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Business News/ Politics / Policy/  Maharashtra plans PPF-style fund for affordable housing
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Maharashtra plans PPF-style fund for affordable housing

The public housing fund will use the money to create a land bank for its housing development arm, Mhada

A file photo of a Mhada colony. Photo: Hindustan TimesPremium
A file photo of a Mhada colony. Photo: Hindustan Times

Mumbai: The Maharashtra government is considering starting a public housing fund (PHF) in which people can contribute a small part of their monthly income for a period, like in an insurance policy or a public provident fund (PPF), in a bid to make homes more affordable in Mumbai and other cities.

The PHF will use the money to create a land bank for its housing development arm Maharashtra Housing and Area Development Authority (Mhada).

The fund will also be used to give loans to builders for affordable housing projects or to housing societies, who opt for redevelopment without involving the builders, said a senior official of the state housing department who did not want to be named.

The PHF proposes to offer interest equivalent to a provident fund account and the state government may approach the centre to make contributions to the fund tax-free.

The move is part of the state government’s aim to create 11 lakh affordable homes in Mumbai Metropolitan Region over the next five years. “The draft of the policy has been prepared and it will soon be sent to the cabinet for approval. We are attempting to make it public by the middle of next month," the official said.

Maharashtra’s urban population of more than five crore is the highest in the country and it is growing by about 10 lakh a year, according to the national census 2011.

It needs $200 billion in investment by 2022 in the urban housing sector, according to the report Maharashtra: Redefining Urban Growth released by KPMG on 22 April.

“Buying a house is a lifetime project for the middle- and lower-middle classes. Often they find it difficult to contribute the initial 20% amount which one has to pay for houses even as the rest is available through housing loans. This fund aims at providing this amount to the middle-class by encouraging them to save," said the official.

To incentivize the saving, the government will give preferential allotment to the Mhada houses to those who contribute to the fund.

The flats developed by Mhada are 30-50% cheaper than market rates as the land is allotted to it by the government.

Allotments to Mhada housing projects are done through a draw of lots and attract a huge response. Currently it has invited applications for 1,000 houses.

While the last date to apply is 14 May, in the first week itself 30,000 people had applied.

“The concept of PHF is being discussed but nothing has been finalized yet. You will come to know about it, when the cabinet approves the housing policy," said state housing minister Prakash Mehta.

“Contribution towards a PHF aims at facilitating the process of more people getting a chance to buy a home eventually," said Ashutosh Limaye, the head of research at property advisory Jones Lang LaSalle Inc.

“Similarly, a housing society that wants to self-develop without approaching a developer may approach a fund corpus like this, and from the free sale component, give preferential allotment of homes to those who contributed to the fund."

A redevelopment project includes the redevelopment component for existing residents or tenants and the free sale part, which can be sold at market rates.

Simpreet Singh, convener of Ghar Bachao Andolan, an organization that works for housing rights of economically weaker sections, said, “The PHF scheme sounds like a post-dated cheque, and no one knows whether this cheque will be honoured or not."

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Published: 04 May 2015, 12:19 AM IST
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