Home / Money / Personal-finance /  How to make affordable housing more attractive

To get subsidy under Pradhan Mantri Awas Yojana (Urban), the carpet area has been increased by 33%. Mint Money asks experts how affordable housing can be made more attractive:

Rope in private sector under PPP

The initiative, ‘Housing for All by 2022’ is the central pivot around which the government’s efforts are concentrated. This, in turn, covers different aspects like rental and affordable housing.

Roping in the private sector under the Public-Private Partnership (PPP) model is the key solution (to improve this segment). Among other initiatives, the government needs to grant infrastructure status to the entire real estate industry making long-term financing easy for the industry; fix GST rate for all types of housing at 6%; revise carpet area to 60 sq. mt including in metro cities (to qualify for subsidy); make land available at subsidized rates in metros and tier 1 cities so that the projects can be viable; reduce premium on additional FSI (floor space index) to encourage affordable housing within metro cities; and also reduce time taken and cost of permissions and clearances. Beyond this, the wish list is simple—to make affordable housing happen, we need to work on the mass housing model, bringing economies of scale into the picture. —Niranjan Hiranandani, president (national), NAREDCO CMD, Hiranandani Communities

Permit higher floor space index

Land in metros forms a significant proportion of the project cost and renders such projects unviable for the affordable segment. Policies should be formulated wherein land can be provided at rates that make the affordable projects viable. Land can be provided to develop composite projects where one segment, say, LIG (lower income group) is cross-subsidised by the revenues earned from the other segment, say HIG (higher income group).

Significant land banks across regions can be identified by agencies. If such corridors allow for high density development, a higher FSI can be permitted, with an incremental benefit of FSI being applied towards affordable housing. The government should provide incentives to private players who use technology to deliver quality product.

To promote large scale development, it is imperative to have standards in place for size of the door, windows, rooms.... Such standardisation may further improve efficiency and make construction of homes like a manufacturing set-up. —Shubham Jain, sector head—corporate sector ratings, ICRA

Reward developers for last mile connect

Availability of land in cities at affordable pricing is one of the major challenges. The government could facilitate the development of affordable housing by making surplus land held by PSUs (Public Sector Undertakings) available for affordable housing projects. Also, local government’s property that is no longer useful can be monetised by selling to developers.

Land is a state subject and that adds another layer of complexity. The central government should guide the states on programmes to allocate and incentivise the usage of land for affordable housing, while also incentivising state governments to facilitate engagement and implementation.

It is also recommended to incentivise developers for infrastructure and last mile connectivity development in semi-urban centres. It can be in the form of an increase in FSI or reduction in stamp duty or tax, and others. Infrastructure upgrading precedes the FSI increase to ensure that existing households are not adversely impacted due to the new development.—Joe Verghese, managing director, Colliers International India

Allot land parcels at subsidized costs

We believe the recent move to raise the carpet area and the RBI’s revision of housing loan limits for priority sector lending (PSL) eligibility will help bring most of the under-construction dwelling units in urban India under the purview of the CLSS. Most of the impact is likely to be felt in the peripheral locations of tier I, tier II and III cities, where the size of units are larger. This will not only bolster homebuyer sentiments, but also further propel construction activity in the affordable housing sector. However, the next steps for the government should be:

■ Look at the benefits for developers. Elements like reduction in construction inputs should now be a priority.

■ To make optimum use of the initiative from a consumer’s standpoint, the land allotment should be at better locations and subsidized costs.

■ Focus should be on building a holistic environment that incorporates infrastructure and social facilities. Access to holistic livelihood facilities will be key in determining the success of the initiative.—Anshuman Magazine, chairman, India and South East Asia, CBRE

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