Financial Chronicle, 10th September 2014: The Narendra Modi government, chief ministers, top realty honchos, urban planners, private equity firms, bureaucrats and bankers are meeting in New Delhi for two days to find a solution to the most vexed of all problems, finding a decent home for all Indian citizens, a task so mammoth that is easier said than done. The “Housing for All by 2022” conclave on September 12-13 convened by the National Real Estate Development Council (Naredco) will focus on a comprehensive roadmap to give a boost to the housing sector and try to meet the deadline to ensure a decent home for all Indians. Well begun is half done is a truism all right, but will Naredco, an autonomous self-regulatory body set up in 1998 under the aegis of ministry of housing and urban poverty alleviation succeed in its noble, if daunting, mission?
The statistics are heart breaking. At present, as far as urban centres are concerned, there is an estimated shortage of close to 18.78 million homes as first calculated for the 12th Five Year Plan (2012–2017) by the ministry of housing and urban poverty alleviation ministry (HUPA). This, more or less, still holds good. This includes households that exist in unsafe dwellings or unlivable environments. Of this, close to 56 per cent of the shortage comes from the economically weaker section (EWS) of society, while the remaining lies with the low income group (LIG) and other sections, which are even lower on the scale. The overall shortage of homes by 2022 is likely to rise to 30 million units as per government’s estimate, if supply remains at the current level. According to Anshuman Magazine, CMD at CBRE South Asia, an international property consultancy, the erstwhile government had set up a committee to develop a slum index at the city, state and national levels to sharpen policy focus on the urban poor. HUPA, slum data, released in March 2013 for Census 2011, had pointed out that around one out of every six households in urban India (17.4 per cent) lived in a slum. It had showed that well over a third of all slum households (38 per cent) were in cities with a population in excess of a million.
Manju Yagnik, an invitee member of the governing council of Naredco and vice-chairperson at Nahar Group, said based on the population trends, the present deficit in urban housing in India is around 24 million units. Considering the push in demand from redevelopment and shrinking size of households, a KPMG report (KPMG-Naredco funding the vision) estimates that there is a need to develop a total of 90 million (9 crore) housing units at a cost of $ 2 trillion, by 2022.
However, there is a silver lining to this giant task. Ashutosh Limaye, head of research and real estate intelligence services at JLL India, a property consultancy, said due to faster growth in construction of housing stock as against the growth of households in the previous decade, the shortage in homes has fallen over the last decade. He is optimistic that this trend would continue under the present government because of the increased focus on housing for the masses.
But given the current shortage, close to 2.34 million homes will have to be constructed every year for the next eight years. During the 11th Five Year Plan period, the authorities could provide for around 1.2 million homes every year towards this purpose. Therefore, Limaye said there is a need to double the effort during the coming eight years.
This requires strong determination and systematic planning.
The rural development ministry has envisaged an expenditure of Rs 3.45 lakh crore to build nearly 30 million houses for the homeless by 2022 under the National Gramin Awaas Mission and this works out to a cool Rs 50,000 crore-a-year programme.
Naredco chairman Navin Raheja, CMD at Raheja Developers, and Naredco president Sunil Mantri, chairman at Mantri Realty, will present the industry and hom buyers’ perspective. The conclave will discuss speedy clearances, standardisation and simplification of procedures involving aviation, environment, administrative bottlenecks, land acquisition, non-agricultural conversion, affordable housing through PPP mode, legal issues, urban planning, technologies and innovation for creating new cities and issues related to SEZ and reforms. Raheja said the biggest problem in filling the huge housing deficit is high input cost. The developers cannot create affordable housing due to high land prices, long time approval processes, lack of single window clearance system, lower FSI, population density and ground coverage. “These factors take housing beyond the reach of the common man resulting into low supply of housing in category of EWS, LIG and affordable. The country is facing major deficit in these segments,” Raheja said.
According to Mantri, the requirement of creating 90 million houses would translate to a whopping $2 trillion fund requirement resulting into Rs 15.6 crore per annum, if the government wants to fulfill “Housing For All By 2022”. He said it would also require huge manufacturing, material, transportation and all industries dependent on the realty sector, would have to be accelerated.
Rahul Nahar, MD at XRBIA Developers, said the process of obtaining construction permits has become difficult over the last several years and is among the major reasons contributing to the delays in real estate development. He said according to the report of the Committee on Streamlining Approval Procedures for Real Estate Projects (Saprep) set up by the ministry of housing and urban poverty alleviation, a developer has to follow at least 34 regulatory processes for obtaining construction permits and it takes an average of 227 days. “Such delays in obtaining approvals and adhering to regulatory processes can raise the project cost by 40 per cent of the sales value,” Nahar said. He said the government is evaluating this process by the single-window clearance mechanism. Several cities in India such as Ahmedabad, Chennai, Cochin, Madurai, Ghaziabad, Pune, Trivandrum, Delhi and Kozhikhode have implemented the automated system for approving building plans, he said.
