By R K Arora, Chairman, Supertech Limited
India is a rapidly urbanising country facing development challenges connected with speedy growth. One of the key challenges for a budding country like India is urban migration, which is further exacerbated by restricted resources to meet intensifying housing demands. The high percentage of labour immigration from rural areas to cities has contributed to urban congestion, pressure on basic amenities such as water and sanitation, etc, and most of all, housing shortages in cities across India.
Further, the country’s total urban housing deficiency is anticipated to be about 30 million by 2022. This constantly increasing gap between demand and supply in the affordable housing section is forcing the public to live in slums and informal settlements. It is understandable that the subject, if not dealt capably, can have a marvellous negative impact on the country’s financial growth and poverty reduction efforts.
Real Estate developers and private players are focusing mainly on MIG and HIG segments due to the higher returns from these projects. On the other hand, high land costs, interruption in project approvals, rising raw material costs and low-profit margins have made low-cost housing projects less attractive to the private developers. Also, housing, as well as Affordable Housing being a state subject creates complexities in implementation because of unstable financial condition of development authorities, state/ city-level agencies and their restricted capacities in supervision in these projects.
Role of Government:
To fruitfully build India’s Affordable Housing, a partnership between the central government ministries, state governments, urban local bodies, civil society, the private sector, and financial organization is essential. The combined schedule must go forward with the efficiency of affordable housing sector at an optimally low cost while maintaining security standards and basic facilities. To mainstream affordable housing, the government needs to principally act as an enabler for growth and be concerned in facilitating investments, both public and private, and shake-up processes across the value chain.
Housing in India varies significantly and can reproduce the socio-economic mix of its vast population. In the previous decade, there has been remarkable growth in the country’s housing sector, along with demographic changes, rise in income, increase in the number of nuclear families, and urbanisation.
The commitment to have housing for all by 2022 is the vision of the new government, and realizing this dream can be a step towards building a brighter India. Before taking any action, it is significant to re-examine the current state, recognize bottlenecks, and build an efficient execution strategy. Though the housing deficit is much wider in rural areas compared to urban areas, it requires only a small portion of total investments foresee till 2022, which can be meted out without much difficulty.
The central government with partaking from state governments, drafting a plan of delivering three crore houses in rural areas with an outlay of INR3.45 lakh crore (USD58 billion) by 2022 is a good start.
Private sector participation:
Since the beginning of the twenty-first century, a slew of regulatory reforms such as allowing foreign direct investments, improving access to credit by households, providing tax incentives on housing loans, developing special economic zones and thrust on infrastructure development, coupled with high economic growth, have propelled private sector participation in urban housing development. However, it has largely resulted in the development of Middle Income Group (MIG) and High Income Group (HIG) houses, leading to a significant shortage of EWS/LIG or affordable houses. The development of urban affordable houses has been limited due to several structural issues making it unfeasible business proposition for the private sector.
Encouraging private sector participation in urban affordable housing development could require a coordinated effort from central and state governments. A key role of the central government in the ‘Housing for all by 2022’ vision would be that of a facilitator by creating an enabling environment through Introducing statutory and regulatory reforms in land acquisition, and a real estate regulator, and review archaic regulations governing the real estate sector. Streamlining clearances and approval procedures required from central government agencies such as the Ministry of Environment and Forest, and the Ministry of Civil Aviation.
The mobilisation of such huge resources (funding, construction capacity, labour, technology, etc.) for mass scale affordable housing development by the central and state governments may be difficult, without participation from the private sector. The private sector, which is often better in terms of managing construction risks and project delivery, should be encouraged by central and state governments, by addressing several structural issues.
Promote the PPP framework effectively to address major issues:
PPP projects can play an important role in bridging the gap between the housing need and supply as they can be instrumental in attracting private capital for financially viable affordable housing projects. The PPP framework can be effectively used to address some issues in housing development such as land availability, approval delays, funding, and affordability by the poor.
The housing sector has tremendous potential as it is a major enabler as well as the contributor to the economy. It is among the largest contributor to the exchequer and second largest employer. The sector also supports 250 other ancillary industries and has a huge multiplier effect on the economy. Proper nurturing of the sector could help increase its share to 10 to 12 per cent by 2022. The central government could explore forming a nodal agency under the Ministry of Housing and Urban Poverty Alleviation to facilitate fast-track development of affordable housing projects. This nodal agency could be a coordinating agency amongst the private sector, consumers, lending institutions, investors, various housing regulatory agencies and infrastructure sector ministries, and state governments and ULBs.
Another key aspect that is widely neglected while planning an Affordable Housing Project is the maintenance, post hand over of units to the customers/ beneficiaries. This eventually creates ‘New Urban Slums’ and defeats the purpose of creating these assets in the first place. It is of utmost importance to address this aspect to create sustainable benefits of the creation of these assets. The Government of India in its schemes has taken many steps to boost the sector, but challenges still remain. For instance, while Rajiv Awas Yojana (RAY) envisaged a fund for maintenance of assets created under the scheme with a one-time contribution from the central government, it could not be implemented at a wider level.