Clock is ticking for housing for all by 2022

While there were also reputed national players active in this segment, affordable housing in India has historically been the playing ground of smaller, non-established developers who did not follow any rule book. 

Anuj Puri, Chairman, JLL Residential, says, “Their modus operandi was to buy small land parcels on the outskirts of cities and in gram panchayat areas, and build very basic housing projects bereft of any rudimentary facilities and amenities. The plots they favoured were invariably in areas which, because they fell outside municipal limits, did not have proper water and electricity or even road connectivity. Worse, such builders often did not have all regulatory clearances and permits for their plots and projects.” 

The arrival of RERA has put paid to such underhanded activity. The central government has also rolled out various incentives to boost affordable housing. To begin with, it designated this vital sector as a favoured segment under its Housing for All by 2022 initiative. This led to affordable housing graduating  from being the poor second cousin of the Indian real estate to a highly important sector. The most recent Union Budget provided direct tax relaxation to the lowest income earners, along with a much-needed clarity on the designated beneficiaries under the Pradhan Mantri Awas Yojana (PMAY). 

Puri explains, “The government also brought in a new Credit Linked Subsidy Scheme (CLSS) for the middle-income group, with a provision of Rs 1,000 crore. Additionally, the extension of tenure for loans under the CLSS of Pradhan Mantri Awas Yojana (PMAY) was increased from 15 to 20 years. Finally, affordable housing has also been accorded the very important infrastructure status, ensuring that developers in this segment have access to cheaper loans and various other incentives to encourage them to pitch in and drive supply.” 

Land is a very price-sensitive commodity, and its current shortage in major city-centric areas prevents the development of affordable housing in areas where it is most direly needed. The cost of land currently accounts for as much as 30-50% of the cost of a project within city limits. However, RBI regulations do not allow banks to fund land purchase. Developers, therefore, are left with only a few options. They can either form a joint venture (JV) with the land owner, or get funded through NBFCs — usually a very expensive route, which again precludes the prospect of developing affordable housing on the acquired land. 

Puri remarks, “This is not the only area that needs to be looked at seriously. The lower-income groups also need access to housing loans to a much greater extent that the PMAY scheme offers. In the first place, awareness about this scheme among those whom it intends to benefit is seriously lacking. Also, the tedious KYC norms need to be relaxed for low-income, informal sector buyer who has the most pressing need for housing.” 

Will we see the government make yet another series of determined moves to fulfil its vision to put a roof over the head of every Indian citizen by 2022? The clock is definitely ticking.