The clock is tick­ing: Will af­ford­able hous­ing be a re­al­ity for ev­ery­one in In­dia by 2022?

HT Estates - - FRONT PAGE - Anuj Puri feed­back@hin­dus­tan­

NEWDELHI: Af­ford­able hous­ing is not just about pro­vid­ing homes to the lower-in­come strata of so­ci­ety, though that is what the Modi govern­ment’s avowed in­ten­tion be­hind the ‘Hous­ing for All by 2022’ doubtlessly is. Af­ford­able hous­ing cre­ation also has a di­rect and favourable cor­re­la­tion with the na­tion’s econ­omy, as well as most other real es­tate seg­ments. Hous­ing for lower-in­come wage earn­ers in­creases the eco­nomic strength of anyc­ity or re­gion, as it at­tracts in­ward mi­gra­tion which cre­ates a big­ger man­power pool.

This, in turn, boosts the vi­a­bil­ity of open­ing up in­dus­tries and busi­nesses in the re­gion, trans­lat­ing into more de­mand for com­mer­cial real es­tate spa­ces. For­mal and in­for­mal re­tail is also at­tracted to res­i­den­tial catch­ments, trans­lat­ing into con­sum­mate de­mand for re­tail spa­ces in an­daround­such­catch­ments. Fi­nally, af­ford­able hous­ing in In­dia co­ex­ists quite benev­o­lently and ben­e­fi­cially with mid-in­come hous­ing, as the mid­dle class in­vari­ably de­pends on the ser­vices of lower-in­come earn­ers to keep its show­go­ing, so to speak.

In cities like Mumbai, low­er­in­come hous­ing ex­ist­ing along­side the su­per-ex­pen­sive abodes of ul­tra high net worth in­di­vid­u­als (HNIs) is also not con­sid­ered an anom­aly. The fairly re­cent trend of ‘gated com­mu­ni­ties’ per­haps seeks, to some ex­tent, to re­serve the prop­er­ties within its perime­ters to a cer­tain level of net­worth fam­i­lies - but even in such projects, we see low-cost hous­ing sprout­ing upal­most as a log­i­cal con­se­quence all around them.

The crit­i­cal im­por­tance of af­ford­able homes is doubtlessly an im­mutable truth in any coun­try and its econ­omy. In In­dia, af­ford­able hous­ing has def­i­nitely played this role and will con­tinue to do so. How­ever, there has in the past also been a more sor­did side to the story. While there were also re­puted na­tional play­ers active in this seg­ment, af­ford­able hous­ing in In­dia has his­tor­i­cally been the play­ing ground of smaller, non­estab­lished de­vel­op­ers who did not fol­low any par­tic­u­lar rule book.

Their modus operandi was to buy small land parcels on the out­skirts of cities and in gram pan­chayat areas, and build very ba­sic hous­ing projects bereft of any but the most rudi­men­tary fa­cil­i­ties and ameni­ties. The plots they favoured were in­vari­ably in areas which, be­cause they fell out­side mu­nic­i­pal lim­its, did not have proper wa­ter and elec­tric­ity or even road con­nec­tiv­ity. Worse, such builders of­ten did not have all reg­u­la­tory clear­ances and per­mis­sions for their plots and projects.

Peo­ple bought homes in such projects be­cause the quoted ticket sizes were at­trac­tively low - of­ten so low that they would have aroused sus­pi­cion with more in­formed buy­ers. Such de­vel­op­ers banked on the fact that their tar­get clien­tele was ex­tremely cost-sen­si­tive and usu­ally not up to speed on regu- la­tory mat­ters.

The ‘amnesty schemes’ that the Govern­ment rolled out to ‘reg­u­lar­ize’ such hous­ing projects for a cer­tain fee jus­ti­fi­ably drew ire, as such schemes seemed to en­cour­age the de­vel­op­ment of il­le­gal hous­ing projects. Without a doubt, many flyby-night de­vel­op­ers ben­e­fited from these schemes in the past and even banked on the pos­si­ble op­tion of re­sort­ing to them when the de­mo­li­tion ham­mer fi­nally loomed over their projects.

The ar­rival of RERA has put paid to such un­der­handed ac­tiv­ity, and only strong de­vel­op­ers in the for­mal hous­ing sec­tor will pre­vail even in the af­ford­able seg­ment. This in­cludes well-es­tab­lished lo­cal play­ers with good track records for timely com­ple­tion and qual­ity stan­dards. The breed of fly-by-night op­er­a­tors who looked at af­ford­able hous­ing as a means to make a quick buck will now be driven off the mar­ket.

