Central Government clears a policy to address shortage of affordable housing in India.

Central government has cleared a policy which will facilitate the allotment of low-cost houses to low income groups (LIG) and economically weaker sections (EWS).

Central government has cleared a policy which will facilitate the allotment of low-cost houses to low income groups (LIG) and economically weaker sections (EWS).

There have been reports which talks about shortage of 19 million houses in India, with majority of them in EWS and LIG categories.  With those dismal stats in mind, the housing and urban poverty alleviation ministry had drafted the policy to help lower income groups and weaker sections. 

Households with an annual income of up to Rs. 2 lakh can apply for the subsidized houses, as per the provisions of this policy.

Low-cost houses under this draft policy will cost Rs. 4-10 lakh. But there has been no cost specified by ministry for affordable house under the scheme.

These houses for LIG and EWS categories would be developed in partnership with either state housing boards or private developers.

Centre has plans to grant Rs. 75,000 per dwelling unit under this scheme to the project developer. Whereas state governments intends to contribute towards this scheme by aiding incentives like providing subsidized land for housing and giving fast project approvals to developers to facilitate accelerated construction.

Loans for these low cost housing and affordable housing with subsidized interest rates can be availed by beneficiaries. Developer/ housing boards will sold these houses at rates fixed by the states and beneficiaries will be selected through draw of lots.

Development of rental housing stock and dormitories for new migrants would also be encouraged under the policy.

Low Cost Housing in India – Demand Up, Supply Limited!

During 2001-2011, the urban population of India grew at a CAGR of 2.8%, resulting in the increase in level of urbanization from 27.81% to 31.16%.

As per 2011 census, the country had a population of 1,210.98 million, out of which, 377.10 million (31.16%) lived in urban areas.

affordable housing shortage in india

The urban housing shortage in the country at the end of the 10th Five-Year Plan was estimated to be 24.71 million for 66.30 million households.

Urbanization has resulted in people increasingly living in slums and squatter settlements and has deteriorated the housing conditions of the economically weaker sections of the society.

Housing percentage shortage in EWS is 99.9 % which is double than the estimated number of households.

Where as in HIG and MIG it is so less 0.2% only.

There is no clear-cut definition of the term ‘affordable’, as it is relative concept and could have several implied meanings indifferent contexts.

According to a report on Making Urban Housing Work in India, affordability in the context of urban housing means provision of ‘adequate shelter’ on a sustained basis, ensuring security of tenure within the means of the common urban household. 

According to MHUPA in 2008, affordable housing for various segments is defined by size of the dwelling and housing affordability derived by the household income of the population.

What is clear cut message which comes out of the present situation of housing shortage in India is to work harder on increasing the supply of affordable housing or low cost housings. There should be a proper plan needed to be laid out in detail and on which execution needs to be carried out in best of best manner to tackle this huge gap between demand and supply of low cost housing in India.

India and its government needs to gear up on it.  As soon as it happens, best for country and its people.

Policy changes must for affordable housing in India

Affordable housing is the key to India’s realty industry being able to change lanes to the fast track but cost escalations due to delayed permissions, lack of access to cheap credit and shortage of building material are proving to be major hurdles. The solution: Policy changes covering land to lending.

Affordable Housing – Policy Change Needed!

The demand for affordable homes alone, in the range of Rs.1-5 million, is in the range of five million.

Over a third of new homes is in this category. According to industry statistics, out of 500,000 homes to be delivered this year, a large part will be the affordable housing segment.

But the affordability of home-buyers has been severely hit by cost escalations and high project cost is proving to be the main deterrent. The lack of sustained funds flow to the realty industry not only restricts supplies, leading to housing shortage (mostly in the affordable category), but also results in a spurt in property prices.

Amid this liquidity crisis, a large number of realty companies today find themselves in a debt trap. So much so that promoters of a few companies have pledged a major part of their holdings to seek debt. There is a need to ease bank funding and make foreign direct investment and external commercial borrowings more accessible to developers.

On the private equity front, statistics show that such investments in the residential property segment registered a 50 per cent decline compared to the office realty space, as these investors were more interested in income-generating assets.

In this context, speeding up the launch of real estate investment trusts, or listed companies that own and manage property on behalf of shareholders, on the bourses will help meet the large-scale fund requirement for mass housing.

It is, indeed, heartening that the National Housing Bank (NHB) is setting up an urban housing fund with Rs.2,000 crore ($360 million) to spur affordable housing. The Housing and Urban Development Corp, with a target to build 500,000 affordable homes, has in its first tranche raised about Rs.2,200 crore ($400 million).

Both these funds will work as a “pool fund” to incetivise cash-strapped developers aspiring to tap the high potential segment of affordable housing.

It is on the policy front that there is the lack of effective initiatives. This year’s budget sop of Rs.100,000 ($1,800) additional tax benefit on home loans will largely benefit tier II and tier III cities.

But given that the top six-seven cities constitute less than a fourth of the overall affordable-housing supply, there is a need to launch incentivised policies for developers to provide mass housing in the suburbs and satellite towns of metros and Tier I cities.

For developers, the tax exemption for low-income houses up to 60 square metre carpet area and extension of tax holidays for low-income housing under Sec 80 1B of the Income Tax Act could prove beneficial.

With urbanisation expected to grow at a compounded annual growth rate of more than two per cent over the next two decades, there is the need to liberalise obsolete development norms, rationalising floor area ratio and density. There should be policy initiatives in place to fast-track the public-private partnership route.

With a host of new private equity players and developers targeting mass housing, the coming months will witness increased traction on this segment of the realty industry. Increasing viability of affordable housing projects will be the way forward.

Source: The Economic Times