Constraints With respect To Demand and Supply of Affordable Housing

Thesis Title: Study of the Constraints With respect To Demand and Supply of Affordable Housing Using New Institutional Economics Perspective: case study Nagpur city.


To study the constraints with respect to demand and supply of affordable housing using New Institutional Economics perspective and propose policy recommendation


On the basis of need of the study, and in order to achieve the aim, the following objectives have been formulated:

  1. To analyze the success and failure of affordable housing sector in Maharashtra (Nagpur).
  2. To analyze the case study of Nagpur with respect to supply demand of affordable housing using NIE component – Transaction cost.
  3. To provide policy recommendations for making affordable housing reachable to respective income groups.


  • Study is limited to the one NIE component, Transaction cost.
  • Study is focused to only one urban center: Nagpur, Maharashtra.
  • The research is limited to the affordable housing Markets and EWS- LIG income group.
  • Study is based on primary and secondary data.
  • The primary data will be collected by survey with the actors in markets and end-users.

Demand Balance

Need for Study

Housing is one of the basic needs of every individual as besides providing shelter and security, the urban population of India has been growing at rapid rate. As per the Census 2011, 31.16 per cent of the total population is in the urban areas. (Director-CoI, 2011) The shortage of housing units for the urban areas for 2012 is estimated at 18.78 million units (National Housing Bank, 2012) .

The major cause for above statistics can be a Transaction cost, Indian cities the buyer of a House faces a variety of different transaction costs. The search costs, the bargaining costs and the policing and enforcement costs are some of the transaction costs which buyer has to pay while purchasing house. That all transaction cost alone responsible for major part of the housing purchase cost.

Nagpur have complex taxation system with Nagpur Improvement trust and Nagpur Municipal Corporation. According to the census data out of 6.55 Lakh houses 10% of house are still vacant and slum pollution contribute 36% of total city population (CHF International, 2008).

In another scenario the vacant houses and buyer also present in market but gaps between buyers and seller are increasing. So demands are not meeting in housing market. The major cause of this condition can be seen as intervention of transaction cost and it has to be study in city level. The Nagpur city scenario has to be study with NIE Transaction cost perspective.

Housing Demand

Case Study: Nagpur City


Nagpur is the witness of fastest growing city in Maharashtra, as the big project coming like Mihan, Nagpur Metro etc then the level of Urbanisation also increase, Population and demand for housing also increase. Sustainable and well functioned market of housing can minimize the problems of unaffordability and problem associated with rapid urbanisation. This research explores the different aspects of Affordable housing sales market in Nagpur city.

The New Institutional Economics’ Transaction cost parameter in housing market plays very crucial role. It differ from location to location and local authority to local authority. Higher the transaction cost tends to lower the efficiency of affordable housing market and hence increase unaffordability. This study emphasised that every affordable housing buyer has to pay tentatively 10 % as transaction cost on Housing price which is enough to make affordable housing unaffordable. High transaction cost and unaffordable housing are seen conductive to the creation of urban slum.

On the analysis part of this study Bank loan first and Transaction cost have notified as third main hurdle in achieving affordable housing. People living in slum are getting rejected in loan application to the bank also the round trip transaction cost itself cost tentatively 10%- 12% of total housing price. Urban poor are seeing this as hurdle in buying of property.

In city level those problem should be address by ULB or Development planning authority. This research study is attempt give recommendation to such problem of affordable housing using New Institutional Economic perspective.

Keywords: Housing; Affordable Housing; New Institutional Economics; Microeconomics

Author – Akshay Patil
Guide –  Ms. Neha Verma Madan
College – College of Engineering, Pune (COEP)
Undergraduate – B.Tech (Planning)
Year of thesis completion – 2016

Kindly contact at [email protected] to request more information about author/ thesis

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