PPPs can be instrumental in attracting capitalfor viable and affordable housingprojects in major cities and maintaining them too
India is a rapidly urbanising country facing development challenges connected with speedy growth. One of its key challenges is urban migration, which is further exacerbated by restricted resources to meet intensifying housing demands. The high percentage of labour migration from rural areas to cities has contributed to urban congestion, pressure on basic amenities such as water, sanitation and most of all a housing crisis in cities. The country’s total urban housing deficiency is anticipated to touch about 30 million by 2022. This constantly-increasing gap between demand and supply in the affordable housing (AH) segment is forcing people to live in slums and informal settlements. The subject, if not dealt with capably, can have a negative impact on the country’s financial growth and poverty-reduction efforts.
Real estate developers and private players are focussing mainly on Middle Income Group (MIG) and High Income Group (HIG) segments due to the higher returns from these projects. On the other hand, high land costs, interruption in project approvals, rising raw material costs and low-profit margins have made low-cost housing projects less attractive to them. Also, AH being a State subject, creates complexities in implementation because of unstable financial conditions of development authorities, State/city-level agencies and their restricted capacities in supervision of these projects. To overcome these obstacles, a partnership between the Centre, States, urban local bodies (ULBs), civil society, the private sector and financial organisations is essential. To mainstream AH, the Government needs to act as an enabler for growth and facilitate investments, both public and private. It must also shake-up processes across the value chain. Housing for all by 2022, is the dream of the Government and before taking any action, it is significant to re-examine the current state, recognise bottlenecks and build an efficient execution strategy. Though housing deficit is much wider in rural areas compared to urban areas, it requires only a small portion of total investment foresee till 2022. The Centre, with partaking from States, drafting a plan to deliver three crore houses in rural areas with an outlay of Rs 3.45 lakh crore, is a good start.
At the beginning of the 21st century, a slide of supervisory alterations such as agreeing to foreign direct investments (FDI), refining access to credit by thrust households, giving tax incentives on housing loans, establishing special economic zones (SEZs) and infrastructure development, attached with high economic growth, have driven private sector participation in urban housing development. However, it has largely resulted in the development of MIG and HIG houses, leading to a significant shortage of AH. Boosting private sector participation in urban AH development would need a synchronised effort from both Central and State Governments. It has been the key role of the Central Government to create an enabling environment through statutory and supervisory alterations in land acquisition, real estate management, analysing archaic regulations governing the real estate sector, streamlining clearances and approval procedures required from Central Government agencies such as the Ministry of Environment and Forest, and the Ministry of Civil Aviation.
Mobilisation of such huge resources (funding, construction capacity, labour, technology, and so on) for mass-scale AH development may be difficult without the participation of the private sector. Hence, the private sector, which is often better in terms of managing construction risks and project delivery, should be encouraged to participate by the Governments by addressing several structural issues.
Public-Private Partnerships (PPP) can play an important role in bridging the gap between housing demand and supply as it can be instrumental in attracting private capital for financially-viable AH projects. The PPP framework can be effectively used to address some issues in housing development such as land availability, approval delays, funding and affordability by the economically weaker sections (EWS).
The housing sector has great potential as it is the main enabler of the economy in terms of contributions to the exchequer and employment generation. The sector also supports 250 ancillary industries and has a huge multiplier effect on the economy. Proper nurturing could help increase its share to 10-12 per cent by 2022. The Centre could explore forming a nodal agency under the Ministry of Housing and Urban Poverty Alleviation to facilitate fast-track development of AH projects. This nodal body could be a synchronising agency between the private sector, consumers, lending institutions, investors, various housing regulatory agencies, State Governments and ULBs.
Another key aspect that is widely neglected while planning an AH project is maintenance, post hand over of units, which creates new urban slums. It is of extreme importance to report this aspect to generate sustainable benefits of the creation of these assets. As per a report by Deloitte on Affordable Housing, the Government has taken many steps to boost the sector, but challenges still remain. For instance, while Rajiv Awas Yojana (RAY) envisaged a fund for the maintenance of assets created under the scheme with a one-time contribution from the Centre, it could not be implemented at a wider level.
(The writer is Director of a major real estate group.)