The Hindu Business Line : SRZs for quality housing

The Confederation of Real Estate Developers Association of India (CREDAI) has proposed a concept of Special Residential Zones (SRZ) as a solution to meet the demand for affordable, quality housing. Rapid urbanisation but poor infrastructure development has led to traffic congestions, drinking water shortages, power cuts, inadequate drainage, health and sanitation facilities and reduced housing amenities for an increasing number of people residing in the major metros. The middle and lower-middle class are pushed towards the periphery of towns, even as huge slums are created. An SRZ is a notified geographical region that is free of domestic taxes, levies and duties, with special development rules to promote large-scale green field affordable housing projects. The objective is to create an independent living system that is not only self-sufficient but also has the potential to grow and inject growth into the geographical areas around the SRZ.

Mr Abdul Azeez, Treasurer, CREDAI, says the SRZ proposal is under the consideration of the Urban Development Ministry, and the developers are awaiting a favourable response from the Government. The SRZ will have a prescribed minimum number of dwellings of specific sizes with adequate social infrastructure, including schools and medical facilities.

Tax barriers

As of December 2007, the pan India average rate per sq.ft for a residential apartment is around Rs 2,700 of which Rs 700 per sq.ft can be directly attributed to various local, state and central duties and levies and direct and indirect taxes. By any measure, this tax component is prohibitive and a significant barrier for builders interested in developing large-scale housing projects for the cost-conscious urbanised mass market wishing to relocate.

The benefits of SRZ include decreased housing cost, uniform infrastructure and housing plan, economic growth of the region, controlling slum population, planned urban development, lesser time to development and revenue for government. Since the theme is to create affordable good quality housing supported by a conducive infrastructure, a typical SRZ would contain low-sized units of 300 sq.ft to maximum 750 sq.ft. It should have a minimum threshold on the number of units to be developed.

Over the past 50 years, the government has notified various developmental schemes to alleviate housing conditions. These schemes, though in the right spirit, have had limited results and have been in isolated pockets in a few locations across the country. The key reason for the limited success was that they were designed as individual schemes. An SRZ, layered with the right economic benefits in the form of specific waivers and exemptions from direct and indirect taxes and duties and levies, would create the right environment for developers and the government to come together and create something special for the urbanised Indian mass market consumer, says Mr Azeez. In the current market situation, any attempt towards low-cost housing projects results in poor construction and infrastructure quality, and lower standard of living for the residents. Hence, the need for an economic vehicle that supports affordable, quality housing.

The SRZ provides a framework that is both ethically and economically pleasing to all the participants concerned, including the family. India has a workable model in place in the form of the special economic zone (SEZ), which can effectively be applied, with some modification, to the current situation.

In view of the fact that 50 per cent of the population is expected to be living in urban areas by 2041, it is necessary to develop new integrated townships. These should be located on comparatively degraded land, at a reasonable distance from medium or large existing towns.

Spurs similar to SEZs

Further, it is important to develop mass rapid transport corridors between existing medium and large towns and new green-field towns so that the relationship between industry and commerce is developed to an optimum level. The massive growth of SEZs in such a relatively short period is made possible only by altering specific fiscal policies for the region and by simplifying the approval/sanction process and, in addition, creating single window clearance and administration systems. In a similar fashion, the government ought to offer similar concessions for specific geographic regions earmarked for sustainable development of small residential units, says CREDAI.

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