The Govern­ment has also rolled out var­i­ous in­cen­tives to boost af­ford­able hous­ing. To be­gin with, the GOI des­ig­nated this vi­tal sec­tor as a favoured seg­ment un­der its Hous­ing for All by 2022 ini­tia­tive. This led to af­ford­able hous­ing grad­u­at­ing from be­ing the poor sec­ond cousin of In­dian real es­tate to a highly in­flu­en­tial sec­tor. The most re­cent Union Bud­get pro­vided di­rect tax re­lax­ation to the low­est in­come earn­ers, along with much-needed clar­ity on the des­ig­nated ben­e­fi­cia­ries un­der the Prad­han Mantri Awas Yo­jana (PMAY).

TheGovern­men­tal­so­brought in a new Credit Linked Sub­sidy Scheme (CLSS) for the mid­dlein­come group, with a pro­vi­sion of INR 1,000 crore. Ad­di­tion­ally, the ex­ten­sion of ten­ure for loans un­der­theCLSSofPrad­hanMantri Awas Yo­jana (PMAY) was in­creased from 15 to 20 years. Fi­nally, af­ford­able hous­ing has also been ac­corded the very im­por­tant in­fra­struc­ture sta­tus, en­sur­ing that de­vel­op­ers in this seg­ment have ac­cess to cheaper loans and var­i­ous other in­cen­tives to en­cour­age them to pitch in and drive sup­ply.

Hav­ing emerged as a preferred seg­ment for hous­ing fi­nance in­sti­tutes, af­ford­able hous­ing is now also at­tract­ing the in­ter­est of more de­vel­op­ers who had pre­vi­ously shunned it be­cause of its ‘down-mar­ket’ im­age. To­day, af­ford­able hous­ing has be­come a re­spectable seg­ment and the Govern­ment’s de­ter­mined push to­wards cre­at­ing it across the coun­try in suf­fi­cient num­bers, it now plays a very im­por­tant role in the hous­ing fi­nance sec­tor.

That said, whether the Govern­ment’s vi­sion for Hous­ing for All by 2022 is re­al­is­tic and im­ple­mentable to its in­tended ex­tent is still a big ques­tion mark. Def­i­nitely, it seems im­pos­si­ble if enough land is not re­leased for the cre­ation of af­ford­able hous­ing. Var­i­ous Govern­ment agen­cies such as the In­dian Rail­ways do, in fact, hold size­able land parcels which could log­i­cally be de­ployed for this pur­pose.

Land is a very price-sen­si­tive com­mod­ity, and its cur­rent short­age in ma­jor city-cen­tric areas pre­vents the de­vel­op­ment of af­ford­able hous­ing in areas where it is most direly needed. The cost of land cur­rently ac­counts for as much as 30-50% of the cost of a project within city lim­its. How­ever, RBIreg­u­la­tions do not al­low banks to fund land pur­chase. De­vel­op­ers, there­fore, are left with only a few op­tions. They can ei­ther form a joint ven­ture (JV) with the land owner, or get funded through NBFCs - usu­ally a very ex­pen­sive route, which again pre­cludes the prospect of de­vel­op­ing af­ford­able hous­ing ontheac­quired land.

This is not the only area that needs to be looked at se­ri­ously. The lower-in­come groups also need ac­cess to hous­ing loans to a much greater ex­tent that the PMAY scheme of­fers. In the first place, aware­ness about this scheme among those whom it in­tends to ben­e­fit is se­ri­ously lack­ing. Also, the te­dious KYC norms needto be re­laxed for low­in­come, in­for­mal sec­tor buyer who has the most press­ing need for hous­ing. Above ev­ery­thing else, the ob­vi­ous need of the hour to un­ravel the Gor­dian knot of com­plex­ity sur­round­ing af­ford­able hous­ing in In­dia is con­cen­trated po­lit­i­cal will.

Go­ing by its ex­ist­ing track record, the cur­rent Govern­ment is def­i­nitely ca­pa­ble of making the re­quired push -- and with Govern­ment-held land be­ing mat­ter of public record, of de­ploy­ing the nec­es­sary land re­sources. The de­mon­e­ti­za­tion move and rolling out of RERA and GST are ready ex­am­ples of a de­gree of po­lit­i­cal will which has, in many re­spects, not been ev­i­denced in In­dia be­fore.

Will we see the Govern­ment make yet an­other se­ries of de­ter­mined moves to ful­fil its vi­sion to put a roof over the head of every In­dian ci­ti­zen? On­ly­timewill tell -- but the clock is def­i­nitely tick­ing to­wards 2022.



The lower­in­come groups also need ac­cess to hous­ing loans to a much greater ex­tent that the PMAY scheme of­fer

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