The Hindu Business Line : PPP, key to affordable housing

Private realty players in Chennai and the CMDA are exploring avenues of interaction that will fulfil the government’s goal of providing housing for all while being profitable for the private sector.

— G. Krishnaswamy

Chennai is the only city that does not have a planned satellite development.

R. Balaji

Tamil Nadu Government officials and private sector players in real-estate are acknowledging that Public Private Partnership (PPP) in housing is the way forward to meet the challenges of housing for all, particularly the economically weaker low- and middle-income groups.

Discussions are on between the industry and the Chennai Metropolitan Development Authority (CMDA) on exploring ways to carry forward the partnership in housing projects. The aim would be to meet the Government’s objective of providing housing for all while making it profitable for the private sector.

According to officials concerned, at a recent meeting, the builders had asked for support from the Government, mostly in the way of bringing down taxes, including stamp duties and sales tax, and making available land at viable cost for development. The CMDA is in the process of compiling the demands to present them to the Government.

Officials also said that a shelter committee — one of six committees to oversee the implementation of the provisions of the Second Master Plan — has been constituted. Affordable housing is high on the list of its priorities.

Tamil Nadu can emulate a number of success stories, say builders and officials — the concept of slum redevelopment in Mumbai, development of new suburbs and satellite towns through joint sector or assisted sector ventures as is being done in Kolkata, and even involvement of NGOs and microfinance institutions.

Concern over land auction

One concern unanimously expressed has been the recent move by the Tamil Nadu Housing Board to auction land parcels in and around Chennai. It is a good idea to sell to the highest bidder if the Government is only looking at maximum income, but if it wants to provide for housing for a wide segment of society, then public agencies such as the housing board and the slum clearance board should partner with the private sector.

This partnership should ensure housing for the needy while making it financially viable for the private sector, they say.

At a recent seminar on affordable housing, Mr Vikram Kapur, Member Secretary, Chennai Metropolitan Development Authority, suggested the concept of issuing transferable development rights (TDRs) based on the guideline value to the developers who provide space for the economically weaker sections.

Elaborating on the concept, which, he emphasised, was his personal opinion and not that of the regulatory body, he said five lakh sq.ft of space developed for the economically weak in an area with a guideline value of Rs 5,000 a sq.ft would yield a TDR of 100 sq.ft. This could be used by the developer as additional Floor Space Index (total built-up area allowed in a given space of land) which would be tradable or used by the developer to build additional space in another project. This would be an effective substitute for cash subsidy, which was unaffordable.

He pointed out that at current price levels, a family under the economically weak category earning Rs 5,000 a month, as defined by Housing and Urban Development Corporation, could only afford a loan of Rs 1.5 lakh if it were to set aside a third of the income to repay the loan. So a subsidy element is essential.

For Chennai, the master plan says this segment needs over 50,000 residential units a year, which works out to a subsidy of about Rs 2 lakh a unit, which is Rs 10,000 crore a year. But if the construction is subsidised residents would get quality housing while the builder gets the additional tradable FSI — a cashless option for the Government.

For the middle-income group, the Government needs to put in place well developed infrastructure for the suburbs. The CMDA is working on a Rs 9,000-crore mobility plan for Chennai which integrates road and rail network.

Builders point out that the basic cost of construction is similar across the board but the primary factors that drive up cost are land prices and taxes. If land is available at viable costs for the developers, then they would construct houses for the economically weaker sections, low-, middle- and high-income groups. Built-up space for the first two groups would be handed back to the government agencies at cost or pre-fixed prices for allocation to the beneficiaries at government prices, while the developers would be free to sell the balance areas to the middle- and high-income groups and commercial segments at market rates.

Govt as facilitator

Mr S. Hariharan, Convenor, Confederation of Indian Industry-Urbanisation Panel, Chennai Zone, and a senior official in one of India’s largest infrastructure and construction companies, says the Government should act as a facilitator in making available land for development of satellite townships, create infrastructure upfront in such developments and allow the builders to provide the housing.

The State Government should ensure that in the area allowed for development, a proportion is earmarked for housing for the economically weaker section and the low income group, which the builders develop and hand over to the Government for allocation. This way, land cost is discounted for the poor while the builders recover their cost of construction. The rest of the area would be left to the builders to develop housing for middle-income and high-income group or commercial development to be sold at market rates.

Creating infrastructure upfront would be essential for planned development of satellite towns on the city’s outskirts — effective transportation holds the key. Chennai is the only city that does not have a planned satellite development. Look at Mumbai and Delhi where satellite developments have grown into vibrant urban centres, Pune and Bangalore have a few in the pipeline, Mr Hariharan said.

Redevelopment of slums could also happen within city limits. Slums covering a large area could give way to vertical development of quality space for the slum dwellers. The additional space freed up would be allowed to the developers for commercial projects. This has been implemented successfully in Mumbai and could be emulated in Chennai, he says.

But if the Tamil Nadu Government continues to auction off plots for development, it would only serve to hike land prices, which, in turn, would mean only expensive housing projects would be viable.

Way out of slowdown

Mr R. Sarabeswar, Chairman and Chief Executive Officer, Consolidated Construction Consortium Ltd, feels the Government has to drive housing projects, particularly in the current recessionary trend. This would serve multiple benefits of providing quality housing at affordable rates, apart from rejuvenating the construction sector, generating jobs and supporting related industries that have also been hit by the slowdown.

Ideally, the price for the low-income group and middle-income group housing has to be fixed. Going by current trends, the price should be about Rs 15 lakh or less for the middle-income group and Rs 6 lakh or less for the low-income group. Builders developing space for low-income groups should be allowed extra Floor Space Index for developing High Income Group flats and commercial space that can be sold at market rates.