How is Housing for All faring?

Owning a dream house is a common aspiration of people of all strata. A house is a fulcrum on which major features of good living hinge. Skyrocketing prices of land in cities and increasing construction cost kept these people away from buying a house. The government’s scheme Housing for All 2022 that was announced in June 2015 is a strident move towards providing affordable housing to urban poor

We are working towards ensuring that every Indian has a home by 2022, when India marks 75 years since Independence.” Prime Minister Narendra Modi made this statement while launching the scheme Housing for All by 2022. Seeing the enormity of the issue, it is easier said than done.
Government estimates in 2011 suggested,the urban housing shortage in India stood at 18.78 million units, out of which about 96 per cent is in the Economically Weaker Section (EWS, 56 per cent) and Low Income Group (LIG, 40 per cent) categories put together. However, Hardeep Singh Puri, Union Minister of State (I/C), Ministry of Housing and Urban Affairs (MoHUA), reportedly said that the new assessment suggests that the estimate of the housing shortage in urban areas has been revised downwards to about 10 million units. It means to achieve the target of Housing for All, the government now needs to build 8.76 million fewer houses. The government has already completed 6 million houses which means, as per new estimation, they need to build 4 million more houses by 2022 to achieve the target under Housing for All scheme. Seeing the progress of the government’s efforts under the scheme in the last four years, the target seems a cake walk. If the estimates of the government are to be believed on its face value then everyone will have a roof over their head by 2022.
However the facts tell a different tale and the objective of the program seems flimsy. Around 25 per cent population in Indian cities lives in slums. Have we considered them while counting the requirement of houses? On one hand, developers have a huge inventory of unsold apartments. And, on the other, we have a shortage of affordable housing for the poor and the middle class. The change of social contours has also changed the ownership patterns.
Urbanisation in India began with setting up of industries. Cities around industries had a provision of housing facilities for its industrial workforce. Though many of the old mills and industries died over a period of time, such colonies still exist in most of our old industrial cities such as Kolkata, Mumbai, and Kanpur. Can we link employment and housing together? This is still happening in remote industrial locations. But, in cities, low wage workers are devoid of any such facility. Can we link Housing for All or PMAY with Make in India scheme? There is a range of options available but to make this a reality, the government and private players have to work together.
The financial viability of the projects for buyers and developers has to be chalked out in a way that makes the program a success.

The government estimates in 2011 suggested,the urban housing shortage in India stands at 18.78 million units, out of which about 96 per cent is in the Economically Weaker Section (56 per cent) and Low Income Group (40 per cent) categories put together. However, MoHUA’s new assessment suggests that the estimate has been revised downwards to about 10 million units. The govt has already completed 60 per cent of the required work,they need to build 4 million more houses by 2022 to achieve the target. Seeing the progress of the government in the last four years, the target seems a cake walk

Role of the private sector

The role of private players in the arena of Affordable Housing has not been more than of a bystander. Most of the big players in the sector have not entered the territory of affordable housing. Affordability is a relative term. Affordable housing means different things in different context. Some of the developers who are advertising affordable luxurious apartment or using this adjective before any project are free to do so because there is no clear-cut definition or uniform definition for an affordable housing project. Such ‘affordable’ projects are, of course, not contributing to building a pool of houses which will contribute to the success of Housing for All. The scheme has its own set of parameters for a project to be qualified as an Affordable Housing project.
Private players are also in a fix. They do not want to jump into affordable housing space for many reasons. They are of the view that the land and construction cost is going up and if they have to build affordable houses they will have to go outside city limits where demand is uncertain. The industry players have seen dull responses from buyers in the past. According to news reports, the government had allocated around USD 1.5 Billion for the project but USD 319 million could be utilized. The engagement of private players in the scheme can be a game changer.
The recent crisis in Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) may impact the real estate sector. As in recent times, their share of the sector is almost 40 per cent. The Asset and Liability mismatch in the case of big players like IL&FS, DHFL has created a negative sentiment across the sector. It is expected that the intervention of government and the Reserve Bank of India will soothe the frayed nerves somewhat.

