Mr. ABHIRUP BHUNIA, Policy Consultant
Homes may come up for those earning about Rs. 6
lakh a year. But, what about those earning half that or less?
Among the three schemes that Prime Minister Mr.
Narendra Modi launched on June 25, 2015 is ‘Housing for All’, a
self-explanatory scheme - noble in intent and one that was long due.
As a major emerging economy, which is even
projected to leave China behind soon, and the largest democracy in the world,
it is high time India’s every citizen found a decent shelter in cities and
metros.
That said, it is important to understand that
India has a real estate problem quite aside from the Housing for All (HFA)
mandate.
The problems range from ever-increasing prices of
houses — which are not concomitant to growth in per capita incomes- , illegal
constructions, stressed balance sheets of builders due to massive unsold
inventory and incredibly low share of property tax in GDP.
The terrible state of municipalities in India is
another story, though not entirely unconnected to the subject.
Shelter to the needy..!
The provision of new, affordable houses to the
needy is one of the segments of the scheme; others being: credit-linked
subsidy; beneficiary-led upgradation / construction; and in-situ development
(upgrading slum households), which will help achieve slum-free cities.
Indeed, slums are a degrading way for people to
live in. The slum population in the country has grown 25% between 2001 and
2011, during which total urban population rose 32%.
About a third of total slum area in Delhi is
tenable (meaning, where housing upgrade/development is possible). This means
the rest have to be rehabilitated into newly built houses.
Under the HFA, the two beneficiary groups are the
economically weaker sections (EWS) and low income groups (LIG), defined as
those earning up to ₹3 lakh and up to Rs. 6 lakh per annum respectively, an
unexplained three-fold increase from earlier thresholds.
The redefinition of the target beneficiary groups
for the scheme needs to be taken stock of.
Let us for a moment forget the names of the
categories. In terms of income as on 2012, more than 95% of the total housing
shortage was constituted by those earning up to ₹2 lakh per annum.
Affordability issues..!
So now, with the changed definition, the shortage
is largely restricted to the EWS - those earning up to ₹3 lakh.
Those earning up to Rs. 6 lakh (now known as the
LIG) can afford a house worth Rs. 30 lakh (5
times the annual income, according to the government’s own formula).
Developers / builders are more likely to be
willing to build units under this category, and the same will also be made more
affordable through interest-linked subsidies. Even bankers are more amenable to
this category.
But the crucial challenge remains the
provisioning of houses costing up to Rs. 15 lakh. Studies suggest that builders
generally find it unviable to build houses costing between Rs. 5 lakh and Rs.
10 lakh.
If HFA is to become a success, this segment is of
utmost importance. The government alone will not be able to cater to this
demand, thus the private developers need to pitch in very strongly. But the
question is, will they?
HFA would also (ideally) entail development of associated
infrastructure including adequate transport linkages and the provision of basic
civic amenities.
Otherwise we could end up with a ghost town made
up of lines of really cheap houses, which will eventually be a costly buy-in
for the recipients.
In this context, the Atal Mission for
Rejuvenation and Urban Transformation (AMRUT) scheme - which aims at improving
urban infrastructure - should be tied to the HFA scheme and looked at in
conjunction rather than separately.
The
implementation of AMRUT will help make housing units attractive and viable to
buyers.
We can not call HFA a success if the majority of
beneficiaries are those households with annual income of above Rs. 2-3 lakh.
One should recall that the per capita income (a
statistic that includes even the richest) in Delhi as on 2014-15 was Rs. 2.41
lakh, which is also among the very highest in India.
HFA’s other challenge will come in the form of
land acquisition, a tricky subject in today’s political dispensation.
The land question...!
As the Union minister for urban development,
Venkaiah Naidu, has rightly said, easy land acquisition is crucial to the
success of HFA. Consultancy firm KPMG’s estimates suggest that nearly 2 lakh
hectare of land would be required to meet the country’s urban housing need.
Just as a means to put that number in context
consider that a few thousand hectares make for a mega-industrial park.
Scarcity of land can be dealt with Floor Space
Index (FSI) relaxation, a question that needs to be deliberated upon by urban
planners and policymakers.
Mumbai has already effected some reform to that
end.
In addition to the land acquisition problem, it
is worth noting that municipalities across India have a rather
corruption-ridden construction approval process, putting India in the 184th
position in World Bank’s ‘Ease of Dealing with Construction Permits’ and 121 in
‘Ease of Registering Property’ parameters.
Real estate services firm Jones Lang LaSalle
estimates that the approval process after land acquisition till commencement of
construction can take over two years. The 2022 timeline, howsoever desirable,
looks rather steep.
The writer is a policy consultant.
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