Monday, July 10, 2017

Housing for all: There’s a lot to be built


Amidst the government’s celebrations on completing three years in office, one flagship scheme remains a massive — and challenging — opportunity: Housing for all by 2022. The groundbreaking, affordable housing initiative backing this promise, the Pradhan Mantri Awas Yojana (PMAY), plans to provide homes to 18 million households in urban India and nearly 30 million households in rural India .
But as of this April, the Government has approved only 1.88 million urban houses — and roughly 103,000 have been built. The progress of PMAY’s implementation has been disappointing. However, it’s important to understand how India’s affordable housing puzzle challenges the programm’s ability to reach the 2022 goal.
There are factors impeding PMAY from reaching its full potential.
Challenge 1: How do we “build” millions of new houses?
The Technical Group on Urban Housing Shortage estimated that the national housing shortage reached 18.78 million in 20123. It’s easy to see why real estate developers may be keen to highlight the need to build millions of new houses. But at the current pace of PMAY, with a little over 100,000 houses built, it will take hundreds of years to build our way out of the housing shortage. However, the Technical Group’s report pointed out that 80 per cent of the shortage was attributed to congested houses — something that may be better addressed by enabling individual households to upgrade their own homes.
Challenge 2: Land is scarce
If the aim is to build millions of new housing units, clearly, land is scarce. However, if the intent is to enable people to upgrade their congested housing, then there is no shortage; these congested households are already occupying land. The challenge is to in-situ upgrade this housing. The Government has made efforts to unlock this land potential by providing Transfer of Development Rights (TDR) to incentivise developers to in-situ rehabilitate slums. While this has proven effective in Mumbai, the economics breaks down in smaller cities where land values are not as high and developers are unable to recover their costs.
Challenge 3: The unacknowledged bottleneck of property records
An important aspect of PMAY is the interest subsidy on a home loan and the direct subsidy for individual house construction or enhancement. However, a requirement to avail either subsidy are title documents to the property. And therein lies the crux of the problem: our land and property records are in a poor condition.
Many people continue to live in ancestral homes, whose title deeds may be in the name of deceased grandparents. Slum dwellers — arguably the target beneficiaries under PMAY — are unlikely to have title documents.
To complicate things further, land records are governed by the State’s revenue department, while housing is a separate agency. Citizens are unable to navigate this maze to obtain their property documents, ending up locked out of the scheme’s benefits.
Challenge 4: One crore vacant houses do not enter the rental market
The Census showed there were over 10 million vacant houses in 2011, nearly half the urban housing shortage. The vast majority of these property owners are private citizens who prefer to leave their house vacant, rather than offer it on rent. This reflects the distorted rental market in India where property owners fear they may lose their property to tenants, leading to under-utilisation of assets.
Overcoming challenges
There are three major policy levers that can help solve these challenges. First, States need to simplify the process of updating property records. This will allow all citizens to obtain legal documents to their land and property in order to fully embrace the subsidy features of PMAY and access credit, which will enable them to upgrade their housing.
Secondly, enable individual households who don’t have legal titles to in-situ upgrade their housing by providing them with security of tenure — even a “no eviction guarantee”. Ahmedabad’s success with the Slum Networking Program shows that the security and comfort from such measures can encourage slum residents to invest money and upgrade their shelter.
Finally, States need to push through the much-needed rental reforms that balance the interests of tenants with the protection of property owners’ rights, and don’t distort rental markets by artificially controlling rents.
This has the potential to bring vacant housing stock into the rental market and alleviate the housing shortage.

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