HOUSING FOR ALL: A DISTANT DREAM?

In order to prevent illegal constructions that result in building collapses, the government needs to work with the developers and implement stronger policies to provide affordable housing for all, says      Developing affordable housing in Mumbai is crucial to ensure that the low-income group is not compelled to live in illegal buildings, thereby, curbing tragedies related to collapsing buildings. There are a lot of economic, regulatory and urban issues which need to be looked into for ensuring that there is enough affordable housing inventory to meet the demand. While the unavailability of urban land, rising costs of construction and regulatory issues are the supply-side constraints, lack of access to home finance is a serious demand-side constraint, which impacts the ability of people in the low-income group to buy homes in the organised sector.      Here are a few aspects which the stakeholders of the real estate industry need to consider in order to facilitate affordable housing in Mumbai.  LACK OF LAND PARCELS  There is a huge demand for land due to the high population density. As a result, land prices in India are much higher than can support mass real estate developments. Naushad Panjwani, senior executive director, Knight Frank India, informs, "The government must work on the PSU and PPP model. In the PSU model, the government remains the owner of the land and can take advantage of all future FSI benefits through redevelopment. As the land is already owned by the government and is lying idle, only the cost of construction needs to be funded. Land acquisition norms are inadequate to satiate the need for housing." According to Manju Yagnik, vice-chairperson, Nahar Group, "We require certain policy decisions by the government such as the reservation of land for housing for all projects, making land available at a concessional rate or creating a special housing zone in line with the SEZ concept."  PAUCITY OF INFORMATION  Due to the lack of transparency in getting the correct transactional information, acquiring land takes a lot of time and money. "The land records can be accessed through the department of registration but the process is cumbersome and the transaction prices mentioned in the registration document might not be representative of the actual transaction costs. Further, mapping of land inventory has not been carried out comprehensively nor is it accessible to the buyers. A large segment of the intermediaries that deal with prospective buyers on behalf of the land owners are not certified or professional brokers," a report by Jones Lang LaSalle India (JLL) elaborates. Thus, buyers of land not only lack access to information on options but also have to deal with a largely unorganised sector for their land transactions.  RISING COSTS OF CONSTRUCTION  Although the land prices are exponentially lower in the peripheral locations of the city as compared to the city centre, the construction costs have a significant impact on affordable housing prices. Construction costs form nearly 50-60 per cent of the total selling price for affordable housing due to the rise in prices of materials such as steel, cement, sand and labour. If land in the peripheral area of the city costs about Rs 200 per sq ft, the cost of construction of an affordable housing project with basic amenities costs about Rs 900 per sq ft, which would result in a minimum selling price of Rs 1,400-1,700 per sq ft.      Abhishek Kapoor, CEO, Rustomjee Urbania, opines, "For developers constructing in far-flung suburbs, the government must develop civic infrastructure and ensure better connectivity through roads and railways, as this will lead to an influx of people." It is important to minimise costs for construction of low-income housing whilst balancing the amenities provided, while at the same time ensuring the safety and serviceability of the built structure during its lifecycle.  NO ACCESS TO HOME FINANCE  For home buyers, making a purchase in distant suburbs still remains a challenge. Viraj Momaya, a resident of Dombivli, faced a lot of difficulty in getting a home loan as he was employed in the unorganised sector and was paid in cash. About 65-70 per cent of the workers in urban areas are employed in the unorganised sector. They are paid in cash and lack formal documents of identification, address and income. This segment of the society hence remains under-served by the Housing Finance Companies (HFCs).      According to Monitor Inclusive Markets, a business unit of Deloitte, the loan market of Rs 3-10 lakhs is worth almost Rs 11,00,000 crores. Despite this, a majority of the loans disbursed by the HFCs are to mid-income and high-income groups in the loan bracket above Rs 10 lakhs. Lalit Kumar Jain, chairman, CREDAI, informs, "The interest rates on home loans, especially in the affordable category, cannot and should not be more than seven per cent. Also, the current guidelines by the RBI are antihousing industry as the cost of finance is very high, making housing costlier. Housing should be recognised as an industry and should be given cheaper project finance."  REGULATORY CONSTRAINTS  The process of real estate development is also affected by the efficiency of urban local bodies which undertake city planning, deliver utility services and regulate controls on development through approvals. "India is ranked 177 out of 183 countries with respect to dealing with construction permits, which indicates the challenge developers face in India in the development of real estate," the JLL report states.      To obtain a plan sanction for a project, the developer has to visit nearly 40 departments, right from the central department for environment and the airport authority to the state government for revenue, fire and high-rise approvals and the local bodies for water, sewage and traffic-related approvals. From entering into an agreement for land purchase to the date of commencement of construction, the process takes nearly two to three years, complain developers. "We have been demanding the setup of a single window clearance system, proper coordination between various authorities and reform in approval process; however, this hasn't happened," laments Yagnik.  HIGH TAXATION  If you thought only high land and construction costs made homes expensive, you are wrong. According to calculations made by experts, taxes amount to about 40 per cent of the price of the end-product. Sunil Mantri, MD, Mantri Realty, says that practically, it makes no difference today if you make an affordable housing or a luxury housing project. "The taxes are the costliest these days. The government can give more encouragement to the affordable housing sector by doing away with or reducing the stamp duty, transaction cost, custom excise and providing additional FAR and FSI," Mantri adds.  GREATER FSI AND FAR  Creating housing for all also needs some relaxation in FSI. If we consider the city of Mumbai, developers currently get a FSI of one and in some cases, a little higher, which is certainly not sufficient to implement housing for all classes. Today, top developers in the city are demanding more incentives so that they can turn their attention to affordable housing. In 2010, an MoU was signed between the government of Maharashtra and MCHI. It stated that the developers will create 10 lakh affordable homes through slum redevelopment, PPP model and other schemes. However, this has remained only on paper. So far, only one lakh such houses have been created. "There are bound to be incidences of building collapses, as illegal housing will continue to provide cheap housing. The government must turn to professional developers for which they have to look into various suggestions. It needs to work in tandem with the developers and come up with policies that encourage housing for all," Mantri signs off.  QUICK  BYTES      THE GOVERNMENT CAN GIVE MORE ENCOURAGEMENT TO THE AFFORDABLE HOUSING SECTOR BY DOING AWAY WITH OR REDUCING THE STAMP DUTY, TRANSACTION COST, CUSTOM EXCISE AND PROVIDING ADDITIONAL FAR AND FSI.      FOR DEVELOPERS CONSTRUCTING IN FAR-FLUNG SUBURBS, THE GOVERNMENT MUST DEVELOP CIVIC INFRASTRUCTURE AND ENSURE BETTER CONNECTIVITY.