Affordable housing is today’s buzzword, with developers increasingly eyeing the lower-income and middle-income segments. After ruling the realty business for many years, lavish and expensive apartments have now taken a back seat to smaller, more affordable housing. Consider the fact that even players who traditionally catered to the affluent—Raheja, Unitech, Tata, Hiranandani and Puravankara Projects—are now turning their eye towards the lower and middle-income groups.

However, certain factors, have played a major role in increasing the sale price of flats—land costs, expenses behind sanctions from various government agencies, environmental issues, eviction of tenants and the political fallout.

Further, the economic boom propelled by the IT industry increased the demand for commercial and residential properties, resulting in short supply and a consequent increase in price. As a result of the rise in prices, affordable housing projects are now being planned largely in the outskirts of cities and metros. It is a misfortune that today suitable land is available only in areas far away from the city. The government should develop proper infrastructure with good transportation facilities to attract the urban population to these projects.

Bridging the Housing Gap Economically weaker section (EWS) and low income group (LIG) housing units are schemes with a carpet area between 300 and 600 square feet, with a cost not exceeding four times the household gross annual income and EMI/rent not exceeding 30 per cent of the household’s gross monthly income.

In urban India, the population is increasing at a fast clip and there is a huge housing shortage. According to the Planning Commission Report, the urban housing shortage in March 2007 was around 24.71 million and this is estimated to increase to 26.5 million by 2012.

Most of this shortfall is in the EWS and LIG segments. Approximately 42.8 million people live in slums with inadequate sanitary and drinking water facilities. The proportion of people living in slums is much higher in metropolitan cities. Providing them with adequate housing will be the biggest infrastructure challenge for the government.

The government has taken many steps towards providing housing to the urban poor and low-income groups. In connection with this, the Central Government has set up a high-level task force headed by Deepak Parekh, Chairman, HDFC, to study and submit its recommendations on affordable housing. Some of the recommendations of the said committee are as follows:

􀁘 Simplify procedures and processes of land acquisition and conversion of agricultural land for urban usage.

􀁘 Review the processes for master planning and effect such changes as necessary for assessing land requirements and allocating them for different uses—including for affordable housing.

􀁘 Upward revision of Floor Area Ratio (FAR) and Floor Space Index (FSI) across cities, commensurate with the investment in infrastructure that it will necessitate.

􀁘 Implement in-situ development in an integrated manner.

􀁘 Create a healthy rental housing market under programmes like the Jawaharlal Nehru National Urban Renewal Mission (JNNURM).

􀁘 Revamp the role of State Housing Boards and encourage them to play a more active role in the provision of affordable housing, even if it is through public-private partnerships.

􀁘 Funds raised through land transactions by State Housing Boards must be ring fenced, with a defined proportion redeployed only for affordable housing.

􀁘 Permit housing financial institutions (HFIs) to access the long-term external commercial borrowing market as they require long-term funding sources at the lowest cost possible to pass on to the ultimate borrowers.

􀁘 Reinstate the income tax deduction under Section 80 IB of the Income Tax Act for developers engaged in affordable housing projects.

􀁘 Reduce stamp duty rates and registration fees for affordable housing to 2 per cent ad valorem uniformly for all states.

􀁘 Set up a housing finance company whose main focus will be microfinance and support and scale up existing microfinance companies by effecting changes in the regulations that constrain their operations.

The Role of Government
Based on the recommendations of the Deepak Parekh’s Committee report, the Central Government and many state governments have taken steps towards bridging the gap between demand and supply in EWS and LIG housing. The Central Government has provided an extension of 80 IB for smaller units for another one year and allowed interest subsidy on housing loans up to Rs 5 lakh. The Delhi Government has issued a policy on slum and JJ cluster redevelopment and guidelines for collective community rehabilitation or relocation—in-situ up-gradation/rehabilitation and resettlement colonies norms, and has already identified approximately 28 slum clusters for redevelopment in Delhi under Public Private Partnership. The Haryana government has issued a policy for the development of EWS and LIG housing by private developers in the state and has relaxed norms for population density and ground coverage, which will result in a higher number of units. The units will be sold by developers at pre-determined rates as per policy. Noida authorities have undertaken upward revision of FAR.

The National Urban Housing & Habitat Policy (NUHHP), 2007, stipulates that 10–15 per cent of land in every new public/private partnership project or 20–25 per cent FAR, whichever is higher, be reserved for EWS/LIG housing. The reform agenda under JNNURM stipulates earmarking at least 20–25 per cent of developed land in all housing projects (both public and private agencies) for the EWS/LIG category, with a system of cross subsidisation. The Rajiv Awas Yojana provides schemes for affordable housing through partnership and for interest subsidy for urban housing. Slum redevelopment programmes by the Maharashtra government include provisions for higher FSI for rental housing.

However, there are still many issues that need to be addressed. These include:
􀁘 A standardised policy on FAR for EWS and LIG housing.

􀁘 Availability of bank finance for these units.

􀁘 Channelisation of central assistance available under JNNURM and RAY.

􀁘 Earmarking of land for EWS and LIG housing in a master plan.

􀁘 Single-window clearance.

􀁘 Classification of these housing projects as ‘infrastructure projects’ and making them eligible for external commercial borrowings and foreign direct investment. They must also be made eligible for tax holidays under section 80 IA of the Income Tax Act.

􀁘 Zero stamp duty for the EWS category and 2 per cent on LIG housing units.

􀁘 The clear role of National Housing Bank.

􀁘 Reducing the cost of development: One significant way to make homes more accessible is to reduce construction costs with the use of alternative materials and technology. For instance, precast components can slash costs. But to achieve economies of scale, you need to build a minimum of a million square feet, say experts. Lack of awareness, unfortunately, has limited the use of such technologies in construction.

Evidently, we need a multipronged strategy to tackle the housing shortage: augmenting land supply, subsidising land costs, containing the costs of construction using modern technology, rationalising regulations governing the housing sector and simplifying related rules and procedures, with tax and other incentives. The reforms brought about by government till date are only a small step towards meeting the housing needs of the economically weaker sections of society. We still have miles to go before we reach our destination. It won’t be easy, but will be necessary.

The writer is Vice President, Strategic Planning, Raheja Developers Limited