Opinion

Affordable housing segment set to grow

Thomas George Muthoot | Updated on January 20, 2018 Published on March 08, 2016

Find me shelter One I can call home G KARTHIKEYAN

The Budget has provided the necessary fillip; now States will have to come on board



Singapore can boast of having one of the most successful models of affordable housing in the world. More than 80 per cent of its population lives in flats and 93 per cent of them own them.

The most conspicuous feature of the model is the institutional approach adopted by the Housing and Development Board (HDB), the single and comprehensive statutory body which does the planning, land acquisition, construction, financing and policy making.

Second, it ensures affordability through a unique set of modalities like different unit sizes, progressive mortgage payments, low interest rates and subsidies.

Given the complex and composite nature of real estate sector, it may be nearly impossible for India to emulate the Singapore model. Here land is opaque.

Or it is either over-regulated or badly regulated. There is near non-existent infrastructure by the local bodies to support the developers. Multiple statutory agencies, plethora of laws, mismatch of pricing, and hundreds of stakeholders compound the issue here and affordable homes for all may still be a distant dream. We will still keep wondering why houses are not sold at the prices affordable to the needy.

Supply shortage

According to industry estimates, the housing shortage in India has touched 18.78 million units. As per the latest Economic Survey, there is a shortage of nearly 20 million homes in India. So, supporting the supply side is as critical as stimulating the demand side.

Realising about this widening gap, the government had rolled out an ambitious programme — Housing for All by 2022 — targeting the urban areas.

Rehabilitation of slum dwellers through public private partnership projects, promotion of affordable housing for weaker sections through credit linked subsidy and promotion of housing for urban poor are the elements of this initiative. The scheme will cover 4041 towns in three phases.

Government effort alone cannot fill this gap. It has to provide an enabling and empowering environment where private players can come in, with ease of doing business, and support the agenda. The Budget has constructive measures to improve the supply and demand side.

Allowing 100 per cent deduction for profits to housing projects up to 30 sq metres in the four metro cities and 60 sq metres in other cities is likely to spur supply of affordable homes, which makes for almost 90 per cent of the demand for homes in India.

Government’s service tax exemption on houses less than 60 sq metres, and the additional exemption of ₹50,000 for housing loans up to ₹35 lakh for homes not above ₹50 lakh will both likely to improve first-time home buyers’ sentiment. The government’s focus on digitisation of land records is in the right direction especially in the rural areas, which will render land records free from encumbrances.

The Budget has also increased the limit of deduction of rent paid under section 80GG from ₹24,000 per annum to ₹60,000, will help in the supply side.

Already there is an increased interest among the developers to lay out affordable housing. If we want to reach somewhere near the target of providing shelter to all, each developer needs to reserve 20 per cent of the projects as affordable housing component.

Evolving response

Over 20 projects are in progress at places like Karjat, Vasind, Palghar and Boisar in Mumbai along with Chakanand, Shikrapur in Pune. Developers like Xrbia Developers, Tata Housing (ShubhGriha) and VBHC are entirely focused on innovative affordable homes and have already launched multiple projects across cities. Housing Development and Infrastructure Limited (HDIL) and Usha Amenities, Breco Realty, Mahindra Lifespaces, TVS Housing and S Raheja are also into the space.

But the task ahead is to get the States also on the same platform and support the initiatives. There are different parameters for different States in many areas like the density norms. As always in the Budget announcements, the key lies in the execution, which is possible only with political will and administrative acumen.

The writer is Director, Muthoot Housing Finance

Published on March 08, 2016
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