SOCIAL JUSTICE CURRENT AFFAIRS 2017 HOUSING FOR ALL -PMAY

SOCIAL JUSTICE CURRENT AFFAIRS 2017 HOUSING FOR ALL -PMAY India is undergoing a rapid urbanization now. This requires expansion of urban amenities. A major deficit is housing among urban population. National Urban Housing and Habitat Policy (NUHHP), 2007 has set the objective of affordable housing for all as a key focus. The government has set 2022 as the target year to realize this objective by making specific initiatives for the promotion of urban housing. Today, while developers in India s metropolitan cities are sitting on lakhs of unsold residences costing upwards of Rs. 50 lakh, the country is estimated to have a shortage of nearly 20 million housing units needed by the rural and urban poor, at far lower price points of Rs. 5-15 lakh. The PMAY aims to address this shortfall. The government has launched Pradhan Mantri Awaas Yojana. PRADHAN MANTRI AWAS YOJANA (PMAY) The Pradhan Mantri Awas Yojana (Urban) Programme launched by the Ministry of Housing and Urban Poverty Alleviation (MoHUPA), in Mission mode envisions provision of Housing for All by 2022, when the Nation completes 75 years of its Independence. The Government envisages building affordable pucca houses with water facility, sanitation and electricity supply round-the-clock. FOUR KEY ASPECTS Slum rehabilitation of Slum Dwellers with participation of private developers using land as a resource Affordable Housing for weaker section through credit linked subsidy Affordable Housing in Partnership with Public and Private sectors Subsidy for beneficiary-led individual house construction /enhancement. BASIC DETAILS The mission seeks to address the housing requirement of urban poor including slum dwellers. Beneficiaries include; Economically weaker section (EWS). 99.9% of the EWS doesn t have a house and 88% of the urban housing shortages are from EWS. low-income groups (LIGs) Around 11% of shortages are from LIG Middle Income Groups (MIGs). The houses constructed/acquired with central assistance under the mission should be in the name of the female head of the household or in the joint name of the NEO IAS 0484-3190310, 9446331522, 9446334122 Page 1

male head of the household and his wife, and only in cases when there is no adult female member in the family, the house can be in the name of male member of the household. Slum redevelopment projects and Affordable Housing projects in partnership should have basic civic infrastructure like water, sanitation, sewerage, road, electricity etc. Urban Local Bodies (ULB) should ensure that individual houses under credit linked interest subsidy and beneficiary led construction should have provision for these basic civic services. ANALYSIS Amidst the government s celebrations on completing three years in office, one flagship scheme remains a massive and challenging opportunity: Housing for all by 2022. CHALLENGES Slow pace: The Technical Group on Urban Housing Shortage estimated that the national housing shortage reached 18.78 million in 2012. At the current pace of PMAY, with a little over 100,000 houses built, it will take hundreds of years to build our way out of the housing shortage. However, the Technical Group s report pointed out that 80 per cent of the shortage was attributed to congested houses something that may be better addressed by enabling individual households to upgrade their own homes. Land is scarce: If the aim is to build millions of new housing units, clearly, land is scarce. However, if the intent is to enable people to upgrade their congested housing, then there is no shortage; these congested households are already NEO IAS 0484-3190310, 9446331522, 9446334122 Page 2

