Taking a cue from global practices, HUDCO comes up with a host of new schemes. A look by M.A. Siraj

India’s march on the trajectory of urbanisation is relentless. It is not likely to see any let-up in the coming years. Nor is it anywhere desirable. In 1950, a little over half of India’s GDP was coming from rural areas. By 1995, it had halved to about 25 per cent. Agricultural productivity is at best stagnating, or at worst decreasing. This together with the lure of better standards of living is acting as a strong pull towards towns and cities. Needless, therefore, to say that only organised housing can save our urban spaces from being chaotic.

The Ministry of Housing & Urban Poverty Alleviation’s (MoHUPA) latest annual report says that the number of people living in slums in cities has gone up from 28 million to 93 million or registered a three-fold increase between 1981 and 2011. These people should be taken as those excluded from the development programmes and process.

In the wake of this massive influx into cities, the housing deficit of 18.78 million in urban areas shows a yawning gap in demand and supply. Of these, the EWS (economically weaker section) sector alone accounts for 10.55 million units or 56.2 per cent of the total. The LIG (Low Income Group) sector required 7.41 million housing units or 39.4 per cent whereas MIG + HIG (middle and high income group) had a deficit of 0.82 million or 4.4 per cent. Evidently, 95 per cent of the deficit is in the EWS and LIG segments. It is where the major challenge lies for developing a mechanism for the financial institutions and the real estate sector to come up with adequate responses.

Even if a dwelling unit is assigned Rs. 5 lakh towards its cost, the money needed to meet the deficit in the EWS and LIG segments is Rs. 9.5 lakh crore. The National Housing Bank’s estimates come very close to this figure i.e., Rs. 8.5 lakh crore for slum and non-slum housing. But the urban population is increasing at an annual rate of 2.8 per cent and adding 10.5 million people to our cities means that planners need to take cognisance of the risings needs too.

According to V.P. Baligar, Chairman, HUDCO, flow of funds to the affordable housing segment of the real estate sector is dismal and there is need to incentivise and encourage private sector participation in affordable housing for the urban poor.

While non-availability of cheaper and long-term finance was the major stumbling block for individual housing aspirants, the high cost of capital for builders hinders the progress.

Credit risk

Mr. Baligar says the formal sector is not very comfortable in lending to private sector real estate due to high NPA (non-performing assets) and credit risk. Even rising inventories (unsold flats: Mumbai - 48 months; Bangalore - 25 months; Delhi - 23 months) dissuade the financing agencies. Above all these, home loans are almost inaccessible for EWS and LIG segments which constitute the bulk of deficit. Even though mortgage penetration has been going up in India and outstanding housing loan as a percentage of GDP has risen from two per cent in 2002 to nine per cent in 2012, it is very low in comparison to other countries. It is 20 per cent in China, 88 per cent in U.K., 81 per cent in the U.S. and 29 per cent in Malaysia. Low mortgage penetration implies room for higher growth.

The mandarins in the Housing and Urban Ministry are already mooting a variety of fiscal incentives to developers of affordable housing. They are having an overview of the global practices in this regard. The Chinese model suggests transiting from State-provided housing model to private developer-led model. China’s affordable housing programme called “Jingji Shiyong Fang” envisaged providing dwelling units to LIG and MIG groups at 50 to 70 per cent of the market value through private developers. The developers were given free land and infrastructure by the State. China has embarked on building 36 million affordable housing units for LIG families during its 12th five-year plan (2011-15).

Tiny Singapore has at times spent almost 40 per cent of its capital expenditure on affordable housing. Normally, it asks the beneficiary to mandatorily contribute 20 per cent of income to the Central Provident Fund which is redirected as mortgage loan repayment. South Africa has made access to housing a Constitutional right. The Government allocates free land, and provides capital subsidies for the LIG segment provided private developers allocate part of the units they construct for affordable housing at below market rates. In the U.K., all new housing development of more than 25 units have to build a pre-agreed number of affordable units which may range from 15 to 25 per cent of the total.

The schemes

Following these global precedents, HUDCO has come up with some schemes. First among them envisages partnership with private developers (approved by the Central Government) and provides financial support at special interest rates i.e., 8.25 per cent for dwelling units with a sale price of Rs. 4.25 lakh; 13 per cent to those between Rs. 4.25 lakh and Rs. 12 lakh; and 14 per cent to those with sale price up to Rs. 25 lakh.

Under another scheme named Hudco Nav Nagar Yojana (HuNNY), the Central Government undertaking visualises partnering with urban local bodies (ULBs) and providing them an integrated solution (from planning to financing). HUDCO will involve itself in financing, conceptualising, architectural consultancy, preparation of DPR (detailed project report), training for capacity building etc. ULBs or UDAs (urban development authorities) will be offered land in bulk and a subsidy of Rs. 75,000 for each EWS/LIG housing unit provided 35 per cent of units is earmarked under affordable housing with not less than 250 of them in number.

Under a scheme to include women in slums and those working in the informal sector, HUDCO is partnering with NGO Sewa through equity investment of Rs. 1 crore (10 per cent) in a housing finance company. While the schemes certainly seem to incorporate the poor and the houseless into urban development, organised urban growth will depend on their honest and successful implementation.