Budget 2011-12 belies hopes of effectively addressing the housing needs of the poor. It fails to provide the much-needed impetus to improve the supply of affordable housing for economically weaker sections (EWS) and low-income groups (LIG), particularly those who live in the urban areas. About 99 per cent of housing shortage pertains to these two socio-economic categories. In absolute terms, by the end of 2012, the deficit will be as staggering as 26 million units. Instead of devising schemes to target this segment, the budget assumes that a broad stimulation of growth in the housing sector will solve the problem. It relies on the upgraded interest subvention scheme, which will now offer one per cent discount on home loans for dwellings priced at Rs.25 lakh and below, and revised home loan limits to improve the supply of affordable housing. But the question is will it? As the Ministry of Housing and Urban Poverty Alleviation points out, any dwelling unit that costs more than Rs.250,000 for the EWS and Rs.500,000 for the LIG will not be affordable. It is clear that the budget schemes that encourage construction of houses priced at Rs.25 lakh and target buyers who can mobilise Rs.10 lakh on their own will neither benefit the poor nor bridge the housing deficit.
The Finance Minister has proposed to set up a Mortgage Risk Guarantee Fund and to offer investment-linked tax deduction for affordable housing schemes. Setting up a risk fund to guarantee housing loans extended to the poor is not a new idea. The draft National Housing Policy proposed it in 2005, recommending a corpus of Rs.500 crore for the purpose. Unfortunately, this proposal was not implemented. It has now been resurrected and integrated with the existing Rajiv Awas Yojana (RAY). However, the ground reality is that RAY, announced in 2009 to improve the housing conditions of the poor, is itself in the preparatory phase, with the parameters yet to be finalised. Providing income tax benefits to encourage private developers to build houses for the poor is one of the approaches successfully adopted by several countries. Indian policymakers who are trying this method for the first time have an important lesson to learn: fiscal incentives by themselves will not produce desired results. Unless it is integrated with a well-worked out delivery mechanism and a regulatory framework, the scheme will not benefit the needy. It is true that State governments also have a responsibility to address the housing needs of the poor. But the Finance Ministry could have done its part better by showing more commitment to meeting basic needs.
Keywords: Union Budget 2011, housing, poor
The idea of tax benefits provided by Income tax department to private builders to encourage them to build houses for Economically weaker sections (EWS),Low Income groups (LIG) is very appreciable in foreign countries which is in progress.If Pranab takes the initiative by getting inspired by this scheme of foreign countries will really benefit to houseless of EWS and LIG.Many projects in India has not given tasty fruits to poor and own house dream for poor left just as a dream.Banks,State Governments also must take initiatives to provide home loans with less interest to EWS and LIG who are white ration card holders.Government should pass a G.O and plan budget that a person who doesn't have even a single house on his own can enjoy 2% of loan interest discount for people under EWS category and 1% for people under LIG.This may fetch the poor in accomplishing their dream of own house.
Housing needs in the urban areas are different than those in the rural areas. In the metrpolitan towns and big towns, it is found that land has acquired astronomical price. Therefore, it may not be appropriate to have the same parametrs in the urban and rural areas for Central government's housing grants and subsidies. It is often noticed that the slum dwellers who occupy a sizeable portion of public land in metros and big towns are in a position to influence local politicians to get some extra benefit when housing schemes are announced. Naturally the slum dwellers want houses near their place of work and in the metros, this means very high opportunity costs if they are provided houses in prime location. Hence it is necessary to establish a balance between the needs of the slum dwellers and of the rest of the public. The impact of interest subsidy on improvemebnt in housing stock would not be much. For real impact, the government should consider constructing housing complexes on a massive scale and that too near big towns, with private sector partnership, for the beneft of common man and offer subsidies in the price of the houses. The Housing Boards of the state governments are doing this but because of corruption the impact is not felt.
Please Email the Editor