Affordable Housing

Published on May 2016 | Categories: Documents | Downloads: 36 | Comments: 0 | Views: 486
of 11
Download PDF   Embed   Report

Comments

Content

AFFORDABLE HOUSING

Contents
1 2 3 4 5 6 1. 2. 3. 4. 5. what is affordable HOUSING? ................................................................................................................... 3 Affordable Housing – Definition ................................................................................................................... 3 Is affordable housing and low-cost housing the same? ............................................................................. 3 Demand and supply constraints ................................................................................................................. 4 Demand drivers and supply constraints for affordable housing in India ...................................................... 4 Role of PPP in Affordable Housing ............................................................................................................ 6 Conclusion .................................................................................................................................................. 8 GUIDELINES FOR AFFORDABLE HOUSING IN PARTNERSHIP ......................................................... 8 INTRODUCTION: ..................................................................................................................................8 OBJECTIVE: ........................................................................................................................................... 9 COVERAGE: ........................................................................................................................................... 9 The main features: ................................................................................................................................ 10 CENTRAL GOVERNMENT ASSISTANCE: ........................................................................................... 11

2|Page

1

WHAT IS AFFORDABLE HOUSING?

AFFORDABLE HOUSING – DEFINITION

“Affordability” as a concept is very generic and could have different meanings for different people based on differences in income levels. Affordable housing is a term used to describe dwelling units whose total housing costs are deemed "affordable" to those that have a median income. Although the term is often applied to rental housing that is within the financial means of those in the lower income ranges of a geographical area, the concept is applicable to both renters and purchasers in all income ranges. Affordable housing refers to any housing that meets some form of affordability 1 criterion. Different countries have defined affordable housing to present the economic potential of an individual buying a house. In the United States and Canada, a commonly accepted guideline for affordable housing is that the cost of housing should not be more than 30 percent of a household's gross vary with regions and income levels. Another point to note is that the definition of affordable housing is not just restricted to the three categories mentioned above, but applies to people across the country. Affordable housing can be defined using three key parameters viz. income level, size of dwelling unit and affordability. While the first two parameters are independent of each other, the third parameter is correlated income. Housing costs here include taxes and insurance for owners, and utility costs. If the monthly carrying costs of a home exceed 30–35 percent of household income, the housing is considered 2 unaffordable for that household. Defining affordable housing in India is a difficult task given that at every square kilometre of the
country, the dynamics of the market are different.

Defining Affordable Housing

Affordable housing can be defined using three key parameters viz. income level, size of dwelling unit and affordability. While the first two parameters are independent of each other, the third parameter is correlated to income and property price, and hence can be termed a dependent parameter. Another point to note is that the definition of affordable housing is not just restricted to the three categories mentioned above, but applies to people across the country.

2

IS AFFORDABLE HOUSING AND LOW-COST HOUSING THE SAME?

Affordable and low-cost housing are of teninter changeably used, but are quite different from each other. Low-cost housing is generally meant for EWS category and comprises bare minimum housing facilities while affordable housing is mostly meant for LIG and MIG and includes basic amenities like schools, hospitals and other community facilities and services.

3|Page

3

DEMAND AND SUPPLY CONSTRAINTS

DEMAND DRIVERS AND SUPPLY CONSTRAINTS FOR AFFORDABLE HOUSING IN INDIA

The demand drivers for affordable housing are as below: Urbanization: Rising income levels leading to a sizeable middle class segment: Urbanization is an “index of transformation from traditional rural 1 economies to modern industrial one .” India‟s urban population is increasing at a faster rate than its total population. At 28 percent, the pace of urbanization in India has been slower than the average pace of urbanization in Asia. However, the absolute number of people in urban cities and towns has gone up substantially. In India, urbanization can be described as a product of demographic explosion and poverty induced rural-urban migration. This situation 4|Page

has resulted in pressure on urban infrastructure and in an increase in the number of homeless people living on the streets. As per the 2001 census the total urban homeless population was 7, 78,599 people, which would be much more currently given the inadequate availability of 2 affordable / low-cost housing.

Rising income levels leading to a sizeable middle class segment: The past few years have seen tremendous economic growth in the country and one of the implementation of one of the most successful anti-poverty programmes in the country‟s history. While 93 percent of the total population in 1985 was under deprived category, this declined to 54 percent of total population in 2005 and is expected to 3 further declines to 22% by 2025 .The economic growth is also expected to dramatically change India‟s income pyramid 3 by creating a sizeable layer of middle class. This middle class segment is expected to be the primary driver for affordable housing.

