housing solutions. In India, housing
affordable housing has been the exclusive preserve of public sector undertakings such as
Housing Boards or Development Authorities. Private sector, real estate developers have been
historically precluded from affordable housing both structurally and at the level of policy.
Developing affordable housing in Indian cities faces significant challenges due to several
economic, regulatory and
Urban issues. Whilst the lack of availability of urban land, rising construction costs and
regulatory issues are supply-side constraints, lack of access to home finance is a serious demand-
side constraint, which impacts the ability of low-income groups to buy housing. Although some
of these are gradually being mitigated, efforts are required by multiple institutions to facilitate
mass development in this sector.
Some of the major factors responsible for making housing a dream of common man are:
 Land cost in urban city centres are high, often constituting more than 50% of the project cost
for developers; this makes affordable housing projects less feasible.
 Building affordable housing entails buying raw material at a cheaper cost so that the benefit
18 important raw material for
can be passed on to the end-user or homebuyer. Land is the most
real estate developers. In order to build affordable homes, land can mainly be purchased in
peripheral areas of the city since cost in city centres is high. But peripheral areas of the city
lack infrastructure facilities such as good connectivity to city centres, water supply and
 sanitation.
 Typically, in India, the process of acquiring necessary construction approvals for each project
takes anywhere between 18-24 months. Such a long holding period leads to additional cost
escalation for developers.
 People who belong to LIG and EWS segment have little access to organized finance. These
people often do not have documents such as proof of address, salary slips, etc. The housing
finance industry is hence not geared towards providing finance to those who need it the most.
 There is lack of sound government policies that enable and incentivize the affordable housing
segment such that developers are geared to build affordable housing projects.

Factors affecting Affordability

 Cost of land: If that was excluded from the price, housing would be affordable for many
more people.  
 Demand for up‐front payment: If the down payment was quite small, and payment could be
in instalments, many more would be able to afford the same cost house. The availability of
long‐ term finance is thus critical to expanding affordability.
 Incremental Construction: If the house could be built not in one go, but incrementally, over a
period of years or decades, expanding and improving in step with the growing income of the
family, affordability could be dramatically improved

Clustering on the basis of ‘caste’ and ‘class’:

The caste system historically influenced the spatial distribution of people in Mumbai. However,
as Mumbai developed economically during the nineteenth century, the spatial distribution of
people on the basis of castes reduced while class became a more significant factor. The study of
the spatial distribution of people in Mumbai helps the research by showing the relationship of
different communities with the city and its development. The urban fabric of Mumbai that
developed
Decades ago still have a large influence on Mumbai. The areas where textile mills used to stand
until the 1980s are now being converted into malls and offices. This is also increasing the
property value of the neighbouring residential areas and multi-storey
19 buildings are built next to
old chawls. These chawls, many decades ago, used to be Neighbourhoods of moderately earning
mill worker
Origins of Middle-class Housing in Mumbai:
Housing for the expanding working middle class in Mumbai evolved in the form of a particular
type of building known as a chawl. While the direct origins of chawls are not clear, they do
appear to be related to traditional Indian courtyard housing and wadis translated over time to the
urban conditions of Mumbai. The native houses are locally called wadas or wadis. They have
courtyards primarily for light, ventilation and privacy surrounded by various rooms. These native
houses can be found in
most of the village areas in the state of Maharashtra.44 These wadis have some spatial
similarities to chawls in that the rooms are arranged along a common corridor with toilets outside
the living areas.
Chawls-

