Given the magnitude of housing shortage in the country, it is clear that the lone effort of public sector and a few private players would not be sufficient to bridge the gap. If India is to achieve the goal of “Affordable Housing for All”, there is a need to realistically address the constraints faced by private developers and formulate policies that encourage their participation.
A recent joint study by KPMG and NAREDCO has highlighted many challenges which are proving to be the main impediments for private participation in affordable housing development. Unavailability of Urban Land, Delay in Project Approvals from Multiple Authorities, Rising Construction Cost, Financing Constraints of Low Income Groups, Limited Financing Avenues for Developers, Obsolete Laws and Building Guidelines, Lack of Skilled Manpower and Disputable Taxation Regime are among the main constraints.
RECOMMENDATIONS
Urban Land Planning -Make affordable housing a priority
Holistic and inclusive urban planning with focus on land-use optimisation would catalyse affordable housingdevelopment in urban areas. Therefore, there is a need to integrate socio–economic planning with spatial planning. Appropriate zoning for affordable housing must be a mandate for Urban Local Bodies (ULBs) and Urban Development Departments (UDDs) in the master plans. The links between housing location, livelihood and transport can no longer be ignored. The country could learn from Singapore example, where public transport planning is linked with housing.
Holistic and inclusive urban planning with focus on land-use optimisation would catalyse affordable housingdevelopment in urban areas. Therefore, there is a need to integrate socio–economic planning with spatial planning. Appropriate zoning for affordable housing must be a mandate for Urban Local Bodies (ULBs) and Urban Development Departments (UDDs) in the master plans. The links between housing location, livelihood and transport can no longer be ignored. The country could learn from Singapore example, where public transport planning is linked with housing.
Private Sector Development – Make it a Viable Proposition
Private real estate developers would participate actively and aggressively in this segment if it is made a viable proposition for them. A strong regulatory response coupled with adequate incentives and subsidies could make the economics work. Following are important recommendations in this regard:
Private real estate developers would participate actively and aggressively in this segment if it is made a viable proposition for them. A strong regulatory response coupled with adequate incentives and subsidies could make the economics work. Following are important recommendations in this regard:
Fast Track Approvals for Affordable Housing Projects
State Governments should consider introduction of single window online clearance mechanism for affordable housing projects which would facilitate clearance of projects within defined timelines. Furthermore, there is a need to simplify procedures and processes for land acquisition and conversion of agricultural land for urban uses.
State Governments should consider introduction of single window online clearance mechanism for affordable housing projects which would facilitate clearance of projects within defined timelines. Furthermore, there is a need to simplify procedures and processes for land acquisition and conversion of agricultural land for urban uses.
Floor Space Index (FSI)/Floor Area Ratio (FAR) Incentive
To augment supply of affordable housing, State governments should use FSI as tool. This will also enable private developers in bringing down the cost of land per housing unit. Land scarcity in urban areas has driven International cities such as New York and Shanghai to have an FSI of over 10 . Given this, there is huge scope for raising the FSI in Indian cities, which have an average of 2.
To augment supply of affordable housing, State governments should use FSI as tool. This will also enable private developers in bringing down the cost of land per housing unit. Land scarcity in urban areas has driven International cities such as New York and Shanghai to have an FSI of over 10 . Given this, there is huge scope for raising the FSI in Indian cities, which have an average of 2.
Waiver of Fees and Charges
EDC charges are quite high in certain Indian states and render many projects unviable. Concessions on development related charges by State Governments could give fillip to affordable housing development and attract more private investments.
EDC charges are quite high in certain Indian states and render many projects unviable. Concessions on development related charges by State Governments could give fillip to affordable housing development and attract more private investments.
Service Tax Exemption
Under the ‘Affordable Housing in Partnership (AHP)’ scheme, construction services relating to residential dwellings and low cost mass housing upto 60 square meters carpet area are exempted from payment of service tax . The Union Government must consider extending this benefit to houses of upto 60 sq.m carpet area developed by private developers on private land. It is estimated that such a concession could lower the project cost by 3.5–4.5 percent.
Under the ‘Affordable Housing in Partnership (AHP)’ scheme, construction services relating to residential dwellings and low cost mass housing upto 60 square meters carpet area are exempted from payment of service tax . The Union Government must consider extending this benefit to houses of upto 60 sq.m carpet area developed by private developers on private land. It is estimated that such a concession could lower the project cost by 3.5–4.5 percent.
Provide Infrastructure Linkages by Using Proceeds from Sale of Land
Social upliftment could be achieved through affordable housing only when the required infrastructural linkages are provided by the State Governments. Parallel development of physical infrastructure like road, drainage, transport, water supply, sewerage disposal, electricity etc and social infrastructure like schools, hospitals and commercialcentres etc. are critical for the success of such projects.
Social upliftment could be achieved through affordable housing only when the required infrastructural linkages are provided by the State Governments. Parallel development of physical infrastructure like road, drainage, transport, water supply, sewerage disposal, electricity etc and social infrastructure like schools, hospitals and commercialcentres etc. are critical for the success of such projects.
Alternate Sources of Funding for Developers
As mentioned earlier, in the current scenario developers are dependent on private sources of funding. This constrains them from investing in affordable housing projects because of high cost of funds. Therefore, there is a need to develop new financing avenues for affordable housing projects.
As mentioned earlier, in the current scenario developers are dependent on private sources of funding. This constrains them from investing in affordable housing projects because of high cost of funds. Therefore, there is a need to develop new financing avenues for affordable housing projects.
Infrastructure Status
Affordable Housing and Integrated Township development would be essential to cope with the urbanisationpressure faced by the country. However, despite being an essential social infrastructure requirement, Affordable Housing is yet to be included in the Harmonized Master list of Infrastructure. Granting Infrastructure status would assist in opening certain additional funding avenues for the affordable housing segment in addition to direct tax benefits. It would also qualify affordable housing projects for raising funds through tax free infrastructure bonds.
Affordable Housing and Integrated Township development would be essential to cope with the urbanisationpressure faced by the country. However, despite being an essential social infrastructure requirement, Affordable Housing is yet to be included in the Harmonized Master list of Infrastructure. Granting Infrastructure status would assist in opening certain additional funding avenues for the affordable housing segment in addition to direct tax benefits. It would also qualify affordable housing projects for raising funds through tax free infrastructure bonds.
Apart from above mentioned the report also mentions about tax incentives. It says, Affordable housing upto a carpet area of 60 sq.m should be brought under the purview of section 80-IA of IT Act 1961. The tax exemption available under sub-section (4) will incentivise private developers who would then be eligible for a deduction equal to 100 percent of the profits and gains derived from affordable housing projects for ten consecutive assessment years. Under Section 80 IB (10) of the IT Act, income tax deductions were available to developers, whose housing projects were approved on or before 31st day of March, 2008. The Government should consider reintroducing this tax exemption and make it applicable for projects sanctioned after 31st March 2008, at least till 2018.
It also says about financial empowerment of EWS/ LIG sections of the society through access to micro credit stamp duty reduction, priority sector lending, financial literacy etc. It also suggests rent control act reforms and social housing.
Source : Accommodation Times News Servives
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