The promise is not far-fetched, but seems a bit unrealistic at the moment as the modalities and concrete steps to be undertaken to achieve this goal have not been spelled out. Experts believe that there needs to be a clear, well-thought out policy document outlining the exact deliverables and methods to streamline the process. Else housing for all will just remain a dream unfulfilled, more so in a city like Mumbai. Mayura Shanbaug Reports.
For most 'Mumbaikars' owning a house in the city has always remained a dream that they chase day in and day out. And with the announcement made by the Narendra Modi government aiming to provide 'Housing For All By 2022' a ray of hope has arisen. In the budget speech finance minister Arun Jaitley promised to construct six crore houses - four crore in rural and two crore in urban India with the budget of Rs 22,000 crore - to bridge the supply demand gap in the real estate sector. Even Maharashtra's CM Devendra Fadnavis is an astute backer of the housing for all mission.
But the big question is: will this announcement remains just another promise or the ambitious government will make it really happen this time? Even if the powers that be, have the will what will be the road ma they will follow, especially with regard to Mumbai?
Estimates say that the population of Mumbai is set to triple by 2030. How will the government's promise become reality?
“The promise is not far-fetched, but seems a bit unrealistic at the moment as the modalities and concrete steps to be undertaken to achieve this goal have not been spelled out,” says Anuj Puri, Chairman & Country Head, JLL India.
According to Puri, making two crore urban houses and four crore rural houses available is a huge project in itself, and will require not only sustained government interest and investment, but will also need substantial private sector investment and involvement. “While in the last budget, the announcement of Housing for All was accompanied by increased allotment to the National Housing Bank for both rural housing and for extending credit to the urban poor/EWS/LIG segment, there was also talk of setting up a Mission on Low Cost Affordable Housing which was to be anchored in the National Housing Bank,” said Puri. “However, the track record of government-built housing in terms of quantum and delivery timelines has been as abysmal as that of the private sector,” he adds.
Experts believe that there needs to be a clear, well-thought out policy document outlining the exact deliverables and methods to streamline the process. “This can reduce approval times and provide specific incentives to build such houses on time,” they feel.
Considering that the government has seven years to achieve this ambitious target, it fundamentally involves construction of 30 billion sq ft, or approximately 4 billion sq ft per year if one assumes an average of 500 sq ft per house.
“This is definitely ambitious and without a clear roadmap in place, it is likely to remain unachievable,” believes Puri. According to him the roadblocks remain in ensuring land availability, easy credit and involving construction experts, town planners and the private sector to expedite this target.
According to Rahul Nahar, Chairman and Managing Director, XRBIA Developers, going by CSO’s estimation on the population of Mumbai by 2030, the proposed ‘housing for all by 2022’ will be addressed by building 20 million urban houses.
“To accommodate this rapid urbanization and address the scale of infrastructural and housing shortage, the government on priority basis should focus on developing a structured plan towards building smart cities and satellite towns around existing cities as promised in the earlier budget,” says Nahar. “The proposed plan of 20 million urban houses coupled with an additional stimulus to set up smart cities and developing peripheral areas will release some amount of pressure,” he says.”We understand that by 2030, India will have a housing shortage of 100 million homes,” he adds.
Pankaj Srivastava, COO, Maitreya Realtors believes that the biggest challenge in Mumbai is availability of land which has to be made available at a affordable cost, which means it will have to developed as a satellite town / extended suburb. ”For people to move to these areas, the biggest challenge is the connectivity and time for commute, which if planned and solved properly would definitely make the situation possible,” he says.
However, Anuj Puri argues that the problem is not merely a function of making land available and increasing the FSI. “It involves significant financial incentives to the private sector to enable their participation. The involvement of government agencies in terms of building quality houses and delivering on time is equally poor, and without private sector involvement, the promise is likely to remain unfulfilled,” he says.
There seems to be a need for systemic change in how housing for the urban poor is perceived as an essential need by the government. Regulatory changes, faster approvals, removal of red tape and resolution of land litigation issues need to be adequately addressed to improve stakeholder participation. While the consent clause for the affordable housing segment has been done away with in an ordinance, the government is still struggling to get it passed through parliament.
