Real Estate

Private sector can provide affordable houses

Jaithirth Rao | Updated on March 12, 2018

The main reasons why homes have become unaffordable in our country are the high cost of land in areas with even minimal transport and social infrastructure, extraordinary delay, complex and opaque approval processes in acquiring land and taking up construction; high stamp duty and interest rates.

We have reached a crisis situation where hundreds of millions of our citizens are denied a decent roof above their heads. Most palliatives suggested include increased State intervention, but they miss the point.

Cell phones, cycles, motorcycles and even small cars have been provided to consumers at affordable prices by an empowered private sector. This can easily be repeated in the housing sector. The previous government had an almost explicit strategy of providing negative incentives to this sector. The new Government has made it clear that affordable housing, whichever way you choose to define affordability, is a priority. Merely making this announcement has been a welcome move. The Government has followed up with easing the FDI rules for this sector. The earlier perverse policy, ironically, encouraged FDI mainly in luxury projects. The next move quite frankly has to be made by State governments. The Centre should provide incentives to States to move in this direction.

The States should be asked to levy nominal stamp duties on homes less than 60 sq m and less than a particular price. Stamp duty payments made by builders on purchase of lands should be fully reimbursed. The resulting revenue losses and outgoings should be fully reimbursed to the States for five years. Unless this reimbursement is done openly, transparently and expeditiously, the States will not yield. States that amend their rules and laws allowing automatic zoning of all peri-urban lands as being available for affordable housing should be given a block grant tied to the number of new units that come up each year.

(As told to R Balaji)

Published on February 09, 2015

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