For India, a chaotic democracy with a large population, basic housing is beyond the reach of a sizeable chunk of its citizens. Different governments since independence have tried to ameliorate the problem but nothing much has changed.
Some of the biggest issues have been acquisition of land in urban areas at affordable rates, lengthy approval process and, of course, slum clearance – they make it difficult for builders to make profit from such projects. Hence, there has been a limited availability of such affordable units so far. On the other hand, for buyers with limited means, paying interest rates on home loans is a major worry. This has resulted in sluggish demand for houses supplied.
To tackle such issues, the Modi government – which has also set itself an ambitious target to ensure every Indian has a decent shelter on his or her head by 2022 – has repackaged projects of previous governments under the scheme “Housing for all by 2022.”
Under it, it has added provisions to overcome the specific challenges. For builders, for example, it has made it easier to procure cheaper credit by adding an infrastructure tag to affordable housing and for buyers it has offered interest subsidies on house loans.
The mega project aims to build sufficient houses – 50 million in all – both in the rural and urban areas by 2022 to solve the housing problem altogether. Already, budgetary support for the scheme has increased manifold and policies are being tweaked or added to lend momentum to it.
Besides ensuring shelter for everyone, the scheme is also expected to create jobs by giving a major boost to activities in the real estate sector, which is expected to receive over a trillion dollar investment in the next couple of years.
The big question on everyone’s mind now – how much headway has the ambitious scheme made so far? Has it been able to induce more developers to enter the affordable housing segment? If so, are buyers lapping up the opportunity? And most importantly, is it showing signs of achieving its goal by the deadline?
As far as progress is concerned, quite a few developers have already entered the fray to tap into the enormous opportunities in the underserved segment of affordable housing, buoyed by favourable policies. With an increasing number of rural people settling in urban areas in search of better opportunities, players are mostly focussed on tier I and tier II cities.
By the end of the second quarter of this fiscal year, new launches in the affordable housing segment had risen by about 27 percent. Mumbai led the way with 40 percent of the 26,000 new units built in the metropolis. Kolkata and Pune came in the second and third positions.
Apart from that, several new mortgage lenders are focusing on offering small home loans to denizens in cities and smaller towns. Centrum Housing Finance Ltd, Lodha Ventures, JM Financial Ltd, Capri Global Housing Finance Ltd. and Piramal Finance Pvt. Ltd are to name a few who have already started lending this year or are awaiting licences to start operations.
Big mortgage players too are entering the domain. HDFC is one of them that has raised capital to fund developers in the affordable housing segment. Overall, it aims to pour in one billion dollars to develop 75 million square feet across affordable and mid-income residential projects.
On the buyers’ side, numerous first time home buyers are seen taking home loans, particularly for houses under Rs.30 lakh.
Despite such progress, however, there is scepticism over if “Housing for all by 2022” scheme will be able to gather enough steam to solve the housing problem altogether in a nation of 1.3 billion.
The biggest hurdle in the way of the achieving target is procuring lands in urban areas. As per an estimate, about 57,392 acres will be needed to construct the targeted 20 million homes in urban pockets, assuming each house measures 500 square feet. Despite an infrastructure tag, unlocking lands may prove difficult due to mafias and illegal encroachments. Acres of centrally located urban lands are owned by the state bodies such as ports, railways and defence. Since they are non-marketable pockets and are often encroached upon by squatters, acquiring them may prove to be an involved process.
Currently, building of more than 15 lakh houses have come to a standstill at different stages of construction owing to various reasons and just over 4 lakh houses have been constructed.
On the urban front, objective is to make cities slum free. But In Situ Slum Rehabilitation (ISSR), which aims to make cities slum-free aims by offering slum dwellers homes, has seen weak numbers in terms of launch of units so far.
In rural areas, with abundance of land, glitches have been much less. The government has already built the targeted 10 lakh houses under Pradhan Mantri Awas Yojana (a part of the Housing for all by 2022 scheme) within the deadline. Not just that, the houses have electricity, toilets, drinking water and LPG connections. By the end of March 2018, the government plans to add another 50 lakh homes for the poor in rural areas.
Meanwhile, policy makers are working to add new elements to its affordable housing project so as to enable it to gain traction. Most recently, it has drafted a new policy to tap into the Public Private Partnership in order to mitigate risks and maximise financial gains.
With a couple of years more to go, maybe it would resolve the housing crisis in India to a great extent. Maybe not. It would depend upon many factors, among which the government’s ability to speedily release its own surplus land to address the land shortage will be crucial.