The housing type Chawls has been a very significant part of Mumbai’s history and this research
looks exclusively at chawls in Mumbai. Many chawls were built during the nineteenth century
and twentieth century. They were built by government or private landlords to accommodate the
migrants coming from villages due to the rising employment opportunities in early Mumbai.
Chawls are buildings with one room or two room units of not more than two hundred square feet
attached by a common corridor with shared toilets on each floor. Typically, housing units in
chawls are availed of by relatively poor but gainfully employed migrant families. Chawls were
constructed in abundance during the early 1900s, in the textile mill areas of Mumbai, and indeed
this is how they originated, to provide cost-effective housing to mill-workers in Mumbai. They
were later built by working-class emigrants working in other manufacturing industries also. This
type of housing is no longer built, but remaining structures are still in demand because of their
relatively affordable rents. Chawls are residential apartment blocks of a characteristic layout
plan. They are typically 4 to 5 storeys tall, with between 8 and 16 tenements on each floor. The
tenements are referred to as kholis 'rooms'. A central staircase services the building and gives
access to a long passage which runs the length of each floor. A typical feature of chawl
architecture is that this long passage is open on one side and has a row of doors on the other side,
each door being the entrance to a tenement. Thus, the passage giving access to the tenement
provides an open space (a "balcony") where people living in the tenements can come and stand,
gaze at the street below, get some fresh air and sunlight and socialize with their neighbours. The
fact that all the tenements are ranged on one side of the passage, leaving the other side open to
the sky, is a defining feature of chawl architecture. The architectural similarity between all
chawls is their balcony structures- these were created so that people could come out of their
20
houses and interact with each other. The balconies form common grounds for people to mingle.
Presently, there are many chawls in Mumbai that lack sanitation, are structurally weak and are
dangerous to live in. The chawls also offer the residents with affordable housing to the middle
class residents and this is another important reason for the residents to not move out. chawls in
the city of Mumbai were modified from the rural wadis, due to the growing pressure to
accommodate population. It still cannot be deduced as to when the chawls in Mumbai actually
started to get built. This fact is known that the number of chawls increased rapidly after the
1860s. Numerous chawls were built during the British Raj either by the government or private
landlords.49 Most of the chawls were built after the industries especially textile industry, started
booming around the 1860s.50 As seen earlier, the rise of industries and the rise of different
socio-economic classes had a huge influence on the spatial development of Mumbai. Thus it can
be said that, chawls do form a significant part of the growth and urbanization of Mumbai.

Growth of Slums and Informal Settlements

Another peculiarity of Mumbai city has been the size of its slum population. High real estate
prices, government apathy and bureaucracy on many fronts and lower wages have undermined
the city’s development. This has resulted in the amassing of the population in slums. There are
42 percent of the households in the city (Greater Mumbai) live in slums.
Rapid urbanization has placed tremendous pressure on resources of national and local
government. The need for planned and affordable land, housing, services is to be satisfied
through the efforts of Government or private sectors. As a result, the urban poor have found their
own solution in various types of slums and informal or unauthorized settlements. A majority of
the urban citizens thus have to endure substandard and subhuman living conditions within the
Indian cities. The affluent minority of urban 46 citizens are also affected directly or indirectly by
the health and social risks of the neglected majority.
Impacts of the TDR on Housing:

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 Density of the Areas:

There is little doubt that the Slum TDR programs have increased population density on many
slum sites. That is inherent in the design of the program, because the additional FSI allows the
construction of more dwelling units than initially are on the site
In those cases, the builder may even try to conspire with community leaders to reduce the list of
eligible slum dwellers in order to reduce the amount of the site required for slum housing and
increase the area available for market-rate housing.
 Private Market Housing Investments:
To date, no data is available about how the various TDR programs have an influence on the type,
amount, or quality of housing produced. The rate of private housing construction is important,
because for every unit produced reduces pressure on the existing stock, which tends to mitigate
price increase and make it relatively more important for medium and lower-income groups to
move to better housing.
 3. Real Estate Market Impacts:
Since TDR programs represent manipulations of the real estate markets, it would be helpful if
their impacts were measured more carefully. The TDR is expected to be used as a tool for
development & for providing affordable housing to slum dwellers. It is indirectly affecting the
real estate market.
 4. Impacts on Infrastructure:
Since one of the first objections to TDR is that existing infrastructure is not adequate to handle
density either in ‘sending’ or ‘receiving’ areas. There is no evidence that additional FSI due to
TDR resulted in additional shortages of water, sewer, electricity, or inadequate drainage in areas.