5|Page

The key supply constraints for affordable housing are as follows:
Availability of land:

One of the biggest questions that India needs to answer going forward is with respect to adequate supply of land for housing purposes. The Government‟s vision of “Affordable Housing for All” will require acquisition / supply of large land parcels on a regular basis. As per 2001 census, the country‟s urban land mass (2.4 percent of total land mass) houses approximately 28 percent of the country‟s population, excluding people who live on the streets. According to calculations made by the Town and Country Planning Organization (TCPO), to cater to the demand of EWS and LIG category alone would require 84, 724 to 120,882 hectares 4 of additional land . Land cost is another crucial factor affecting supply of land. Given limited availability of land in urban areas, it becomes unviable for developers to provide affordable housing without Government support. On the other hand, the Government holds substantial amount of urban land under ownership of port trusts, the Railways, the Ministry of Defence, land acquired under the Urban Land (Ceiling and Regulation) Act, the Airports Authority of 5 India and other government departments.
Financial and Regulatory Support:

Financial and regulatory constraints have plagued the housing sector in India. Current financing mechanism prevalent in the country mostly targets MIG and HIG sections of the society while the households falling under LIG and EWS category find it difficult to secure formal housing finance. Commercial banks and traditional means of housing finance typically do not serve low-income groups, whose income may be vary with crop seasons, or is below the „viable‟ threshold to ensure repayment, or who cannot 6 provide collateral for loans . Microfinance institutions are considered to be the next best alternative to for financing the EWS and LIG category. However, there are challenges faced by microfinance institutions which prevent them from extending housing loans. Challenges faced are primarily due to the longer period of housing loans (typically between five to seven years minimum, if not more) and due to the larger amount of loan compared to typical loans extended by MFs. Typically, a house, particularly in the urban areas, will be about INR 1 lakh, whereas when microfinance institutions give for livelihood financing, they give INR 10,000 to maximum INR 35,000. If they have to lend to a significant numbers of people, the amount to be loaned goes into crores of rupees which can be a problem for 7. microfinance institutions Another problem with microfinance institutions is of refinance. While National Housing Bank (NHB) provides refinancing facility, interest rates are not fixed but reviewed periodically. Lack of developed debt market places considerable challenges for microfinance companies depriving them of long-term affordable money and what they currently have is a maximum of three to four year money available at a cost of 15-17 percent, making it difficult to lend for mortgages. Even if they are willing, the rate will be some 18-19 percent, which, while it may be way cheaper than what a moneylender would ask for, doesn‟t really help the 8 cause . According to CREDAI, real estate also faces multiplicity of taxes at different points of housing transactions and average to a little over 25 percent of the property 9 rate.

4

ROLE OF PPP IN AFFORDABLE HOUSING

Role of PPP in Affordable Housing

Effective use of available Government land: Land parcels currently in possession can be used for development, thereby reducing the cost of land Government can enter into joint ventures with developers with land as equity Land Banking: Purchase of large strips by State Governments / Agencies Distribution of land to private developers through a transparent process FSI Relaxation of FSI norms to reduce per flat land cost FSI is an effective tool to provide a cashless subsidy to builders 6|Page

Cross Subsidization Joint development of MIG, LIG and EWS flats – MIG to subsidize others Built-up space covering LIG and EWS to be sold / rented by Government agency; developer can be allowed to sell MIG flats at market rates Redevelopment / Rehabilitation Increasing availability of prime land by redevelopment / rehabilitation

Single window approval for projects Delays incurred in project approvals result in substantial cost overruns. A single window will help reduce delays and contain costs Reduction in approval related costs Subsidizing construction costs Reduction / exemption / deferment of taxes and duties on construction materials Subsidy to developers for R&D in new low cost materials and technologies Subsidy to developer in view of employment generated Lower cost of borrowing for development of affordable housing projects - can be achieved if Government agencies have a participatory interest in the project and guarantee the loans Sales Tax and Stamp Duty Exemption from sales tax and reduction in stamp duty

