“We are doing all that we can to empower the home buyer in this country”
Hardeep Singh Puri is the current Union Minister of State with Independent Charge in the Ministry of Housing and Urban Affairs. A 1974 batch Indian Foreign Service (IFS) officer who served as the permanent representative of India to the United Nations from 2009 to 2013, he was appointed as one of the new ministers in Prime Minister Modi’s Cabinet on 2nd September 2017. He shares his thoughts on his eventful innings in last nine months as the Housing Minister. Edited excerpts:
This was a landmark year for Indian real estate industry with significant rulings for the industry. In the post Rera scenario, with one year of GST and introduction of Insolvency amendment, how do you think the real estate industry is finally shaping up?
Rera came into being as legislation at approximately the same time as the Insolvency and Bankruptcy Code (IBC). Even though the Insolvency bill and the Rera have different focus, with one meant to rescue the homebuyer while the other rescue the company, both at the end of the day are meant to protect the interest of the homebuyer. We needed to amend the Insolvency bill to provide protection to homebuyer by giving them the status akin to that of ‘financial creditors.’ There is a common cynical view that the government does nothing.
I will give you the list of things of what all we have done to rejuvenate the sector. Apart from the RERA bill, Prime Minister Awas Yojana (PMAY), demonetization, look at the amount of relief given to homebuyers in different forms such as increasing the carpet area of houses in middle income group initially from 90 to 120 sq m and then from 120 to 150 sq m and from 150 to 200 sq m. The Government has given infrastructure status to affordable housing and brought down the rate of GST. The rate of GST applicable on houses constructed under PMAY (Urban) has been reduced from 18% to 12% but the effective rate of GST reduces to 8% after taking into account one third abatement towards cost of land.
We can provide the legislation but for people to implement it effectively, will always take a little bit of time. People’s participation is very important. Swachch Bharat is now a people’s movement. PMAY is getting good response. For the smart cities programme, there was some reluctance initially. When I became minister, the allocation was Rs 8,000 crores but by now it is Rs 30,000 cr and by December it will be Rs 50,000 crore. I had said that between June and December you will see the physical manifestation of it and we have been proved right. When we talk about smart city mission, I invite you to go and see any one of the ten integrated command and control centre in Surat, New Raipur, Bhopal etc. It’s a sheer delight to see these – the scheme got announced only in 2015, it started in 2016, it takes 18 months to set up a PMC and another 18 months for Special Purpose Vehicle (SPV) to become operational .But at the end of the day each of the schemes requires for its success a behavioural change. Surat for instance has everything but people are still not wearing helmets.
You need to change that. You can build a toilet but you are not hundred percent sure the person is going to use it. But I don’t think it’s endemic to us- you take the same people and put them in a foreign environment and they will act differently but if 70% of people not using helmet, you also don’t want to use it. Our job is to set up the ecosystem- that’s very true for housing as well. Ultimately these are commercial transactions between two private parties. In this case, we have given power to the party which is adversely affected and that is the homebuyer.
Very often you confer an authority or a power on someone and the person doesn’t even realise the value of it. The IBC (Amendment) Ordinance, 2018 provides for recognising the homebuyers their status as financial creditors.
This would give them due representation in the Committee of Creditors (CoC) and make them an integral part of the decision making process in case of Insolvency. Homebuyers would be able to invoke Section 7 of the IBC against errant developers.
We have lost six months after the Rera challenge, we are facing the Insolvency debate where if you have declared insolvency or bankruptcy, after that you want to bid for that owned asset at a concessional price – those are the issues now. The practice will ultimately determine what the contours are.
Rera has been one of the biggest interventions during your tenure. But how do you respond to pleas for amendments such as having the sanctioning authorities under its purview as builders allege that primary reason for delay of projects is from authorities’ end?
First of all, lets understand what real estate industry is from my point of view. The real estate construction industry is a very important segment of the economy – it’s the second largest employer in the country. Having said that, I also want to say that if there is ‘stress’ in terms of assets being in low supply or assets being in tension, then the state government, the central government and the housing minister have every reason to address that segment of the economy and the stress in that segment, upfront.
But there have to be some qualifiers – when you talk about land, one has to start by acknowledging that land is a state subject and state governments have to enact their own procedures and rules. Rera is a central legislation and the fact that for seventy years after the independence of country, the second largest sector of the economy did not have a regulator is a very strong pointer to the problems that existed.
The fact is that problems still exist. You cannot resolve a seventy year old problem with one year of a new legislation. The real estate sector whether we like it or not, was characterised and continues to have large scale malpractices such as fraudulent behaviour against innocent and unsuspecting homebuyers who have been duped by promoters and developers.
