M Ramachandran: Housing for all?

A housing strategy will have to look at a hierarchy of people who need it the most. Of the 4,041 statutory towns in the country, 63 per cent have slums. India has 13.75 million slum households, and they will rank high in strategies for housing

We are dealing with a sector here where clear data is not available and the variables are many. There have been efforts by different committees to make an assessment of the exact housing shortage in the country. The eleventh Five-Year Plan assessed the urban housing shortage at 24.7 million units, with 99 per cent of this pertaining to economically weaker sections (EWS) and lower-income groups (LIG). A technical group put the housing shortage in 2012 at 18.78 million units, taking into account households living in non-serviceable kaccha houses, obsolescent houses, congested houses and in homeless conditions. According to this group, 56 per cent of the shortage is in EWS, about 40 per cent in LIG and little over four per cent in MIG and above. The McKinsey report on India's urban awakening talked about 25 million households not being able to afford houses at market prices and around 17 million of these living in slums. Provision of affordable housing on such a large scale is unprecedented; only China, which had a policy of state provision of housing, had a comparable scale and spread.

A proper strategy of addressing the housing issue would naturally involve looking at a hierarchy of people who need it the most. Census 2011 reported that of the 4,041 statutory towns in the country, 63 per cent (or 2,543) had reported slums. Slum households are 17 per cent of the urban population, numbering 13.75 million households. Naturally, these persons will rank high in strategies for housing. The states with the most slum households are Andhra Pradesh, Chhattisgarh, Madhya Pradesh, Odisha and West Bengal. Among big cities, Greater Visakhapatnam, Greater Mumbai, Vijayawada, Meerut and Nagpur have the most. So these cities also will have to lay specific emphasis on the issue, especially because they are generators of higher GDP and employment.

As a proactive step to address the issue, the Budget this year proposed setting up a Mission on Low Cost Affordable Housing, anchored in the National Housing Bank. A lot of coordination would be involved if this approach is to work, because state governments and city bodies along with other agencies involved will all have to be brought together on a single platform.

Finding the resources required for a task of this dimension is going to be a real challenge. One estimate says more than 100 million houses will have to be built by 2022 if the shortage in both urban and rural areas put together is to be met. Thirty million houses for the rural homeless by 2022 are estimated to cost Rs 3.45 lakh crore. This is more than double the current level of investment; and the investment must grow at a compounded annual growth rate of 18 to 20 per cent. Easier flow of foreign direct investment (FDI) is a facilitative measure assured by the government so that the required funds are available. As a follow-up, while the minimum built-up area required to attract FDI has been reduced and, similarly, the capital requirement also has been brought down, removal of the three-year lock-in for overseas investments is a point on which a decision is expected.

Real Estate Investment Trusts (REITs), generally used as instruments for pooling of investment in several countries, have also been identified as another means of finding resources for which incentives have been proposed. It is reported that if the taxation relief sought materialises, $10 billion of REIT can be listed by March 2015, because the top 18 developers have the type of stock which has this potential.

The Reserve Bank of India's recent measure, of bringing housing loans up to Rs 50 lakh under priority sector lending and some first-time home buyers becoming eligible for tax breaks, are positive steps for one segment that has to be provided with houses.

But how to make this happen for slum-dwellers, or those who do not have the required wherewithal to be able to borrow funds? Lack of any documented proof of income is one of the major hindrances to housing finance companies being able to lend to people belonging to the lower-income categories.

Deepak Parekh has distinguished between affordable housing and low-cost housing, the latter covering basically the LIG and EWS categories. The very definition of affordable housing will have to be well-structured,
because key elements like gross household income, cost of the tenement excluding land costs, size of the tenement, all will have to be factored in. It cannot be a single all-India definition.

How the state governments proactively find land for the purpose of constructing large numbers of such houses will be critical. Without making a city-wise assessment of the number of such people to be provided with houses and updating it on a dynamic basis, the agenda will not make the required progress. Urban local bodies need to be involved in this act even though housing is not a subject constitutionally mandated to them. Since there are different central bodies like the NHB, banks, HUDCO, construction technology agencies and the ministries themselves - at the state level also, there are a variety of organisations involved - an empowered, effective coordination and monitoring structure must be put in place by state governments.

The author was urban development secretary