Interestingly enough there is a paradox in building the affordable housing in India. It apparently seems that there is an acute shortage of the low cost and the affordable housing but there is an oversupply of high-end housing. The reason why the developers are not shifting their focus from the high-end housing to the affordable housing is mainly for the policy irregularities. It is estimated that in the next decade a number of people as large as 3 billion will shift to the urban areas and the cities in the next decade or so. If this happens there will be a huge shortage of housing in the time to come. Already the shortage of housing in India is estimated at a figure of 19 million units. Of these, a huge 95 percent is in the affordable and low-income housing groups.
There are few of bottlenecks in the building of affordable housing and low cost housing in the nation. The first hurdle is of course the low margins in the affordable housing construction along with the hurdle of multiple approvals and clearances which are the same from different authorities. Land issue is another concern which is the dearth of cheap land and the land plots that are available in remote locations but they are not so rich in infrastructure to cater to the demand.
The next major issue isthe financing of the affordable sector housing and the banks and financial institutions has a ceiling on real estate funding. The banking industry favours the high end projects from reputed builders with high margins which for obvious reasons gets more preference over the affordable housing projects.
The next problem is the tax rates that the real estate sector attracts at different points of the transactions of the real estate projects which amount to 25 percent of the property rate. This becomes too cumbersome for the developer.
Measures to boost affordable sector
The industry veterans and the trend watchers suggest few of the measures and recommendations which can help and create a solution for the higher supply of the affordable housing sector.
For easy availability of funding and direct tax benefits granting the infrastructure status to the affordable sector would be a feasible solution.
A reduced stamp duty clearance with a single taxation may be like that of GST can be a crucial step, suggests many. The 80 IB provision of Indian Income Tax Act which has provisions of liberal income taxes for real estate construction in the affordable sector is recommended to be reinstated.
A single window clearance is also a remedy which will be a short route to rounding off about 35 to 40 major approvals from varied departments, local authorities and agencies that a group housing project needs to obtain. The entire exercise as per the realtors takes about more than two years and eventually results in escalation of costs and delays in completion.
The cost of capital should also be lowered in case of affordable housing which many feel should be ideally excluded from the different RBI ceilings. It is even better if the RBI instructs the banks to include such funding in the Priority Sector Lending (PSL) as classified by all the banks.
The availability of land for the affordable sector is also a step that the state governments should implement and in that implementation of a zoning process can be a key in boosting the construction of affordable housing.The government should also designate areas where housing friendly rules for zoning would apply with higher norms of FSI and FAR with relaxed norms of density.
The government-led schemes for affordable housing like the AMRUT, Atal Mission for Rejuvenation and Urban Transformation, Pradhan MantriAwas Yojana (PMAY) and other such central and state government schemes should be helped to propagate with more resource mobilization with such policy measures and administrative structures.
According to the Reserve Bank of India statistics an investment of Rs. 70 trillion is needed for the construction of infrastructure development, affordable housing, construction of urban roads and modern transportation over the next couple of decades. A section of the trend watchers feel that when the New Real Estate Regulatory Bill is passed in the parliament the real estate regulator so constituted under the provisions of the bill will look into these issues and may inculcate few of the low-income customer friendly initiatives.
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