Initiatives by Government of India  

Housing schemes by the Central Government are implemented by the Ministry of Housing &
Urban Poverty Alleviation (MHUPA).  The policies of urban development and housing in India
have come a long way since the 1950s.  In the First Five Year Plan (1951‐56), emphasis was
given on institution building and on construction of houses for Government employees and
weaker sections. Subsequent plans focused on provision of services along with shelter, and
mobilising private sector efforts for low‐cost housing. The National Housing and Habitat Policy
unveiled in 1988 aimed at ensuring “shelter for all” and better quality of life to all citizens by
using the unused potential in public, private and household sectors. Subsequent programmes
include the National Slum Development Programme (NSDP), night Shelter for urban shelter less,
and Valmiki Ambedkar Awas Yojana (VAMBAY).  
 Rajiv Awas Yojana (RAY) 2013‐2022
The Scheme provides financial support to States/Union Territories/Urban Local Bodies
(ULBs)/Central Government Agencies for providing housing and improvement of basic
civic infrastructure and social amenities in selected slums. RAY will also extend financial
support to States for creation of affordable housing stock through public‐private partnership
under the Affordable Housing in Partnership (AHP) component of the scheme.    
 22
Rajiv Rinn Yojana (Interest Subsidy Scheme for Housing the Urban Poor)
Rajiv Rinn Yojana (RRY) is an instrument to address the housing needs of the economically
weaker/low‐ income segments in urban areas, through enhanced credit flow. RRY has been
formulated by modifying the Interest Subsidy Scheme for Housing the Urban Poor (ISHUP)
 piloted in the 11th Plan period with enhanced scope and coverage. Fresh guidelines for the
scheme were issued in October 2013; hence it is still too early to comment on the progress of
the scheme thus far. 
 Basic Services to Urban Poor (BSUP, 2009)
Provision of Basic Services to Urban Poor including security of tenure at affordable prices,
improved housing, water supply, sanitation and ensuring delivery through convergence of
other already existing universal services of the Government for education, health and social
security. Care will be taken to see that the urban poor are provided housing near their place
of occupation. MHADA is the nodal implementing agency for BSUP in Maharashtra. 
 Affordable Housing in Partnership  
The scheme of Affordable Housing in Partnership aims to encourage private sector
participation in creation of affordable housing stock, recognising that mere efforts of the
Government would be insufficient to address the housing shortage. It was earlier introduced
in 2009 as part of BSUP component of JNNURM and subsequently, Affordable Housing in
Partnership was dovetailed with Rajiv Awas Yojana (RAY) in 2011..    

Sampling, Data Collection and Tools of Analysis

What is a survey?
A survey is a research method used for collecting data from a predefined group of respondents to
gain information and insights into various topics of interest. They can have multiple purposes,
and researchers can conduct it in many ways depending on the methodology chosen and the
study’s goal. In the year 2020, research is of extreme importance, and hence it is essential for us
to understand the benefits of social research for a target population using the right survey tool.
The data is usually obtained using standardized procedures to ensure that each respondent can
answer the questions at a level playing field to avoid biased opinions that could influence the
outcome of the research or study. The process involves asking people for information through a
questionnaire, which can be either online or offline. However, with the arrival of new
technologies, it is common to distribute them using digital media such as social networks, email,
QR codes, or URLs.
What is an online survey?
An online survey is a set of structured questions that the respondent completes over the internet,
generally through filling out a form. It is a more natural way to reach out to the respondents as it
is less time consuming than the traditional way of gathering information through one to one
interaction and less expensive. The data is collected and stored in a database, which is later
evaluated by an expert in the field.
As an incentive for respondents to participate in such online research,
23 businesses offer rewards
like gift cards, reward points that they can redeem for goods or services later, free airline miles,
discounts at gas stations, etc. Research studies with rewards are a win-win situation for both
businesses and respondents. Companies or organizations get valuable data from a controlled
environment for market research.
What are the advantages of an online survey?
1. Accuracy: In an online research study, the margin of error is low, as the respondents
register their responses by easy selection buttons. Tradition methods require human
interference, and according to a study, human intervention increases the margin of error
by 10%.
2. Easy and quick to analyze: Since all the responses are registered online, it is
straightforward to analyze the data in real-time. It is also ready to draw inferences and
share the result.
3. Ease of participation: In this new age technology-oriented universe, most people on this
planet have access to the internet. Respondents prefer receiving the survey over the
email. Ease of participation dramatically increases as the respondents can choose a
suitable time and place, according to their convenience, to register their responses.
4. Great branding exercise: In an online design, organizations or businesses have this
opportunity to develop their questionnaire to align with their brand. Using logos and
similar brand language (color and fonts) gives the companies an advantage as
respondents can connect better with the brand.
5. Respondents can be honest and flexible at the same time: According to a study,
researchers have found increased participation by respondents when deployed with online
surveys rather than answering lengthy questions. By designing questionnaires that ask
relevant questions, respondents are honest with their answers and can skip the questions
or respondents to a more neutral option, increasing their flexibility to respond.
6. Survey templates: Leading online research tools have expert-designed ready survey
templates that make it easier for researchers to choose from and conduct their research
study. These templates are vetted questionnaires and are specific to every industry,
making the study even more efficient.

