Housing for all by 2022

Access, Affordability and

quality of life

A few suggestions

Rakesh Ranjan,

Adviser

Housing and Urban Affairs Division

Planning Commission, India

New Delhi, Dec 17, 2014

Housing is a

private good. Should

ordinarily supplied and

demanded through

Market.

1

Scheme of presentation

• Extent and nature of housing shortage

• Current approach and challenges

• Way forward

2

Extent of shortage

Types 2012

Million unit

Household living in non-serviceable Kutcha houses 0.99

Household living in obsolescent houses 2.27

Household living in congested houses requiring new

houses

14.99

Household in homeless condition 0.53

Total 18.78

Homeless

0.53 million

Exclusion error

Congestion: Married couples

Do not have

Separate rooms.

India has

more than

10 million

vacant houses

3

Urbanization Fact sheet

• Contrary to popular perception, so far rural migration has contributed just 20-22% in urban growth.

Source: Isher Ahluwalia HPEC Report (2011)

4

Urbanization: Structural imbalance: Implication

• One can reasonably expect large number of people moving out from

agriculture sector.

• A large number of urban dwellers are in unorganized sector and

affordability of shelter is of great importance.

5

Conclusion:1

• Housing shortage largely due to congestion factor.

• Homeless household 0.53 million.

• Rural urban migration may accelerate.

• Most demand in affordable housing segment.

Current approach and challenges

6

Responsibility of different layers of governments

• State subjects: ( Schedule 7 of the Constitution)

Provision of housing + Land

• Concurrent Subject

• Transfer of property other than agriculture land

• Registration of deeds and documents.

• Municipal subject ( 12th schedule of the Constitution)

• ‘Regulation of land use and construction of buildings’

• Slum rehabilitation

Central Govt: Model Legislation,

reforms, Target setting

Financial inclusion.

Central Govt:

Funds &

facilitator

Current Approach: Central Govt.

Slum Rehabilitation/shelter

Policy/ Model Legislation

Flow of credit

Affordable Housing

Central Govt part - funded

slum rehabilitation/shelter projects

Property

Rights

Subsidy for construction of

Affordable Housing

Rent

Control Act Pro Poor

reforms

5% interest subvention

on housing loan

Reforms Promote

PPP

Develop

Land Markets Planning

Reforms

8

Challenges

1-1.2 million D.U

JNNURM, RAY

Results Lessons to be learnt/ challenges

Major delay in

execution of project

Construction

led approach.

Reluctance to move

In situ rehabilitation is preferred.

Up fronting reform reduces readiness

of state Govts to take up projects

Land is an issue, required to

be sorted out through planning reforms.

Govt neither have the fund nor capacity

to directly address housing problem.

Construction led approach

Implied taking up very less

Number of slums at a time.

19 million x $ 8000

=

152 billion USD

9

Limitations

Interest subsidy

Based schemes

Didn’t work in past

Results Lessons to be learnt/ challenges

Should loan size be expanded

+ incentive to bank increased??

Bank employees face risk in

Sanctioning loans due to procedure

Conventional risk profiling

Is document based. Banks not interested

to provide loans to

Poorer households..

Housing finance

Companies

Found it unattractive..

Appetite for loan in poor

segment high. Default rate in this

segment is low.

10

Limitations

Scheme of Affordable

Housing in Partnership

Didn’t succeed

Results

Lessons to be learnt/ challenges

Land for affordable housing a constraint

Land for shelter required in busy

places. Shelter made away

from markets remained vacant.

People preferred slums. Ahmedabad

Median Income rose 2.7 times in 10 yr.

Slum population rose by 18%. Poor response to

shelter to homeless

Despite 75% of Capital

+ O&M charges available.

Central issue in supply side

intervention is to ensure

Availability of land.

11

Conclusion: 2

• An impressive array of programs.

• Results less than expected.

• Perceptible improvement in slums

• Demand and supply of affordable housing weak

• Land for affordable housing challenge

• Interest subvention scheme yet to take off.

