Affordable Housing: Analyzing the Shift towardModular Construction and Co-living Spaces

Key takeaways:

• Introduction
• Impact of modular construction and co-living spaces
• Major initiatives and schemes

Over the last few decades, the rate of migration of people from rural areas to industrial towns has increased significantly. The various employment opportunities available in urban areas, distress in the agriculture sector, and better standard of living in metropolitan cities have played an important role in accelerating this migration rate. As a result, the pace of urbanization and industrialization has increased immensely, thus boosting the real estate sector in developed and developing countries. During the pandemic, however, the demand for residential and commercial space dropped drastically. Even in the post-pandemic period, low- and middle-income groups have been unable to invest in housing schemes as their income levels due to the soaring real estate prices. This has led to affordable housing projects becoming one of the most important trends in the construction sector.

The affordable housing industry has witnessed huge growth in developing countries such as India, China, Mexico, Brazil, etc. The governments in these sovereign states have launched several affordable housing schemes to improve the living conditions of the people in urban areas and bring them out of poverty. In most of these nations, these housing programs are primarily designed to provide an all-weather accommodation unit to slum-dwellers. Along with such governmental support, financial institutions and banks, too, have stepped in to fund these projects and provide home loans at concessional rates. The industry is expected to gather a revenue of $84.7 billion by 2031. The sectoraccounted for $52.2 billion in 2021 and is estimated to gather a revenue of 4.9% during 2022-2031.

Transition toward modular construction and co-habitation spaces

To improve the quality and efficiency of their operations, construction companies are adopting new methods for broadening their scope in the sector. Modular construction, for instance, has become quite a popular technique that involves manufacturing and production of building components in different locations and then transporting and installing them at the project site. This approach is often referred to as the prefabricated building methodology. The most obvious benefit of modular construction is that it helps companies  address the specific needs of the customers easily. The flexibility and customization offered by this technique aid local authorities in designing houses as per the surrounding environmental conditions.

Additionally, contractors, architects, and builders are increasingly moving toward modular construction methodology to accelerate the building processes, thereby ensuring faster project completion. As per several civil engineering studies, prefabricated building methodologies aid in reducing the time required for site development by around 50%. Many governmental entities, hence, prefer this approach as it helps them provide affordable housing solutions to their citizens within the stipulated timeframe. However, the most important advantage offered by modular construction is that of cost reduction. By ensuring resource optimization, prefabricated building methods help companies reduce the wastage of raw materials. Moreover, the possibility of unforeseen expenses is lowered drastically in the approach, further limiting the input costs. Ultimately, this enables construction enterprises to provide residential spaces to customers at affordable rates.

Along with modular construction, co-living spaces are another trend witnessed in the affordable housing industry. Co-living spaces are residential units wherein three or more biologically unrelated entities live and work together. It is a community living approach wherein people with similar value systems and preferences cohabit in the same area. Also called shared living, this model is quite common in the UK, the US, and India. For instance, government entities and private construction companies in these countries frequently invest in real estate development projects related to tenements, boarding houses, and chawls. The convenience, sense of financial and mental security, and flexibility offered by co-living spaces make them a popular idea in the landscape.

Initiatives by leading stakeholders transforming the industry dynamics

As mentioned earlier, several construction companies and financial institutions have launched various initiatives and programs to strengthen their foothold in the landscape. For instance, in July 2024, Bajaj Housing Finance, a leading NBFC based in India, rolled out Sambhav Home Loans, specifically for first-time loan buyers. The principal amount and interest rates are designed to suit both salaried and self-employed individuals, thus increasing the demand for affordable residential spaces.

Similarly, in July 2024, Costco, an American multinational corporation, announced the launch of affordable housing solutions to address the residential construction crisis in the region. The company, in its press release, stated that the first project has been approved in the Baldwin Village/Crenshaw area of South Los Angeles and will be jointly developed by two leading players in the industry, viz., Thrive Living and architects AO.

Wrapping up, the growing need to revive demand in the construction sector has led to a shift toward affordable housing. Furthermore, the rising popularity of co-living spaces and modular construction techniques is predicted to accelerate the industry’s growth rate and success in the near future.

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