An online survey was conducted in the form of questionnaire using google survey form. To
understand the perspective of both, target audience were Customers and suppliers of housing in
Mumbai. Questions were asked to understand the demand and supply of housing in Mumbai.

Form 1 for customers: Form 2 for suppliers:

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Results of form 1 were as follows:

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 Analysis of Form 1
The survey was conducted to understand the preferences of people when it comes to living in
different part of India. The results will help us in identifying the factors which are affecting the
consumers demands with respect to the housing supply. The report will specifically focus on the
people living in different parts of Mumbai. Hence, the responses of the survey have shown that
Mumbai, being a dream state of India, is one of the most expensive places to rent or buy a house.
There are many reasons for this synopsis, one being the shortage of land with a high population.
People all around the world come either in search of jobs or to work in big national and
international companies or either just to settle in Mumbai. The main reason behind the increasing
interest in this state is that Mumbai is responsible for around 70% of the business transactions in
India via their headquarters in esteemed part of Mumbai. The following are the results and
interpretattion of the consumers responses in detail.

Selecting the Type of Residence

People living in different parts of Mumbai, when asked about their preferences, responded with
58.1% of them choose living in a rented house while 41.9% in a owned housing property. The
reason behind choosing a rented house more for a living can be because of various factors and
one being is the high prices and less affordability. Other than that, around 38% of people find the
process of finding a house for renting or buying, a very tedious task which can be due to either
limited supply or less level of satisfaction in terms of pricing.

Satisfaction Level of Income

The housing market in Mumbai has gone through a lot of changes since 2006. And since then the
price is reaching the height of a skyrocket. The possibility of buying a house for a middle-class
family is next to impossible because of their low annual salary of about INR 2 Lakh and high
renting price. The same can be seen in the survey that the majority of people fall under the
category of “Satisfied” and “Neutral” on termed of their salaries and still are not able to own a
decent house. Specially for places like Bandra, Juhu, Worli and even Santacruz, the prices of
renting a house of about 3,500 sq. ft per month are exceptionally high. Additionally, the
commercial properties in Mumbai have also been on rise since 2006 which also affected most of
the small companies.

Pricing

Pricing plays a very important role when it comes to affording a house and therefore the data
shows that around 80% of consumers find, owing a house in Mumbai is way too expensive.
When it comes to renting a house in average to basic location of Mumbai, it costs more than 12K
for a basic 1BHK flat followed by 9K to 12K, depending on the location. Also, among 90
responses, 46.8% of people prefer buying a house rather in renting 29 because of the high income-
level satisfaction which results in increasing budget to afford a house. Additionally, the EMI paid
to purchase a house is also greater than 20K which seems to be a little higher when compared
with other states of India like Bengaluru, Bhopal, Kolkata etc.
With the increase or high pricing for both renting and owing a house, there is less demand in the
market. Consumers are not willing to pay much for owing and renting on a flat. This have also
resulted in the limited supply in housing market with the shortfall of land and properties.