“Making real estate sector more tech-savvy, speedy approvals, tax subsidies in case of affordable segment of housing, and easy financing and FDI as an additional source of funds will help developers build more homes,” Nahar said.
Brotin Banerjee, MD and CEO at Tata Housing said that with a constant rise in population along with rapid urbanisation and increase in disposable incomes, he expects the demand to increase by 20 per cent annually at least for the next decade.
“Therefore, to tackle the demand of housing requirement of urban India in an effective and speedy manner, there is a need to make changes in the Land Acquisition Act 2013 to remove bottlenecks in acquiring land for projects,” he said. Banerjee also pointed out that it was important to pass the Housing Regulatory Authority Bill, 2013, at the earliest to enable single window clearances for housing projects. “The new housing policy should look to suggest some viable methods for making affordable housing possible in public-private partnership (PPP) mode,” he points out. “The primary reason for this gap in the supply and demand can be attributed to one important aspect – the cost of land in the urban areas, which does not aid in the construction of affordable homes for all,” JC Sharma, vice chairman and MD at Sobha Limited told FC. He said if the issue is addressed appropriately, the country will not only be able to meet the housing requirements for all but also be able to contribute to the GDP of the nation significantly.
Sharma said there was no traction in the affordable realty segment was because of the non-availability of land with clear titles. This will not only help the developers procure good land parcels but also help them pass on the cost benefits to the end consumers, making it ideal especially for the EWS and LIG, he said. “Faster approvals and digitisation of the buying and selling processes will also go a long way in speeding up the housing projects. Also, infrastructural support and the formulation of right policies coupled with some monetary benefits will aid the government in this noteworthy initiative,” Sharma said.
Bimal Hegde, CEO at Chartered Housing, said at present there was not much clarity, mainly due to multiple definitions of the target group – economically weaker segment and low income group under different laws and existing schemes in terms of income and areas of the houses meant for them as well as the definition on low-cost and affordable housing.
“The department of financial services (DFS) is seeking clarity from the PMO on aspects such as whether the mission on low-cost on affordable housing is solely for urban people or for both urban and rural poor because the budgetary announcements is unclear on this aspect,” Hegde said. At the same time, DFS sought to know whether the existing urban and rural housing schemes need to be tweaked so that money can flow into these to achieve the objective, he said.
“Once all these and related issues are settled, the government can make inroads towards achieving it,” Hegde said.
Property consultants said despite the considerable supply, a majority of the urban housing infused into the major cities across India is beyond the purchasing powers of the EWS/LIG sections. “This is mainly because developers are by-and-large focused on launching luxury, high-end and mid-end housing projects which are considered safe from the perspective of risk and return,” Magazine said. He said to address the issue of housing shortage, particularly from the perspective of EWS/LIG sections, who constitute the bulk of the housing shortage, affordable housing is the need of the hour.
The number of impediments to the formulation of an effective affordable housing policy are manifold and wide ranging: escalating land prices, archaic building bye-laws, regulatory hurdles resulting in delay of project approvals and reluctance of formal financial institutions to lend to low-income/weaker sections. Of them, the real challenge before developers is inaccessible financing options for the EWS/LIG segment in urban India. Almost 70 per cent of potential low-income home buyers have informal income avenues, but need access to housing loans to buy a home. Needless to say, traditional financial players do not service this vast group. Growing interest in low-income housing finance is a very recent phenomenon; and it’s taken till 2011–12 for new entities, private players and established financial institutions to make an entry into the market. “For all intents and purposes, therefore, government funds and schemes for mass housing are perhaps the only recourse for India’s teeming urban populace,” Magazine said. According to Limaye, policy making in India has behaved reactively rather than proactively in the past. “This attitude needs to change to ensure housing for all becomes a reality,” he said.
For instance, Limaye said when a commercial area is being planned, authorities have an idea of the number of households that would need accommodation there. Similarly, when a large township project comes for approval from the authorities, they have knowledge about the infrastructure that will be needed around it. However, this information is rarely passed on to the related agencies. As a result, urban development ends up in a chaos. Limaye said timely information sharing and a more cohesive developmental approach from the authorities is a need of the hour. Hopefully, the conclave will keep that in mind.
Source: Financial Chronicle