Puri says that the state government will have to ensure that its new housing policy is inclusive and that the role of the development authority is more as a facilitator with contracts awarded to players on the Budget’s ‘plug and play’ mechanism, where all approvals and linkages are already in place.
Execution penalties will be deterrents, says Puri, “but it is essential to have the right partners who will not put their hands up in the middle of the project execution,” he adds. Likewise, suitable financial incentives to the private industry will also be required to ensure healthy participation. “The need is for a three-pronged approach involving the state, regulatory bodies and the executing agency/private player. Despite this, the target still remains a stiff one and the track record of delivery in the past does not provide lot of confidence, except in the intent of the current dispensation,” he states.
Neeraj Bansal, Head - Real Estate and Construction stated in the research report put out by KPMG and NAREDCO,' Funding the vision — ‘Housing for all by 2022’ says that availability of adequate liquidity is a major requirement for the smooth growth of the real estate sector in India.
However, the real estate sector is largely depended on funding households, which provides about three-fourth of total investment in the real estate sector. As per the report, in the last couple of years, household investment in the real estate sector has decreased owing to rising property prices and high interest rates. Meanwhile, the equity capital which started flowing in after the relaxation in 2005 has completely dried up after the global financial crisis in 2009. Institutional lending has grown at a tremendous rate, and this has largely filled the gap created by the slowdown in investments by households, and the private capital. “Over the last six to seven years, the government’s participation has remained stagnant at merely three per cent of the total investment in the real estate sector,” says Bansal.
“In light of the government’s vision to provide housing for all by 2022, it is imperative that sufficient reforms are introduced in the short-term to improve availability of funding in the sector. These are urgently required as a real estate project cycle is about seven to eight years, and any actions taken now would ideally reflect after few years, says Bansal.
Bansal beleives, reforms such as encouraging PPP, granting infrastructure status, setting up a housing fund, increasing ECBs’ limit, improving mortgage debt and capital market penetration, and overall allocating higher funding towards the real estate sector are few reforms which are overdue.
Sunil Mantri, President - National Real Estate Development Council, beleives new mechanisms as such as External Commercial Borrowings (ECBs), which currently the RBI has allowed for USD1 billion, needs to be raised to USD10 billion. “Borrowing money through the ECB mechanism for real estate projects must be given permission at the earliest,” he said. Unless and until massive support from the banking sector in terms of finance is provided, the sector may not grow to the attainable level of 20 to 25% annually, and realise the government’s dream of achieving eight per cent GDP growth by 2017,” he adds.
Road Map To Achieve Housing For All
Housing for All by 2022 is an ambitious and challenging mission and certain important initiatives by the government can provide the necessary boost to accelerate the vision. Some of these are encapsulated below:
- All major reforms announced by government should to be backed with proper roll out strategy and set timelines
- The much anticipated and long overdue industry status for the real estate sector will ease the flow of bank loans towards the sector already under a severe cash crunch
- With steps being taken to ensure ease of doing business together with government’s proposal to have Single cap for FDI and FPI the industry anticipates more investments and foreign inflow
- The Real estate industry is hopeful of being an indirect beneficiary, basis the impetus provided by government to various key sectors like infrastructure, retail, education, healthcare, railways which will have a cascading effect on the real estate sector.
This is definitely ambitious and without a clear roadmap in place, it is likely to remain unachievable.
—Anuj Puri, Chairman & Country Head, JLL India
To accommodate this rapid urbanization and address the scale of infrastructural and housing shortage, the government on priority basis should focus on developing a structured plan towards building smart cities and satellite towns around existing cities.
—Rahul Nahar, Chairman & MD, XRBIA Developers
For people to move to these areas, ( extended cities) the biggest challenge is the connectivity and time for commute, which if planned and solved properly would definitely make the situation possible.
—Pankaj Srivastava, COO, Maitreya Realtors