Housing for all in India by 2022: Clock ticking for govt
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’ 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 any city or region, as it attracts inward migration.
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. Finally, affordable housing in India coexists with mid-income housing, as the middle class invariably depends on the services of lower-income earners to keep its show going, so to speak.
The critical importance of affordable homes is an immutable truth in any country and its economy. In India, affordable housing has 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, non-established developers who did not follow any rule book.
Their modus operandi was to buy small land parcels on the outskirts of cities, 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. Such developers banked on the fact that their target clientele was extremely cost-sensitive and not up to speed on regulatory matters.
The ‘amnesty schemes’ that the government rolled out to ‘regularise’ such housing projects for a certain fee justifiably drew ire. Without a doubt, many fly-by-night developers benefited from these schemes in the past.
The arrival of the Real Estate Regulatory Authority 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 government has also rolled out various incentives to boost affordable housing. To begin with, the government designated this 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 beneficiaries under the Pradhan Mantri Awas Yojana.
The government also brought in a new Credit Linked Subsidy Scheme (CLSS) for the middle-income group, with a provision of ₹10 billion. Additionally, the extension of tenure for loans under the CLSS of Pradhan Mantri 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 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.
Only strong developers in the formal housing sector will now prevail in the affordable segment