How affordable is ‘Housing for All’?

Among the three schemes that Prime Minister Narendra Modi launched on June 25 is ‘Housing for All’, a self-explanatory scheme — noble in intent and one that was long due.

As a major emerging economy, which is even projected to leave China behind soon, and the largest democracy in the world, it is high time India’s every citizen found a decent shelter in cities and metros.

That said, it is important to understand that India has a real estate problem quite aside from the Housing for All (HFA) mandate.

The problems range from ever-increasing prices of houses — which are not concomitant to growth in per capita incomes—, illegal constructions, stressed balance sheets of builders due to massive unsold inventory and incredibly low share of property tax in GDP.

The terrible state of municipalities in India is another story, though not entirely unconnected to the subject (see ‘Nothing smart about our municipalities, BusinessLine , May 29)

Shelter to the needy The provision of new, affordable houses to the needy is one of the segments of the scheme; others being: credit-linked subsidy; beneficiary-led upgradation/construction; and in-situ development (upgrading slum households), which will help achieve slum-free cities.

Indeed, slums are a degrading way for people to live in. The slum population in the country has grown 25 per cent between 2001 and 2011, during which total urban population rose 32 per cent.

About a third of total slum area in Delhi is tenable (meaning, where housing upgrade/development is possible). This means the rest have to be rehabilitated into newly built houses.

Under the HFA, the two beneficiary groups are the economically weaker sections (EWS) and low income groups (LIG), defined as those earning up to ₹3 lakh and up to ₹6 lakh per annum respectively, an unexplained three-fold increase from earlier thresholds.

The redefinition of the target beneficiary groups for the scheme needs to be taken stock of.

Let us for a moment forget the names of the categories. In terms of income as on 2012, more than 95 per cent of the total housing shortage was constituted by those earning up to ₹2 lakh per annum.

Affordability issues So now, with the changed definition, the shortage is largely restricted to the EWS — those earning up to ₹3 lakh.

Those earning up to ₹6 lakh (now known as the LIG) can afford a house worth ₹30 lakh (five times the annual income, according to the government’s own formula).

Developers are more likely to be willing to build units under this category, and the same will also be made more affordable through interest-linked subsidies. Even bankers are more amenable to this category.

But the crucial challenge remains the provisioning of houses costing up to ₹15 lakh. Studies suggest that builders generally find it unviable to build houses costing between ₹5 lakh and ₹10 lakh.

If HFA is to become a success, this segment is of utmost importance. The government alone will not be able to cater to this demand, thus the private developers need to pitch in very strongly. But the question is, will they?

HFA would also (ideally) entail development of associated infrastructure including adequate transport linkages and the provision of basic civic amenities.

Otherwise we could end up with a ghost town made up of lines of really cheap houses, which will eventually be a costly buy-in for the recipients.

In this context, the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) scheme — which aims at improving urban infrastructure — should be tied to the HFA scheme and looked at in conjunction rather than separately. The implementation of AMRUT will help make housing units attractive and viable to buyers.

We cannot call HFA a success if the majority of beneficiaries are those households with annual income of above ₹2-3 lakh.

One should recall that the per capita income (a statistic that includes even the richest) in Delhi as on 2014-15 was ₹2.41 lakh, which is also among the very highest in India.

HFA’s other challenge will come in the form of land acquisition, a tricky subject in today’s political dispensation.

The land question

As the Union minister for urban development, Venkaiah Naidu, has rightly said, easy land acquisition is crucial to the success of HFA. Consultancy firm KPMG’s estimates suggest that about 2 lakh hectare of land would be required to meet the country’s urban housing need.

Just as a means to put that number in context consider that a few thousand hectares make for a mega-industrial park.

Scarcity of land can be dealt with Floor Space Index (FSI) relaxation, a question that needs to be deliberated upon by urban planners and policymakers. Mumbai has already effected some reform to that end.

In addition to the land acquisition problem, it is worth noting that municipalities across India have a rather corruption-ridden construction approval process, putting India in the 184th position in World Bank’s ‘Ease of Dealing with Construction Permits’ and 121 in ‘Ease of Registering Property’ parameters.

Real estate services firm Jones Lang LaSalle estimates that the approval process after land acquisition till commencement of construction can take over two years. The 2022 timeline, howsoever desirable, looks rather steep.

The writer is a policy consultant

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