Way forward

12

Different segments need different response.

Homeless + those too poor to participate in

housing market

Direct intervention by Government

Can participate in rental and ownership

based market with little bit of nudging

• Encourage affordable housing: Ensure cheap land

• interest based subvention • improvement in rental

markets

Middle+ HIG Group Also uses real estate as

investment

• Remove info. asymmetry • Improve rental laws

13

Rental Housing

India has 10 million+ vacant houses.

Owned by richer household: scarcity at low income end.

Only way to bring these houses to use is through rental markets.

Currently, Indian rental laws are loaded heavily in favor of tenants.

Resolution of property dispute through courts are expensive and time taking.

An oft repeated advice to an owner is to not to rent a house to a lawyer, police officer, politicians and

doctors.

Ministry constituted a task force: its recommendations need

considerations.

14

Securing land for affordable housing

Use less land

Reduce norms regarding

• Minimum area/unit

• Set back area etc.

Planning led reforms

Rationalise FSI

Earmarking of land

for affordable housing

Mixed land use pattern

Integrate land use & transport.

Work with markets while

deciding land use.

Transit Oriented Development: area close to Rly Station etc. may be

developed as centre of economic activity and affordable housing .

15

Transit oriented Development

Singapore

strategically

uses

high FSI

along

trunk

transport. 8

Singapore : variations in FSI are linked to the location

of metro stations and to the network of main streets

Coupled with strict policy on vehicle, handles congestion even if city roads are

narrow.

Source: World Bank

16

FSI and infrastructure: Manhattan

Manhattan

Granular FSI:

Plot to plot

variation for

efficient

landscape.

Economic efficiency,

municipality citizen’s interface

important in deciding land use.

Source: World Bank

17

FSI and infrastructure- Mumbai

Low FSI

with little

variation

rigid land use.

Citizens are

not consulted.

Granular FSI

variation needs a strong

administrative structure to prevent rent

seeking behaviour.

.

Source: World Bank

18

Energy intensity

• TOD reduces energy footprint.

Less trip, better ridership of public transport

Makes non-motorized transport viable.

• Discourage inefficient land use.

• Need a policy on encouraging local building material: Major role of Government in promoting innovation and affordable technology.

• Regulation regarding green technologies and conservation: especially MIG + HIG households.

•

19

Financing of Shelters

• Is money a constraint????

• Its not:

• Land based instruments

• Rentals

• Own savings of households.

20

Sources of finance

Government Private

Land/policy

based Budgetary

Land/policy

based Household

So far, subsidy through

Central budgetary support

Has dominated any discussion

On financing

JNNURM/RAY/IAY/AHP

RRY

Large potential to generate

Resources through

a) Land based instruments

b) Channelising individual

contribution

States reluctance to

take beneficiary contribution.

Singapore: + 70% through

Household.

21

Examples of land based instruments

• Govt Housing: New Moti Bagh, Delhi: Auctioned 4 acre land out of 144 acres. Has saving of Rs. 200+ cr.

• Govt Housing: East Kidwai nagar: Financed through advance lease money

• Gujarat affordable housing and slum rehabilitation Programme : Use of FSI + TDR.

22

Way forward

• RAY:

• Use Govt funds for improvement in basic services.

• Stop demolition and construction led approach

• Reconsider subsidy based govt housing. Promote rental housing.

Restructure interest subvention schemes:

• change risk profiling method

• Stop entering into retail loan market.

• Encourage finance companies through easy refinancing.

The key to address financing issues

is to address non-financial issues

23

Way forward

• Planning Related Reforms is key to success.

• Land is the main issue and Govt has a big responsibility.

• Integrated land and transport use policy.

• Earmark land for shelter & affordable housing.

• Rationalise standards.

• Develop land market and use land based financing instruments.

Housing for all 2022

Partnership between centre

and states a must.

24

People are aspiring for change. They need enabling environment to change their lot. Policy support is far cheaper and effective.

Thank You