Roti, kapra aur makaan” is as relevant an issue as it was in 1974 when Manoj Kumar directed this film, hinting at unemployment, poverty and homelessness. What he showcased in his film is still scripted in most of the political speeches and election manifestoes. Little surprise that soon after assuming power in May 2014, Narendra Modi promised that, “By the time the nation completes 75 years of Independence (2022), every family would have a pucca house with water connection, toilet and 24x7 electric supply.
People were certainly impressed and the real estate sector welcomed the initiative. Finance Minister Arun Jaitely, too, made a bold statement and reiterated Modi’s commitment for housing for all by 2022 during his Budget speech in July 2014. He announced a two-pronged approach to stimulate housing construction by engaging public and private sectors. He said that the investors would be able to create real estate investment trusts (REITs), which will receive a favourable tax treatment. He wanted a “mission on low cost affordable housing” with a seed fund of $615 million.
The government could not do much in the first year. The much-needed guidelines were also not prepared. In fact, the mission on low cost affordable housing was not even set up, though the regulatory sector did come up with guidelines. The securities and exchange board of India (SEBI) issued regulations for REITs in September 2014.
The new regulations required the REITs to invest not more than 10 per cent of their assets in properties under construction and prevented them from investing in vacant land. Besides, they were asked to distribute 90 per cent of their income as dividend on a monthly basis after paying dividend distribution tax as well. As expected, the scheme did not take off. Till date, not a single REIT has been listed on any stock exchange.
During the annual Budget of 2015-16, Jaitely announced the government’s intention of achieving “housing for all by 2022”. However, it did not say anything about the steps that the government would take to achieve this goal.
The idea of building 50 million housing units was floated and finally, on June 25, 2015, the Pradhan Mantri Awas Yojna (PMAY) was launched replacing the earlier idea of forming a mission. Modi again asserted, "India is completing 75 years of independence in 2022, and by then, it is our responsibility to provide a house to everyone."
The main objective of the PMAY is to build 20 million housing units from 2015 to 2022 in urban areas and 30 million housing units in rural areas. However, the guidelines on the PMAY, which were released on June 17, 2015, were amended at least half a dozen times over a period of one year. Now let’s see where the government stands as far as construction of dwelling units is concerned. The outcome is not at all encouraging. As on December 8, 2016, only 6,716 housing units were constructed after around one and a half years of the launch of the scheme.
One rough estimate indicates that the government needs to build 2.85 million units every year to achieve the ambitious target of “housing for all” by 2022. In other words, the government could not even achieve 1 per cent of its target over this period. Despite amendments in the guidelines, it seems the government did not even revisit the scheme.
Modi recalled the scheme only in his post-demonetisation speech, which was termed as a face-saving tactic. In other words, like a hard-core politician, when people started raising questions on demonetisation, he went back to reinstate that “housing for all” is still on government agenda after wasting two precious years.
A month after Modi’s speech, Jaitley in his budget speech 2017-18 announced various sops to attract private builders. There were incentives for low income groups as well.
The government intends to create a demand for housing by slashing the tax rate from 10 per cent to 5 per cent for those who fall in the tax slab of Rs. 2.5 lakh to Rs. 5 lakh along with low-cost housing schemes and subsidised interest rates. On the supply end, the government gave the status of “infrastructural project” to affordable housing to enable builders/developers to avail of low-cost loans from the banks.
Also, these units will be eligible for 100 per cent tax deduction on profits and gains under Section 80-1BA of the Income Tax Act in the coming financial year. Not only this, the developers have been given tax relief on the unsold stock and they will no longer be required to pay capital gain tax at the beginning of the project but at the time when the units are sold. Jaitley seemingly tried to strike a balance between demand and supply.
Also, the government extended the completion period from three years to five years. But is “housing for all” really achievable in the coming five years, despite these incentives? Will it attract private investors?
The PMAY would need an investment of over two trillion US dollars to achieve its objective. An analysis of data available on the website of the ministry of housing and urban poverty alleviation (MHUPA) reveals that out of 3214 projects approved by the government, none of them received any investment from the private sector.
In a statement last week, urban development minister M Venkaiah Naidu said that while the Centre and the state governments approved an investment of Rs. 90,000 crore for affordable housing, nothing came from the private sector.
Reports suggest that real estate companies have been asking the government to absorb the cost of land within the cities, the way Singapore government does. Affordable housing does not remain affordable when it comes to cities, considering the high cost of land, which forms more than 80 per cent of unit cost in some cities. And in case the builders opt for low-cost land, which is available on the outskirts, they find no takers due to inadequate transport facility.
In other words, even if the private builders agree to invest, they are likely to incur huge losses, putting the ailing banking sector at greater risk. If they choose to build in the city, their per-unit cost would be much higher than its sale value. And on the outskirts, their units will remain unsold unless the area is developed in terms of other facilities. In such a scenario, low-interest loans or tax concessions are not likely to attract any takers from the private sector, at least in the urban sector.
As regards subsidised loans for individuals, the government seems to have ignored people who live in shelters or slums. The interest subsidy has been announced for those who take a loan of up to Rs. 9 lakh. Now the million-dollar question is, did Modi ask himself which homeless person would afford to buy a house or avail a home loan? Owning a house is certainly a dream that every Indian has.
Amidst all fancy reports and statistics that the government relies on, there is another report published by housing and land rights network – a civil society organisation in Delhi – which says that the government demolishes more homes than it builds in urban areas. It says 33,257 families were forcefully evicted across different cities in India from January 2015 to December 2016.
It also filed a RTI query with MHUPA to ascertain the number of houses built in the country under the PMAY. The ministry admitted that only 2,776 houses were built under the scheme in urban areas as on August 17, 2016, despite the fact that 89,1346 houses were sanctioned by the government. The report says that the government would only be able to achieve its objective if it builds 10,000 houses a day without demolishing a single unit in urban areas.
Considering the current pace of the scheme, this seems to be a tall order. The government is absolutely correct in fixing a target for itself as there is a shortage of 18.78 million homes in urban areas, 95 per cent of which are needed by economically weaker sections and low-income groups. Fixing an aim is only one step and achieving it with radical thinking, effective policy making and implementation is quite another.
(The writer is a company secretary and director, communications, Deepalaya, and can be reached at email@example.com)