Nowhere in the world you have a situation where somebody takes your money after signing a contract and then diverts the money elsewhere and we all know that the legal system and the criminal system take years to address the problem. Quite simply, Rera is today something that was long overdue. Everyone who had a vested interest in the “status quo” or the situation prior to Rera coming into being was dead against it. So as soon as Rera was enacted, the expected happened- a legal challenge was mounted on all spurious grounds such as it doesn’t cover everything under its ambit etc. The Supreme Court directed the challenge to the Mumbai high court. I was very sure that we will win the challenge to Rera which we did. So my first response is Rera is only one year old and out of that one year, we lost six months in fighting the challenge legislation. S
o for anyone to come and say we want to amend Rera, I want to be very clear where those suggestions are coming from. Bringing all authorities under Rera, means you are changing the basic features of the constitution. I am a student of history and I am always interested in who is writing the history – what are the motivations and biases of people making the recommendation.
The unscrupulous builder loved the pre-Rera situation. The guys who have challenged Rera are the very people who still haven’t come to terms with the existence of Rera. Because what can Rera do - first of all, Rera can ensure that any project that starts from now, will require 70% of the money collected from homebuyers to come into an escrow account and that can only be used for that project.
We are open to any suggestions to make Rera more effective - and we will go clearly setting out those amendments which may be required when we are clear what the benefit is going to be.
There is a target to build 12 million houses in urban areas by 2022 as part of Housing for all Mission by 2022. How many houses have been sanctioned under PMAY (Urban) till now? How many are under construction and how many have been built so far?
We have to build about 11 or 12 million homes. We have already sanctioned 4.75 million. Every month we have a demand for something like 3-5 lakhs. By end of this month, we will have 5 million and by December 2018, we would have sanctioned 10 million. It’s not that there are any impediments but it’s all a question of resources. One of the things that we did for affordable housing apart from all the schemes listed in the four vectors of affordable housing, in situ slum rehabilitation, credit linked subsidy scheme, beneficiary linked development is we realised that demand was so strong that we needed a huge amount of money. So we got an affordable housing fund worth Rs 60,000 crore. But the issue now is that this money will see us through only next six months. In the first month, we were able to utilize Rs 13,000 crore, and now going at the rate of sanctioning 3-5 lakh homes every month, we would have exhausted the funds by Dec 2018.
The title of houses built under the scheme is in the name of woman in the family. What is the response and are people warming up the idea?
In PMAY, the title has to be in the name of the woman of the house or co jointly. People are warming up to the idea and we need to empower the women. It has to be that way and no other way.
If we talk about the flagship schemes of the Modi-led government, whether it is Atal Mission for Rejuvenation and Urban Transformation, Pradhan Mantri Awas Yojana, the focus is towards urbanisation. Isn’t building a counter magnate by developing rural infrastructure a way to ease the burden on our cities?
That was the impression. But the fact of the matter is that there is a very strong rural focus now. If you look at the “unevenness” if I may call it of development in some ways the rural areas got left behind. However, in budget 2018-19, you can see that there is a desire to put the accelerator on the rural economy, rural housing, Swachch Bharat mission etc and several other schemes.
Talking about Delhi sealing drive, you said there will be no tolerance towards encroachments and illegal constructions in Delhi. At the same time, you said that sealing has to be anchored on rule of law and doctrine of common sense. That’s a tight rope walk straddling the interest of the authority and the traders?
There is no tight rope walk. Sealing is an activity directed by the Supreme Court. My job is making policy. Policy making belongs to the Executive, which is the elected government of the day. The master- plan is with DDA – so DDA has authority to amend the masterplan to the extent that it does not violate the interests. But if there are changes to be made to the basic features, then the power to amend the masterplan is with the central government and that’s where I come in. I am very clear that any encroachment on government land is illegal. Neither the traders, nor the RWAs will be allowed to do that. The fact is that encroachments have been taking place and there has been a culture of impunity or more specifically corruption. Local authorities and those who have encroached have colluded and they have gone and occupied government land. But there will be zero tolerance for encroachment.
Now in so far as amendments to masterplan are concerned, in 2006- 7 whenever the masterplan was devised, you couldn’t have anticipated what the demographic pressures on Delhi could be. Masterplan is not cast in stone. You have to go on amending the masterplan so that Delhi starts reclaiming its past beauty rather than becoming one big urban sprawl and a mess. I cannot comment beyond this as the matter is sub judice.
When can we expect National Rental Policy to be released? Will rental homes supplement the Mission of Housing for All?
You can expect the National rental policy to come out very soon. Yes, rental homes is an important segment and we are committed to promoting it in a big way and have been working upon it. Currently there are a lot of homes lying vacant as landlords are apprehensive to rent them out to tenants for a variety of reasons such as the commercial contract not giving adequate coverage and protection. I can assure you that a new policy will come out sooner than expected.
You have said somewhere that we must have tall buildings in the city and have been a proponent of higher FAR. True?
I also said somewhere that our town planners are living in bullock cart age. I feel people have been victims of bad policy. Who created the slums? They did not create the slums rather it was the result of poor planning. There is no doubt that you need higher FAR. Mumbai and Shanghai were at the same level and look at where Shanghai is today. Population is increasing and we need taller buildings in the city to account for increasing population.
Hardeep Singh Puri