Development of urban infrastructure PPP projects for accelerated urban infrastructure - Metro rail, Inter-city highways, Mono rail Increase budgetary focus on urban infrastructure Increase support to State Governments to engage in PPP projects Integrated Townships Joint developers with private players Development of infrastructure and residential space Planned expansion of city limits Development of Satellite Towns Upfront infrastructure development around major cities a pre-requisite for planned development of satellite towns Mumbai and NCR have successfully developed satellite towns, which other cities can emulate

7|Page

Access to lower cost of capital Relaxation of ECB norms for housing companies Increase in income tax ceiling on housing loans will reduce post tax cost of capital for borrowed Increase support to State Governments to engage in PPP projects Housing as a priority sector Increase current limits on interest subsidies from INR 2 million to INR 4 million

Profitability of developers and housing finance companies 80 IB benefits for all approved affordable housing projects and developers Extension of 80 IB benefits for housing finance companies lending to LIG and EWS lenders Special focus on EWS segment Significantly higher Government involvement and subsidiaries are required to provide equitable housing for EWS segment Innovative cross-subsidization schemes, extensive subsidies and suitable credit delivery mechanisms needed to address the specific challenges of EWS segment

5

CONCLUSION

While the basic necessities of life – food, clothing, and shelter – are increasingly becoming a luxury and unaffordable, luxury items such as televisions, mobile phones, refrigerators, etc. are become affordable! While we are often amazed at the progress our country has made when we see an auto rickshaw driver with a mobile phone, we fail to notice that he is still living in a slum-like dwelling. It is understandable that economic growth leads to rise in income but this has led to even faster rise in property prices leaving it unaffordable for majority of population. Affordable housing is expected to have a positive by improving basic quality of life. Problems like traffic congestion, air quality, commute times, etc. can be resolved by providing proper housing facilities to the weaker sections of the society. While the concept of affordable housing seems to be a simple solution to current housing woes, its execution remains complicated due to the unclear policy framework. To make affordable housing work in India, it would require “will” from all the stakeholders by slightly adjusting their interests towards a wider social cause.

6

GUIDELINES FOR AFFORDABLE HOUSING IN PARTNERSHIP

1. INTRODUCTION:

The Scheme of Affordable Housing in Partnership aims at operationalising the strategy envisaged in the National Urban Housing & Habitat Policy (NUHHP) 2007, of promoting various types of public-private partnerships – of the government sector with the private sector, the cooperative sector, the financial services sector, the state parastatals, urban local bodies, etc. – for realizing the goal of affordable housing for all. 8|Page

It intends to provide a major stimulus to economic activities through affordable housing for the creation of employment, especially for the construction workers and other urban poor who are likely to be amongst the most vulnerable groups in recession. It also targets the creation of demand for a large variety of industrial goods through the multiplier effect of housing on other economic activities. This Scheme is a part of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and takes into account the experience of implementing Basic Services to the Urban Poor (BSUP) and Integrated Housing & Slum Development Programme (IHSDP) for three years, and the assessment that shortfall in response from BSUP towns is a factor of the lack of urban land availability for expansion of cities, and after consultation with States/UTs who have agreed that the responsibility of making urban land available at affordable rates must rest with them in order to reduce the acute shortages of housing in urban areas.

2. OBJECTIVE:

The basic aim of the Scheme is to provide stimulus to economic activities through affordable housing programmes in partnership. Its immediate objective is employment generation to the urban poor, especially construction workers, where adverse impact of current economic downturn is being experienced. The Scheme will also strive to ensure equitable supply of land, shelter and services at affordable prices to all sections of society, and thereby to prevent the growth of slums in urban areas.

3. COVERAGE:

3.1 The scheme will apply mainly to the 65 BSUP cities, where shortages of land for housing are driving unplanned growth and raising home prices and rentals to unsustainable levels. 3.2 The projects which should be eligible under this scheme for assistance would need to meet the following two criteria: a) Dwelling units should be a mix of EWS/LIG/MIG categories with the maximum size of a dwelling unit being at 1200 square feet super area, with at least 25% of them for EWS of about 300 square feet. In terms of carpet area, the minimum carpet area for EWS category shall be 25 square metres and maximum carpet area for MIG category shall be 80 square metres. b) The sale price of dwelling units should have an upper ceiling in terms of Rupees per square metre of carpet area. The price ceiling would be settled in consultation with the States/UTs for different classes of cities. 3.3 An indication of allocation of ACA funds for implementation of the scheme, to be released by way of Central Grant, among State/UTs would be made as follows:

9|Page

4. THE MAIN FEATURES:

The main features of affordable housing in partnership scheme are: a. A project approach would be followed. Projects prepared by urban local bodies/urban development agencies/housing boards/improvement trusts/other agencies which may be designated as „implementing agencies‟, accompanied by duly approved layout plans and maps to scale would be posed for sanction to the State Level Steering Committee and then the Central Sanctioning and Monitoring Committee set up for BSUP. b. Land for an affordable housing project could be identified within municipal limits, or on the periphery or outskirts of towns and cities within jurisdictions of development or planning authorities. c. Projects with a minimum of 200 affordable houses would be entertained. d. Dwelling units built under this scheme would be a mix of EWS/LIG/MIG. e. The layout and specifications including design of the affordable houses to be built would be approved by the State/UT Government or its designated implementing agency. f. The sale price of dwelling units would have an upper ceiling in terms of Rupees per square metre of carpet area. This ceiling would be proposed by the States/UTs for different classes of cities for approval by the Central Sanctioning & Monitoring Committee. g. Beneficiaries would be selected and allotments made on a transparent procedure by the State / implementing agency, e.g. draw of lottery, based of detailed guidelines approved by the State/UT Government. h. As far as possible, beneficiaries would be selected in advance to beginning construction, so that the loan for construction can be availed directly by beneficiaries. A tripartite agreement between loanee, bank and development agency should enable facilitation of loan procedures for the individual, and release to the development agency as per the progress in construction. i. EWS/LIG beneficiaries can be enabled to access loans under the Interest Subsidy Scheme for Housing the Urban Poor (ISHUP), which provides 5% interest subsidy on loans up to Rs 1 lakh. j. Title to the EWS/LIG houses would be given as far as possible in the name of the woman. Where the land is at predetermined rates, title may be leasehold, subject to State/UT Government decision, with sufficient safeguards to ensure that the beneficiary is not dispossessed and the sale of the house to another name is not recognized or registered for a certain minimum period; within which transfer of the house should be permissible back to the designated (project) agency only, at cost of construction adjusted for inflation. k. States/UTs/implementing agencies would make effort to ensure that at least 25% of the total built up/constructed area of the projects proposed is EWS/LIG units. l. In order to promote EWS/LIG dwelling units / cross-subsidize the cost of land, the project, with approval of the State/UT Governments may also offer zoning incentives such as land use conversion, additional FAR/FSI for the patch, with or without TDR, based on the prevailing market price of land and the cost of construction, provided the civic infrastructure at the site or the TDR sites is not put under strain. m. The State/UT Government may also permit a portion of the identified plot of land being used for construction of HIG dwellings or commercial purpose, on which the development partner can raise funds to cross subsidize the construction of EWS/LIG dwellings. n. In the case of partnership with a private developer on Government land, it would be required of the State/UT Government / implementing agency to select the private party by a transparent bidding process. o. If considered appropriate, the States/UTs may consider private lands under this scheme. Concessions and FAR, etc. would need to be judiciously designed by them to make it attractive on private lands. However, the project prerequisites will not be relaxed, and the project would not be entertained for sanction except through the State/UT Government p. Supervision of quality and timeliness of construction would need to be done by quality control mechanisms put in place by States/UTs. A threetier Quality Management System will be mandatory. The first level will be developing agency, second by the State level quality monitor and third level by a nationally empanelled third party inspection and monitoring (TPIM) agency. Involvement of beneficiaries in the project should be encouraged. 10 | P a g e

5. CENTRAL GOVERNMENT ASSISTANCE:

Based on the experience that housing colonies do not get occupied for want of civic service connectivity, Central Government assistance under this scheme will flow for the provision of civic services such as water supply including ground level/overhead service reservoirs, storm water drainage, solid waste management, sewerage including common sewerage treatment facilities, rain water harvesting, approach roads, electricity lines including electricity transformers, parks and playgrounds and other amenities. Central Assistance under the scheme will be limited to least of following: Rs. 50,000 per Dwelling Unit for all dwelling units taking EWS, LIG and MIG units together which are proposed in the project; and 25% of the cost of all civic services (external and internal) proposed in the project.

11 | P a g e

Sponsor Documents

Or use your account on DocShare.tips

Hide

Forgot your password?

Or register your new account on DocShare.tips

Hide

Lost your password? Please enter your email address. You will receive a link to create a new password.

Back to log-in

Close