Providing adequate numbers of affordable houses for the urban poor remains an elusive target. Policies framed in the past have failed to deliver. About 96 per cent of the 18.78 million housing units shortage pertains to lower income groups. Hence, when the Ministry of Housing and Urban Poverty Alleviation recently published its task force report on promoting affordable housing, it raised a familiar question: whether the new recommendations would succeed where previous policies failed. Would it bring elusive homes within the reach of the urban poor? The answer is not a convincing yes. The report has many useful suggestions on the financial aspects, but it inadequately addresses supply issues. It rightly points out that many existing schemes have barriers that prevent the poor from benefiting. For instance, the Affordable Housing in Partnership Scheme, launched four years ago to produce one million houses, has so far delivered only 5776. Though the scheme provides a subsidy of Rs. 50,000 per dwelling unit, the government spends only Rs. 26,000. This is due to an unreasonable condition — that the subsidy not exceed 25 per cent of the amount spent on providing services such as water supply. The task force wants the government to fine tune the scheme and increase the subsidy to Rs. 100,000.
Other welcome recommendations include raising the cap on interest subsidy schemes and fixing affordable housing loan targets for banks to achieve. However, such creative approaches are missing when it comes to augmenting the supply of affordable housing. For instance, existing policies recognise that the government alone cannot meet the needs and have tried to rope in private developers. They insist that housing projects built in plots exceeding one hectare in size should reserve about 20 per cent of the developed land for social housing. If these measures have not worked, this is not because the reservation rate is high as the task force reasons. The problem is that these supply-enhancing measures focus only on large-scale projects, which are few and far between. Second, developers do not invest in social housing because the profit margins in the flourishing real estate market are high and incentives offered by the government cannot match the potential gains they could expect to make otherwise. Strangely, the task force misses the point and recommends reducing the reservation percentage to 15. It overlooked the fact that even when land reservations are as low as 10 per cent, as in the case of Chennai, this has not yielded sufficient affordable houses. There is a lesson to learn from countries such as England, which insist that even projects as small as 15 housing units must have a social housing component. The way forward is to cast the net wide.