occupying land. The challenge is to in-situ upgrade this housing. The Government has made efforts to unlock this land potential by providing Transfer of Development Rights (TDR) to incentivise developers to in-situ rehabilitate slums. While this has proven effective in Mumbai, the economics breaks down in smaller cities where land values are not as high and developers are unable to recover their costs. The unacknowledged bottleneck of property records: An important aspect of PMAY is the interest subsidy on a home loan and the direct subsidy for individual house construction or enhancement. However, a requirement to avail either subsidy is title documents to the property. And therein lies the crux of the problem: our land and property records are in a poor condition. Many people continue to live in ancestral homes, whose title deeds may be in the name of deceased grandparents. Slum dwellers arguably the target beneficiaries under PMAY are unlikely to have title documents. To complicate things further, land records are governed by the State s revenue department, while housing is a separate agency. Citizens are unable to navigate this maze to obtain their property documents, ending up locked out of the scheme s benefits. One crore vacant houses do not enter the rental market: The Census showed there were over 10 million vacant houses in 2011, nearly half the urban housing shortage. The vast majority of these property owners are private citizens who prefer to leave their house vacant, rather than offer it on rent. This reflects the distorted rental market in India where property owners fear they may lose their property to tenants, leading to under-utilisation of assets. Real estate problem: It is important to understand that India has a real estate problem. The problems range from ever-increasing prices of houses which are not concomitant to growth in per capita incomes illegal constructions, stressed balance sheets of builders due to massive unsold inventory and incredibly low share of property tax in GDP. The terrible state of municipalities in India is another problem. Corruption-ridden construction approval process: Municipalities across India have a rather corruption-ridden construction approval process, putting India in the 184th position in World Bank s Ease of Dealing with Construction Permits and 121 in Ease of Registering Property parameters. Low sanctioning: With the government sanctioning only 52,000 houses for the slum dwellers against the requirement of at least one crore houses under the insitu scheme, the Centre's ambitious target to ensure "decent" dwelling units to all by 2022 seems to be on a slippery wicket. The number of houses sanctioned for slum dwellers is just 2.2% of the total houses approved under PMAY. NEO IAS 0484-3190310, 9446331522, 9446334122 Page 3

Lack of private players: Slum dwellers will get houses at the same location to ensure their livelihood is not disturbed. Though private investment is the key to such projects, the private sector has not come forward till now. Title of the land: There is lot of suppressed demand but the challenge for Housing Finance Companies is the title of the land. Many people who have taken up space in the cities do not actually own the piece of land they are occupying. Lack of any documented proof of income is one of the major hindrances to housing finance companies being able to lend to people belonging to the lowerincome categories. So the government has to legalise their space by providing clear title. Then it becomes easier to fund them. Continuing migration: It would be a mistake to plan housing for all ignoring the economic imperative of urbanisation and the inevitable migration of large numbers of Indians from villages to towns. Migration would create new homelessness. As services and industry grow much faster than agriculture, creating new jobs, people will move from village to town, to take up the new jobs. These numbers would be huge. They cannot crowd into existing towns. New ones have to be built Finding the resources: Finding the resources required for a task of this dimension is going to be a real challenge. One estimate says more than 100 million houses will have to be built by 2022 if the shortage in both urban and rural areas put together is to be met. Thirty million houses for the rural homeless by 2022 are estimated to cost Rs 3.45 lakh crore. This is more than double the current level of investment; and the investment must grow at a compounded annual growth rate of 18 to 20 per cent. India has a real estate problem quite aside from the Housing for All (HFA) mandate. The problems range from ever-increasing prices of houses which are not concomitant to growth in per capita incomes, illegal constructions, stressed balance sheets of builders due to massive unsold inventory and incredibly low share of property tax in GDP. The terrible state of municipalities in India is another problem. HOW TO OVERCOME CHALLENGES? / WAY FORWARD There are major policy levers that can help solve these challenges. Simplify the process: States need to simplify the process of updating property records. This will allow all citizens to obtain legal documents to their land and property in order to fully embrace the subsidy features of PMAY and access credit, which will enable them to upgrade their housing. Flexibility in legal title requirement: Enable individual households who don t have legal titles to in-situ upgrade their housing by providing them with security of tenure even a no eviction guarantee. Ahmedabad s success with the Slum Networking Program shows that the security and comfort from such NEO IAS 0484-3190310, 9446331522, 9446334122 Page 4