RERA and its implications

The introduction of the Real Estate Regulatory Authority (RERA) Act on May 1, 2017, was a long-awaited step required for controlling and monitoring the affairs in the real estate sector. The sector contributes to almost five per cent to national GDP and is expected to touch USD 180 billion mark by 2020. Before the implementation of the Act, the sector was infested with several problems; buyers were not getting the timely delivery of their houses despite making payments, some builders were defaulting, real estate firms were including norms in buyer-builder agreement that were favourable to them, inflating the price of the property by giving faultyarea measurements, and so on
The tsunami of reforms through RERA, GST and demonetization impacted the growth of the sector but it has changed the way developers conduct their businesses. The reform will help in clearing the sector of the unorganised and unprofessional players. It will surely, in turn, restore the confidence of the home buyers. So it is a welcome and long overdue
policy initiative.

The progress of Housing for All

The Government has also announced the creation of the Affordable Housing Fund under the National Housing Board. The benefits offered by the government under Pradhan Mantri Awas Yojana (PMAY) includes a subsidy to the tune of 2.3 to 2.6 lakhs to home buyers, the tax benefit for five years for the developers of affordable housing projects and reduction of GST from 12 per cent to 8 per cent for under-construction projects. The government has also accorded infrastructure status to the affordable housing space which will give them access to more attractive sources of funding, including external commercial borrowings (ECBs). According to the report of the Standing Committee of Ministry of Housing and Urban Affairs, the government had allocated around 15,025 crore for the scheme of which 10,011 crore were released and only 2080 crore could be utilized. This comes down to be around 21 per cent of the allocated fund. The Committee, chaired by the Biju Janata Dal (BJD) MP from Puri, Pinaki Mishra, had submitted the report in March this year. In a reply to the Committee, the ministry had said: “release of funds/utilisation is part of the normal financial procedures to ensure proper accounting and it is not a true barometer of the physical progress and speed of the implementation of the mission targets/objectives.” The reply further updated the data saying that 17,900 crore was allocated of which 16982 was released. The funds for which utilization certificates were due in 2017-18 amounted to 2516 crore. And, utilization certificates actually received against total funds released till 2017-18 amounted to 5817 crore. In a statement given to the committee, then UD Secretary had said, “…..the ‘Housing for All’ project is very big and major one and is quite challenging too. As we know that there was a Planning Commission, there used to be an assessment and there was a technical group on it. As per the assessment made earlier, there was a gap of approximately 1.8 crore houses yet to be made available to meet the ever growing need and demand. However, as per the validation done with all the States, later on, the revised gap came down to 1.2 crore. We have already sanctioned 40 lakh houses. About 17 lakh houses have been constructed and the remaining sanctioned houses are getting ready. We think that the provision of 25,000 crore made in the next year’s Budget for Housing for All programme as an extra resource, will certainly be greatly helpful and effective as we have committed to providing houses to all by the year 2022. We are progressing to achieve the target to provide Houses to All by 2022. The Allocation of 25000 crore will be very useful to us. We have already started preparing and going ahead to get the approval of the Cabinet by April 2018.” However, there are some measures which can enlarge the canvas of coverage of the scheme. To maximize the coverage, the government should make people aware about the benefits of credit linked subsidy scheme under PMAY. Many people are still unaware of the benefits provided. Another constraint in its success is lack of availability of Affordable Housing projects in medium-sized and metro cities because of the cost of land and construction. Developers need to use modern, low-cost engineering and construction technology to reduce the cost of houses. Developers need to shift their focus to tier-II and tier-III cities. This can also benefit the sector and homebuyers both. Many flagship schemes of the government are designed to shift the pressure from metros towards these cities by achieving total development in terms of physical infrastructure, social amenities like healthcare and educational facilities, affordable housing and employment opportunities. The government and private players both must see that the housing requirements of all are met with an element of dignity.