By Mr. R K Arora, Chairman – Supertech Limited
For a nation where high population numbers have always been a bane, it is no surprise the shortage of homes has been a perennial problem. Keeping this in mind, the NDA Government had announced an ambitious ‘Housing for All by 2022’ programme after assuming power.
But the Government is well aware that implementing a programme is more difficult than announcing it. Accordingly, it has been taking follow-up measures in ensuring the programme is on track to meet the tight deadline. In September last year, the Centre announced its new public-private partnerships (PPP) policy for promoting private participation in affordable housing to support its ‘Housing for All’ agenda. Under this, eight PPP options have been created, permitting private sector investments in affordable housing projects.
One of the prime objectives of this policy is spreading the risks among the Government, private developers and financial institutions. Thereby, entities capable of managing certain aspects best will be handling those roles while ascertaining that underutilised and unutilised private and public lands are put to productive use.
Among the eight PPP models, two deal with extending Central help of about Rs250,000 per house as interest subsidy on bank loans via upfront payment under the Credit-Linked Subsidy Component of the Pradhan Mantri Awas Yojana (Urban). These houses will be built by private developers on private land. In the second instance, the Central aid of Rs150,000 per house will be provided for houses built on private land, in cases where beneficiaries do not wish to avail of a bank loan. All the other six options deal with implementing affordable housing projects on Government land using private investments.
Undoubtedly, these programmes will give a major fillip to affordable housing projects across India. These initiatives have come at the right time when the real estate industry is striving to overcome sluggish market conditions. Although data from Census 2011 indicates the housing shortage rate in the urban areas has dipped from 1.63 million to 0.39 million units, the overall problem persists.
It is in this scenario that the importance of PPPs becomes imperative in bridging the demand-supply gap in affordable homes. Traditionally, private developers and housing finance entities have preferred mainly targeting housing for HIGs (higher-income groups), driving sustained supplies and higher competition in this segment. Conversely, despite the Government always focussing on providing homes to the poor and the EWS (economically-weaker sections), its efforts have generally fallen short.
Given the strengths of each entity, public and private, PPPs are a means of utilising the best of both worlds, which can be critical in overcoming the challenges of providing affordable homes to millions across the country.
Going by official estimates, the shortage in housing was 18.78 million units in 2012. Of this number, 96.5% fell in LIG (low-income group) and EWS, as per end-2017 estimates. Moreover, states such as Uttar Pradesh, Andhra Pradesh, West Bengal and Maharashtra with 7.61 million units accounted for a greater percentage of the housing shortage, according to a report by the Technical Group on Housing Shortage (TG-12). On the other hand, the urban zones suffer the opposite problem of unsold inventories in the MIG (middle-income group) and HIG category.
The challenges confronting affordable housing are varied. These include the scarce supply of affordable land; high cost of capital; lack of adequate attraction for private developers; absence of suitable technology; as well as the complexity of rules and regulations, among others.
To neutralise these obstacles, the Government is considering solutions such as single-window clearance and online approvals for the industry in general, coupled with subsidies and fiscal incentives for private developers participating in low-cost housing projects in particular. In the latter case at least, multiple projects have taken off across the country, with some at various stages of completion. The response from the public has also been good, with robust bookings in almost all projects.
There is no doubt the situation is bound to improve in the days ahead, considering the Centre’s keenness in addressing the acute shortage of affordable homes. As per a report from the Ministry of Housing and Urban Poverty Alleviation, urban housing inventory has risen from 52.06 million units to 78.48 million during the past decade. Besides, the successive Union Budgets of 2017-18 and 2018-19 have offered numerous tax benefits and policy proposals seeking to enhance the lure of the affordable housing segment.
Eventually, the degree of success recorded by the affordable housing mission will be contingent on the level of interest and involvement displayed by both public and private players – each undertaking their assigned responsibilities in the best possible manner and within the predetermined delivery timelines. Success in affordable housing partnerships would then augur well for the future of PPPs in India – in realty as well as other sectors.