measures can encourage slum residents to invest money and upgrade their shelter. Rental reforms: States need to push through the much-needed rental reforms that balance the interests of tenants with the protection of property owners rights, and don t distort rental markets by artificially controlling rents. This has the potential to bring vacant housing stock into the rental market and alleviate the housing shortage. Centre State coordination: Lack of coordination between the Centre and the States has hindered the progress of such welfare schemes. While housing for all is a national agenda, land is a State issue and needs proper coordination between the Centre and the States. Utilise unused land: The Prime Minister s Office has reportedly asked government departments to identify unused land, especially in developed government colonies, to plan affordable housing projects. This is fine when there is scope for high density as basic amenities are already available in such places. Small plots can be consolidated to build vertically and create parking and other amenities. Lessons from China: India should take a page from China. Over the last few years, China has built dozens of new areas as part of a massive urbanisation drive. It now plans to build a new city Xiongan near Beijing -the special economic zone will reportedly cover an area nearly three times that of New York - to ease congestion in its capital. The need is for India to plan well ahead and manage the process of urbanisation in a way that suits our needs. The type of town planning that is envisioned will have a bearing how efficient and secure are our new cities. AMRUT: The Atal Mission for Rejuvenation and Urban Transformation (AMRUT) scheme which aims at improving urban infrastructure should be tied to the HFA scheme and looked at in conjunction rather than separately. The implementation of AMRUT will help make housing units attractive and viable to buyers. Incentivise private players: To attract private investment and participation, incentives should be given to them. The last two budgets (2016 and 2017) have given high priority to this objective. Measures like 100% tax incentives on affordable housing projects, conferring of infrastructure status to affordable housing, reduction of long term capital gains tax period to two years etc. will encourage the participation of private sector companies into affordable housing. Under the Union Budget 2012 13, External Commercial Borrowing (ECB) has been allowed for affordable and low-cost housing. Prioritise as per the hierarchy of need: A proper strategy of addressing the housing issue would naturally involve looking at a hierarchy of people who need it NEO IAS 0484-3190310, 9446331522, 9446334122 Page 5

the most. Census 2011 reported that of the 4,041 statutory towns in the country, 63 per cent (or 2,543) had reported slums. Slum households are 17 per cent of the urban population, numbering 13.75 million households. Naturally, these persons will rank high in strategies for housing. The states with the most slum households are Andhra Pradesh, Chhattisgarh, Madhya Pradesh, Odisha and West Bengal. Among big cities, Greater Visakhapatnam, Greater Mumbai, Vijayawada, Meerut and Nagpur have the most. So these cities also will have to lay specific emphasis on the issue, especially because they are generators of higher GDP and employment. Housing for all should focus on instruments that produce a plentiful stock of affordable housing units, to rent, if not quite to own, in the new towns that have to crop up to fuel India's future growth. Overinvesting in existing habitats and providing people with titles would be politically attractive but not of much use. LATEST GOVERNMENT INTERVENTIONS SIMPLIFIED GREEN NORMS Seeking to achieve a target of housing for all by 2022, the Centre has simplified the environmental clearance processes for building projects in the country. The move allows smaller projects to meet environment conditions through a selfdeclaration process and spares the bigger projects the need of seeking prior green approvals before embarking on construction activity. They are just not required any longer to go to state level environment assessment authorities. This category of building will now get simultaneous building NEO IAS 0484-3190310, 9446331522, 9446334122 Page 6

permission and environment clearance from local authorities which will now also have an environment cell to examine green parameters. The cell will process the online applications and present it in the meeting of a committee of local bodies such as development authorities and civic bodies. The committee will appraise the project and stipulate the environmental conditions to be integrated in the building permissions. The move is aimed at ensuring ease of doing responsible business and streamlining the permission for construction sector. EASY FDI FLOW: Easier flow of foreign direct investment (FDI) is a facilitative measure assured by the government so that the required funds are available. As a follow-up, while the minimum built-up area required to attract FDI has been reduced and, similarly, the capital requirement also has been brought down, removal of the three-year lock-in for overseas investments is a point on which a decision is expected. REITS Real Estate Investment Trusts (REITs), generally used as instruments for pooling of investment in several countries, have also been identified as another means of finding resources for which incentives have been proposed. It is reported that if the taxation relief sought materialises, $10 billion of REIT can be listed by March 2015, because the top 18 developers have the type of stock which has this potential. 50 LAKH UNDER PRIORITY SECTOR LENDING The Reserve Bank of India's recent measure, of bringing housing loans up to Rs 50 lakh under priority sector lending and some first-time home buyers becoming eligible for tax breaks, are positive steps for one segment that has to be provided with houses. CONCLUSION How the state governments proactively find land for the purpose of constructing large numbers of such houses will be critical. Without making a city-wise assessment of the number of such people to be provided with houses and updating it on a dynamic basis, the agenda will not make the required progress. Urban local bodies need to be involved in this act even though housing is not a subject constitutionally mandated to them. Since there are different central bodies like the NHB, banks, HUDCO, construction technology agencies and the ministries themselves - at the state level also, there are a variety of organisations involved - an empowered, effective coordination and monitoring structure must be put in place by state governments. NEO IAS 0484-3190310, 9446331522, 9446334122 Page 7