There is an urgent need to rev up affordable housing projects to cater to rising demand in the urban areas

EASY ON THE POCKET

If statistics are anything to go by, there is a wide gap between the demand in supply of housing – both in terms of quality and quantity – in urban India. According to estimates of the Technical Group constituted by the Ministry of Housing and Urban Poverty Alleviation (MHUPA), 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. The group further estimated that 88 per cent of this shortage pertains to houses for Economically Weaker Sections (EWS) and another 11 per cent for Lower-Income Group (LIG). 

    While the time and cost of construction, labour and approvals for an affordable housing project remains the same as normal housing, the sale price and hence realisation is lower, point out developers. This tends to squeeze margins and hence developers are not incentivised to pursue such projects. Says Hemant Shah, Chairman-Hubtown Limited: "To reduce the price, the cost will have to be brought down further. While the government can play only a limited role in the cost of construction, including labour and material, I think it will do well by increasing permissible FSI for affordable housing projects. This will reduce per unit cost of land and allow creation of less costly homes." 
    Generally, one of the major issues that prevents developers from undertaking affordable housing projects is the time taken by government to grant approvals for the same. Invariably, developers end up on the wrong side of the situation due to the time taken to grant approvals for projects. "This negatively affects the time taken to complete projects. It also raises the cost of homes, and developers have no choice but to pass on these costs to homebuyers. Also, cost of land in Mumbai is exorbitant which is why most affordable housing projects come up in the peripheral areas where land is comparatively cheaper. Builders don't get returns in ratio of the efforts put in for such projects," says Diipesh Bhagtani, Executive Director, Jaycee homes Ltd. Similarly, Shah points out that apart from higher FSI, there should be a dedicated faster approval mechanism for affordable housing. 
    "Additionally, the government should ensure that these projects get cheaper funds to keep the costs in check. Also, the threshold for one per cent lower interest rate in affordable housing should be re-defined in line with the city category for example, for Mumbai it should be at least Rs 75 lakh," he says. 
    Another significant issue with affordable housing projects is absence of adequate civic and transport infrastructure, in locations with lower land cost, observes Manoj John – Vice-President, Corporate, Planning & Strategy - RNA Corp. "Given that these locations are located at a distance from prime or urban centers, the infrastructure development in these locations are also relegated to low priority. This in turn make the 'affordable housing' projects inhabitable," he says. 
    Apart from this, previously existing schemes like 80IB, specifically directed for supporting affordable housing, has since been discontinued. "This could be reinstated with reduced areas or capped on sale value of unit. For metro locations, it could be Rs 25 lakh, for Tier 1 cities it could be 20 lakh, for Tier 2 and 3 cities the cap could be 15 and 10 lakhs respectively. Formation of special housing zones with associated infrastructure development would lend the desired support for developers to actively adopt these areas, without having to worry about the viability of projects," John says. 
    Additionally, these defined zones could also create special taxation areas that have lower excise rates on construction material, or lower income tax rates on revenues earned. Likewise, home-buyers could be offered concessional rates on registration and property tax rates. The loss of income for government through concessions could be recovered through commercial establishments and businesses that would follow to cater to the population residing in these clusters.