Home sweet home

Affordable housing in India is dead. The paradox is that this has happened even before it was really born. Study after study points to the large unmet housing needs of the economically weaker section (EWS), the low-income group (LIG) and the middle-income group (MIG) in India. The ministry of housing and urban poverty alleviation (MHUPA) estimates a shortfall 26.5 million housing units in 2012. The gap between supply and demand is shamefully large.

The narrative from other countries may provide some hope. Public housing was one of the major areas of development after World War II in the US and in the UK. Levittown, on Long Island near New York City, was built between 1947 and 1951. William Levitt, one of the founders of the firm that built Levittown, had just returned from the army having learnt techniques of mass production building using uniform and interchangeable parts. At its peak, more than 30 homes were being built in a day. With government support many of these dwellings converted from rental units to owned units with a 30-year mortgage and no down payment. Levittown eventually set the tone for the suburbanization of America. The path in the UK was different. Council houses were built and operated by local councils to provide clean, well-built homes to the working class. While the idea of council housing traces back to the 10th century, most of these dwellings were built from the mid-1800s. Today, a vast majority of social housing is owned either by the local government or by housing associations. Starting from last year, China plans to build 36 million affordable homes over a 5-year period. CICC, an investment bank, forecasts that this will cost about 5 trillion yuan, with (local) government providing a little more than half of the outlay. A majority of Singaporeans live in government-owned residential housing located in fully self-contained satellite towns that house schools, grocery stores and hawker markets and are well connected by public transport. While there are common elements such as efficiency and frugal construction, each country has followed a somewhat different path towards affordable housing.

India has not discovered its unique path to affordable housing yet. Attempts to date have been too insignificant to matter. Government efforts have generally been conceived poorly, and maintained very badly if implemented. The actual number of private sector built units is really small. “Affordability" has been well studied and is reasonably well understood. If you use a 40% of gross monthly income rental or EMI as the affordability metric, a household with a monthly income of ₹ 10,000 can typically afford an ₹ 500,000 home. The supply side on the other hand has not as been well studied. People have generally tinkered with new and recyclable materials but have not focused on frameworks that can scale.

A partial answer is beginning to emerge in India. The need for a more holistic urban development framework is now accepted. A recent report of the working group on urban strategic planning for the 12th Five-Year Plan says, “the urban planning process must combine spatial planning with socio-economic and financial planning, and transportation planning with land use and environmental planning to be more responsive to the changing needs and demands of the citizens". Of these, the two most critical factors for the development of affordable housing are land use/titles and transportation. If because of poor transportation and excessive land prices EWS housing has to be located in city centres then the only logical result is a slum. Another critical factor is greater “verticalization" of our cities. This, in turn, depends on the development of critical infrastructure such as urban roads, water and sewage. With greater floor space index, the unit cost of putting up multiple dwelling units will go down and will greatly improve affordability for the consumer and viability for the developer.

The affordable housing revolution will have to await a truly visionary plan for some large city in India. This city will need to function as a large, reasonably dense, vertical city with a well-networked and large footprint mass transportation infrastructure, with guaranteed land titles. This is a great opportunity for cities such as Coimbatore, Thiruvananthapuram, Ahmednagar or Surat. If any such city raises its hand, a major “pilot devolution" directly to the urban local body should be funded for the project under the (yet to be formed) 14th Finance Commission. The affordable housing units can be built under a public private partnership model (made viable because of lower land costs). The maintenance and upkeep of all such buildings should be through at least two city maintenance services companies (for competition).

Then, only then, will we be home free.

P.S. “I do not want my house to be walled in on all sides and my windows to be stuffed. I want the cultures of all the lands to be blown about my house as freely as possible. But I refuse to be blown off my feet by any." Mahatma Gandhi.

Narayan Ramachandran is an investor and entrepreneur based in Bangalore. He writes on the interaction between society, government and markets. Comments are welcome at narayan@livemint.com

To read Narayan Ramachandran’s previous columns, go to www.livemint.com/avisiblehand