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Need for Affordable Housing to Occupy the Centre Stage in Real Estate


By Shorya Choudhary

Affordable housing is increasingly becoming a hot topic over the years thanks to the ‘Housing for All by 2022’ program under the Modi Government. However, this promising avenue which can be a key to unlocking great potential in the Indian real estate sector has been unable to attract as much investment due to obstacles such as lack of data on beneficiaries, lengthy approval process, and unavailability of suitable land parcels, to name a few. Proper Government-initiated incentives to give an adequate push to supply in the market can help, which is already set to fall short of the target set for 2019.

As of 2017, around 454,000 homes remained unsold in top cities of Gurgaon, Noida, Mumbai, Kolkata, Pune, Hyderabad, Bengaluru and Chennai. Similar stories emerge in other parts of the world. Take for instance China, which has an increasing number of what they call ‘Ghost Cities’, eliciting the response from President Xi Jinping that houses are built to be inhabited, not for speculation.

There exists a mismatch in the supply-demand in terms of price or location of the housing units. At the end of 2012 itself, there were an estimated shortage of around 19 million houses for the Economically Weaker Sections (EWS), low and middle-income groups. Affordability of houses has dropped from 22 percent in 1995-96 to 4 percent in 2016. The legal mandate and framework to remedy this is in place – Pradhan Mantri Awas Yojana-Urban (PMAY-U), which subsumes all the previous urban housing schemes along with Supreme Court judgments which have stressed on right to shelter as being included under the fundamental right to life embodied in Article 21.

Affordable housing has come to occupy a greater share of the mainstream real estate business due to an increased boost to Government initiatives on the same, like the Pradhan Mantri Awas Yojana (PMAY) and Credit-Linked Subsidy Scheme (CLSS). This is shown in the pie chart below.

However, there are some obstacles to affordable housing. First and foremost, identifying beneficiaries can become a task in itself due to the unavailability of the database. The Government can in partnership with research institutions create such database, along with other details such as what is the predominant type of occupations and where these people are employed. Self-registration portals can be an option, where the families come forward and identify themselves before the respective authorities. However, the main problem arising with this can be a lack of awareness. Government policies like Aadhar, though they face public opposition on grounds of privacy, etc. can be helpful as the data thence collected can be used for creating a list of beneficiaries.

Secondly, obtaining approvals and sanctions can be a long-drawn process, with about 20-30 approvals required from multiple authorities taking up to two years. Real Estate (Regulation and Development) Act, 2016 (RERA) itself in seeking to streamline the process, has provided for compulsory registrations before offering for sale, land title insurance, etc. under its provisions (sections 3 and 16 respectively). RBI in its October 2017 Monetary Policy Statement has said the faster rollout of the projects, including single window clearances, will boost growth. However, the National Green Tribunal has struck down such attempts by the Governments to avoid circumvention of environmental laws by amending the Environment Impact Assessment Notification, 2006, disallowing changes to environmental law which were ‘detrimental to environmental protection’. This, in addition to the existing downside of lower profit margins when catering to the EWS, dampens any incentive the prominent builders or investors might have to bet their money on. While this is commendable as we need to realize that the interests of the environment and consumer cannot be overlooked, this is not enough to woo the builders.

Making it an obligation on builders, such as a Corporate Social Responsibility (CSR) will then be approached as just that – a requirement, and thus lead to sub-optimal results and not the innovative solutions that a free market carries with it.

Apart from this, we need to make the investors and builders realize that perhaps the high-end realty market has reached a saturation point and offers no prospects for exponential growth, so they better invest their money in the affordable housing sector. Awareness about finance schemes for builders such as the Refinance Scheme for Affordable Housing by the National Housing Bank which helps in concessional lending through various lending institutions in the market and CLSS which aid the buyer can be another important step.

In most cases, where redevelopment of a plot of land takes place, the developers get rights, called Transferable Development Rights, to develop and sell a certain portion of the land at the market rate. However, a recent judgment of the Bombay High Court[1] disallowed some claimants due to delay in filing. Therefore, certainty and ease finding out the rules governing these projects is a necessity.

Another issue has been that of lack of availability of land in urban areas. Back in 2004, the Delhi Development Authority (DDA) was trying to rehabilitate the slums of Katputhli colony. The plan was to shift the families to Narela, Dwarka, etc. which could not take off because of lack of jobs for the shifting families in these areas. This highlights the importance of finding land parcels close to where jobs and other services such as schools and hospitals are located. One way can be making use of height. Older dilapidated buildings which need redevelopment and are single or double-storied can be made tall apartment complexes with the consent of the residing people, as per the sanctioned plans. Alternatively, accounting for both housing and transport to the workplace (H + T method) for calculating affordability of housing when it comes to policy-making can be a solution. The generally acceptable amount for housing expenditure has been one-third of the total income of the family unit (under the expenditure method and the median multiple indicators).

We can also look at other countries for ideas – China, for instance, has a provident fund where the employer and employee put money into these funds which they are used for affordable housing; the US has monetary transfers to family units where affordable housing exceeds one-third of the income of the unit. However, these would only work for workers in the formal sector.

Affordable housing is gaining ground among the public, especially in recent years. But there is still a long way to go. The private sector will play an important role and can exponentially help us stride towards a future where housing for all becomes a reality, even though it might not happen by 2022. What will be essential to this is that the Government puts in place adequate facilitators as well as controls to create an environment where the projects can occupy a larger chunk of the mainstream real estate scenario.

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