Fall in Demand

The majority of supply is targeted towards higher end income households so that the builders and
the contractor’s cans secure higher margin on supply of high-end houses that too at posh places
of Mumbai. Because of this, renting a house has become unaffordable to almost 56% of the
people in this state. The shortage in supply has also resulted in the emergence of poor-quality
housing like chauls and slums like dharvi, which is also the largest slum in Asia. This is the
ultimate paradox in the city of dreams where both posh and slums live side-by-side. Moreover,
because of these high prices and limited supply, the demand for houses is relatively less. People
are more focussed in renting a house rather than buying because of the incapability to afford any.

Results of form 2 were as follows:

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 Analysis of Form 2
Role, Type and Size of Housing
People are fleeing to their native places and won’t return to Mumbai for at least a year. This will
leave over 50 percent of inventories in the rental market unoccupied, when asked about their
preferences, responded with the 81.5% of House owner role and 18.5% of Real estate
businessman role in the housing property. It is believed that both of residential and commercial
sectors are expected to take a hit in term of launches, sales and prices, which is showed in a
Knight Frank India survey. Around 42% of the participants believe that for the next six months,
there will be one of the worst phases in terms of new supplies across
32 the major office in Mumbai.
The participants responses have shown there are more flat supplies i.e. around 77.8% while
22.2% offering PG services. Additionally, the supplies are more for 1BHK and 2BHK, which has
around 50% of changes for creating business for suppliers. In the current situation of COVID
also, the size matters a 3 BHK apartment at a prime location in Mumbai’s Bandra West that was
never rented below Rs 90,000 per month is now available for Rs 65,000 to Rs 70,000. That’s a
drop of almost 28 percent. Yet, there are no takers. The participants they equal preferred 37% of
1BHK and 2BHK when it comes to size of the housing.
Pricing and demand of housing
Mumbai is one of the most crowded cities with localities ranging from a local chawl to
sophisticated gated communities. It all depends on the customer’s budget and adaptability to
adjust to their surroundings. People usually prefer an apartment that is preferably closer to work.
Pricing plays an important role when it comes to renting a house in average to basic location of
Mumbai.Residences can be classified by and how they are connected to residences and land.It’s
hard to rent a house in Mumbai without brokerage and paying an exorbitant amount. Brokers
might be the real-estate ninjas, but the rent is often more than the cost of living in Mumbai per
month! The participants have classified that the range of amount charged by them on monthly
basis are 48.1% of 12K and 18.5% of 5K-8K, 8K-12K.The cost of renting a house and the
average cost of living in Mumbai may differ from person-to-person, but the location of the house
is something that will set the tone and lifestyle for the entire monthly budget. Mumbai might be a
single city but the real estate is scattered and broken down over numerous parts. Thus, it makes
sense to stay to the office to cut down on commute time and expenses. However, housing rental
will be higher if a customer is closer to central Mumbai. If prepared to travel, there’s a better
chance of getting a decent 1BHK for around ₹15-20k. Coming to Real estate businessman the
range of housing provided more than 90L as per the participant says 22.2% of it.

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  ANNEXURE -I
CERTIFICATION 

This is to certify that the Project Report on analyse demand and supply of housing in india with
special reference to mumbai market  submitted in the partial fulfillment for the award of  MBA
Programme of department managerial Economics of  IBS Hyderabad was carried out under the
guidance of   Professor Subhendu Dutta, this has not been submitted to any other University or
Institute for the award of any other degree/ diploma /certificate.

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 ANNEXURE -II
DECLARATION

We would like to express our profound gratitude to all those who have been instrumental in the
preparation of our project report. To start with, we would like to thank our Professor Subhendu
Dutta of Managerial Economics for providing us the opportunity to undertake this project and
allowing us to explore the comprehensive study of a company which was entirely new to us and
which will surely prove to be very beneficial to us in our future assignments, studies, and career
ahead.

A special thanks to all other officials as well. All of them have been very kind to help whenever
needed. I am highly grateful to IBS Hyderabad for helping us get such a wonderful experience
and know the corporate world better.

We wish to place on records, our deep sense of gratitude, and sincere appreciation for our
teamwork which helped us to prepare the framework of the project.

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Bibliography

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