Rebooting Affordable Housing

Rebooting Affordable Housing
The Economic Times, November 10, 2009, Page 8

Arindam Ghosh and Souvik Sanyal New Delhi

The global economic slowdown which shrunk availability of credit and led to meltdown in asset prices including that of real estate has had at least one positive fallout. Almost all property developers focused on bringing low cost affordable housing to attract the common man and perk up demand.

The Economic Times Realty Convention, 2009 held on 27th October in New Delhi brought together a string of stakeholders from policymakers to property developers to discuss the changing prospects of the housing sector in the country.

The focus on affordable housing over the last one year is a marked change from the past when real estate players were primarily targeting high priced premium housing schemes. "Part of the slowdown was caused by rush of real estate companies to go for top-end housing," said urban development minister Jaipal Reddy while addressing the convention.

The urban affordable housing segment forms the largest chunk of the domestic housing market. Typically, it has a steady growth in demand that does not shrink significantly with the drop in stock markets or the global economy.

To support the growth of affordable housing, the urban development ministry is in talks with the ministry of finance to make an interest subsidy and other tax incentives to borrowers on loans of Rs 20 lakh to be raised to Rs 30 lakh.

Rohtas Goel, CMD of Omaxe Ltd and president of National Real Estate Development Council (NAREDCO), said that customers currently are going in for needbased housing rather value-based housing.

He assured the government that all the real estate developers will work closely with the government in achieving the social objective. But he raised concerns over the direct tax code and asked for more relaxation that need to be given to real estate developers.

Mr Reddy spoke about a sustainable habitat policy under which new and emerging concepts of developing green buildings and other eco friendly infrastructures will be considered. "Now we are going to launch a project to create sustainable habitat aimed at developing green buildings," the minister said.

Green buildings will be designed in such a manner so that it will have a longer life cycle, and help in conserving natural resources like water, while consuming minimal power and energy. These infrastructures are expected to play an important role in offering environmental, economic and social benefits.

Mr Reddy urged realty players to develop more "affordable homes" and "green buildings" and invest in other eco-friendly infrastructures keeping in mind long-term sustainability for the environment. Stressing on the need to create a pollution-free environment, he said, "We need to avoid further pollution. Water in India is not only wasted but polluted."

He said that a technical expert group from France is working on water improvement project in Nagpur and the initiative could be extended to other parts of the country.

Urban development is intrinsically linked to the provision of civic amenities to all the citizens living in urban areas as well as empowerment of urban local bodies to enable them to become financially sustainable democratic institutions capable of providing good quality civic services.

The ministry of urban development along with the ministry of housing and urban poverty alleviation had launched the flagship scheme Jawaharlal Nehru National Urban Renewal Mission (JNNURM) for a period of seven years (2005-2012) with an allocation of Rs 50,000 crore, to develop quality infrastructure and governance in the urban cities of India.

Under the initiative almost 90% of the funds is to be used for developing basic services like drinking water facilities, sewerage, underground drainage, solid waste management, storm water drains and so on, further around 10% of the fund has gone for developing infrastructural facilities such as roads and fly-overs. The proposed Rajiv Awas Yojana is designed to enable existing slums to avail of the same amenities as the towns in the country.

The real estate players highlighted their concerns for getting project clearances. They felt that the process to get the green signal is very cumbersome and a lot time and money gets wasted in the process. The provisions should be made more flexible and friendlier towards construction firms.

The minister spoke on the e-governance initiatives that are being worked out as part of the JNNURM plan, an initiative that he said will help reduce red-tapism and corruption. Replying to the question on enabling faster land approvals and other regulatory clearances, the minister said that the state government's should be more transparent and uniform in their policies. "I want all of you to recognise the fact that we have some structural constraints in advising the state governments. State governments should be little more transparent in their policies," he said.

The union minister also pointed out the need for the high-rise buildings for meeting the demand of increasing population towards housing in big cities. "Water and transport" are the two conditions required for the growth of an urban city, he added.

Mr Reddy said that metro train projects for Delhi, Bangalore, Mumbai, Chennai, Hyderabad and Kochi were sanctioned to provide safe and quick public transport to the commuters and avoid traffic congestion. "Metro can play an important role in facilitating the development of small towns, which will have all the amenities, and facilities of a large city, the union minister said.

The convention also touched upon the issue of worker's welfare and the government's role in ensuring it. Mr Reddy asked the real estate developing companies to come up with suggestions as to how construction workers can be provided basic facilities though partnership between government and private sector.

Talking about mounting grievances of consumers of housing sector, M Ramachandran secretary in the ministry of urban development, pointed out that a real estate bill is due to be presented in the next parliamentary session, which would formulate an integrated system to address consumer grievances.

The bill would also look at the need and requirement of affordable housing in the coming years, to ensure optimal capacity development. Mr Ramachandran stressed on the role of basic public transport system in building a holistic housing hub in the national capital region(NCR), as the housing capacity in the capital is nearing saturation. "Improved transportation in the NCR would encourage housing opportunities in the region," he said.

Arup Roy Choudhury, chairman of National Buildings Construction Corporation(NBCC) said that the builders and developers should be mandated to adopt a transparent pricing structure, wherein consumers are informed about the construction costs, tax levies and even the profit margin enjoyed by them.

He also said that stringent penalties should be imposed on builders and developers if they fail to deliver as per committed terms, adding that a regulatory organisation should be set up to supervise the same.

Considering the fact that affordable housing is still out of reach for a large percentage of population, R V Verma of National Housing Bank said that in order to reach out to the people in the low income segment, financing procedures of banks ought to be simplified. However, the due diligence process for giving loans should not be compromised upon to avoid the asset bubble faced by the US economy due to the sub-prime lending.