Affordable housing: Four ways to give it a boost

New Delhi: In an affordable housing symposium in the city today, Union Minister for Housing and Urban Poverty Alleviation, Ajay Maken, stressed on the importance of _makaan_as one of the basic needs of any person.

“After food or roti, shelter comes second in the priority of needs for any person and hence housing is so important,” Maken said.

According to a recent report by the ministry , India’s urban housing shortage is 18.78 million for the next five year plan from 2012 to 2017, of which 96 percent are in the EWS (economically weaker section) and LIG (low income group) categories - shortage for the EWS stands at almost 11 million homes or 56.2 percent, while that for LIG is at 7.41 million homes or 39.5 percent.

According to studies, Maken said, the disparity in terms of shelter and housing in urban areas is more than that in rural areas, yet 11 million urban houses are lying vacant.

But, with high land prices, difficulties in land acquisition and red tape in the process of getting permissions, what will make developers want to venture into affordable housing - where they essentially make lesser profits and yet go through the bureaucratic grind they are already being subjected to?

1. Incentivise affordable housing for developers

The sector should be given, both, financial and non-financial incentives so as to develop more affordable housing projects.

Giving land at lower rates and higher FSIs will be one way, said Maken.

[caption id=“attachment_663280” align=“alignleft” width=“380”] Representational Image. Reuters[/caption]

Arun Kumar Misra, Secretary, Ministry of Housing and Poverty Alleviation, said non-financial incentives like a single window clearance, extra FSI, Income Tax concessions and an industry status to real estate will help boost the segment.

Misra said that the recent move by the RBI to allow External Commercial Borrowings (ECBs) unto $1 billion for low-cost affordable housing projects and the plan to allow more FDI in the affordable housing segment will will also boost the segment.

2) Single window clearance

Misra said a single window clearance system will also make it easier and more efficient for developers to be encouraged to take up affordable housing projects.

With time, money and energy saved on trying to get approvals, clearances and sanctions, builders will be more likely to be able to lower their margins and provide affordable housing.

A report on the single window clearance is expected to be completed next month, Misra said.

3) Implementing existing norms more strictly

Delhi already has a norm where private builders have to reserve 35 percent of the housing they build for the EWS - it is as per a provision by the DDA, said Misra.

“We are now insisting that 15 percent of the floor area ratio be kept for the EWS and followed,” Misra said.

In an earlier interview , Amitabh Kundu, chairman, technical group on Urban Housing Shortage Report 2012-17, had told Firstpost that implementation was an important part if we had to provide housing to all, especially the EWS and LIG.

“Making sure developers have a 35 percent reservation for these sections of society is going to be a very challenging task. We have had so much of positive talk for the last 40 years, but implementation fails because the framework itself is very weak and without a robust framework, a general announcement is no good,” Kundu said.

4) Financial support to poor to buy homes

“India has seen a housing boom in the past 10 years, mainly aided by the private sector and foreign investors, but nobody ever thinks of building homes for the EWS and LIG,” Misra said that the symposium. “Housing today is out of the reach of even middle class, so how will the poor afford it? he asked.

He thus said that financial support to the poor by way of subsidies will have to continue so that the poor can afford housing - like the Rajeev Gandhi Awas Yojna where the government gives local bodies the money to construct homes for its people. To avoid misuse of the scheme, the beneficiaries have to pool in at least 10 percent of the cost themselves.

Misra also said that a pool of money will have to be created so as to service the poor and so that they can borrow from that pool.

Maken too was agreeable to the point made by Misra.

“Easy loan and credit must be given to the poor so that they can but homes. In our research during setting up the Credit Risk Guarantee Fund (CRGF) -a scheme for low-income housing - we found that the disbursement of housing loans were set up in a way that a poor person could not take a loan,” Maken said.

Hence, after taking charge as Union Minister for Urban and Poverty Allieviation on Oct 30 last year, Maken announced the CRGF - a trust of Rs 1,000 crore set up by the government through which the government can provide credit risk guarantee to lending institutions against housing loans of up to Rs 5 lakh for borrowers falling under the EWS/LIG categories.

Under the scheme, banks can give EWS and LIG intreats subsidies on loans they take for buying houses and also on loans borrowed to use on improving existing houses and improving their standard of living.

Maken said that 16 banks across the country had already collaborated with the government on this.