Slum-free India’ plan will add sheen to urban mission

Slum-free India’ plan will add sheen to urban mission
The Financial Express, December 02, 2009, Page 10

Kakoly Chatterjee, New Delhi

Basic services to the urban poor (BSUP) and integrated housing and slum development programme (IHSDP), the two components of Jawaharlal Nehru National Urban Renewal Mission (JNNURM), would be discontinued in their present form. The government plans to merge the two schemes with Rajiv Awas Yojna (RAY), an ambitious programme of the Centre to transform Indian cities by making them slum-free.

“Once Rajiv Awas Yojna (RAY) starts, which is likely to be early next year, BSUP and IHSDP would stop in its present form. In other words, JNNURM stops and RAY starts”, sources in the ministry said.

Rajiv Awas Yojna allows slum dweller to get property rights of a house. This implies that if need be, the dweller can mortgage his house in order to obtain loans. The strategy, as conceived currently, would give states greater flexibility of funds. Loans can be raised from financial institutions in India and abroad and can also help out the urban local bodies (ULB) with their share of payment.

“The centre is looking at involving private developers in a big way to complete this task. In order to encourage public private partnership (PPP), the Centre is ready to give up to 40% viability gap funding along with capital subsidy and interest subsidy. The Centre would also bear the infrastructural costs, which means the developer would have to build the dwelling units some of which would be used to accommodate the slum dwellers and rest would be sold at market price. Other incentives for the private developer include land use changes and increase floor space index. Some states like Gujarat, Rajasthan and Andhra Pradesh have made necessary changes in regulations to encourage more participation from private developers,” ministry sources said.

The housing ministry has worked out the average price of EWS housing at Rs 2.5 lakh. After capital subsidy and interest subsidies, it turns out that the Centre is bearing more than half of the cost of the dwelling unit.

Not only JNNURM but two other schemes running under the housing ministry—Interest Subsidy for Housing the Urban Poor (ISHUP) and affordable housing in partnership— would be dovetailed into RAY.

“Earlier in the ISHUP scheme, the Centre gave 5% interest subsidy for loan upto Rs 1 lakh, now for RAY it would go up to Rs 2 lakh. The Centre also does not want the equated monthly installments (EMI) of the dweller to exceed 25% to 35% of his income. In case the EMI works out to be more, states and ULBs are expected to pick up the entire amount,” sources said.

The dweller can pay EMI for a period of 10 years to 15 years. Housing ministry is also taking a holistic approach towards this scheme. In order to ensure that the borrower who often does not have a regular source of income can access funding, the ministry is exploring possibilities of setting up a micro finance company dedicated only for housing.