Putting affordable housing on the fast track

The three-year term of the Modi government is marked by its commitment to ensuring development for all, through its progressive approach of 'Reform, Perform & Transform', putting an end to years of policy paralysis, through good governance.

Fully realising that urban development by way of boosting real estate, housing and infrastructure, is a key to economic development, NDA government's major focus on these vital sectors, with a view to reforming the economy and ensuring long-term sustainable growth, is showing visible results.

A number of landmark reforms and policy initiatives taken by the government in line with its vision have paid rich dividends, belying the claims of critics that the government's economic development programmes have largely remained stagnant on the ground and their benefits are not reaching the people. The government's intention to give a fillip to urban development was clearly reflected in its first full-fledged budget, in which allocation for infrastructure development was hiked by Rs 70,000 crore, besides creating a Rs 4,000 crore National Investment & Infrastructure Fund and earmarking Rs 22,000 crore for housing and urban development. And in the following budget, a massive Rs 2.31 lakh crore was made available for roads, highways and railways. In this year's budget, in a bid to put housing (especially affordable housing), on the fast track, the government undertook far-reaching reforms to accord it the status of infrastructure.

It is significant to mention that over the last three years, the central assistance of Rs 18,500 crore per annum was given for urban infrastructure development as against Rs 9,850 crore a year during 10 years of the UPA regime. In fact, immediately after taking over in May 2014, the NDA government set out on its reform agenda by addressing the long pending issue of liberalising FDI in real estate and construction sector, to ensure better access to foreign funding for housing. As the government has done away with unnecessary restrictions on the flow of NRI and foreign capital, the liberalised FDI policy has helped boost fund flows in a big way. According to United Nations' World Investment Report 2016, India has attracted a record $5.7 billion of FDI inflows in real estate, besides receiving $32 billion in private equity funding. The ushering in of Real Estate Investment Trusts (REITs) reform is set to further bring in much-needed funding to the sector.

In the backdrop of India facing a massive urban housing shortage of 18.78 million units, the government took a major reform initiative – 'Housing for All by 2022' – focusing on affordable/low-cost housing. This mission for urban housing is aimed at promoting affordable housing and housing for weaker sections of society, through credit-linked subsidy, PPP, subsidy for beneficiary-led individual house construction, besides slum rehabilitation. And for this purpose, a special provision of Rs 4,000 crore was made for National Housing Bank, besides tax breaks for home buyers and property developers. Hundred per cent service tax exemption was extended to affordable housing developers, besides providing income tax incentives. With the inclusion of EWS and slum redevelopment under CSR, developers got entitlement to 100 per cent tax deduction. The reform to provide infrastructure status to affordable housing was made to enhance credit flow, with a view to boost the construction of affordable and low-cost homes by the private sector. HDFC bank Chairman, Deepak Parekh, has lauded the reforms and tax sops which have drawn big players including large corporates to housing, especially affordable housing.

The government complimented it with mortgage reforms to give a further push to affordable housing. In addition to affecting over 150 bps cut in interest rates, the RBI introduced a new Marginal Cost of Funds Based Lending Rate (MCLR) for speedier transmission of rate cuts to home buyers. The new Credit Linked Subsidy Scheme (CLSS) under Pradhan Mantri Awas Yojana (PMAY) broadened the scope of interest subsidy to cover those having an annual income of Rs 18 lakh and availing a maximum home loan of 12 lakh, with a view to benefit more middle-income people.

In the context of Housing for All, the real game-changing reform done by Modi government is Real Estate Regulation Act (RERA), that had been hanging fire for almost a decade. RERA (operational from May 1, 2017), that empowers and protects property consumers, will help make homes affordable to the masses. Aimed at regulating real estate, with fair and transparent transactions, it will also boost investors' confidence. The passage of Benami Transaction Prohibition Bill, together with measures to check influx and circulation of black money, including demonetisation, not only had a sobering effect on land and property prices but also boosted investor sentiment. The GST reform, set to be implemented later this year, will also have a similar impact on real estate, as single uniform tax regime will bring in transparency and predictability, besides reduction in tax management expenses and compliance costs.

There is a paradigm shift in the government's strategy for urban transformation by improving urban governance through focused reforms for better service delivery. The focus is now on achieving better resource utilisation and targeted result through area-based development against open-ended and project-based approach in the past. This new urban development approach has shown results. As part of this strategy to accelerate urban infrastructure for inclusive and sustainable development, urban missions like AMRUT (Atal Mission for Rejuvenation & Urban Transformation), PMAY, Smart City Mission, Swachh Bharat Mission, City Development & Augmentation Yojana (HRIDAY), Urban Transport, have been launched which have made considerable progress.

Under AMRUT, projects worth over Rs 10,000 crores have already been awarded for execution, out of a total of 77,000 crores, approved for entire mission till 2019-20 for providing drinking water to 2 crore urban households in 500 mission cities, besides augmenting water supply to 135 litres per capita per day, expanding sewage and drainage systems and non-motorised transport. The Smart City Mission aimed at improving the quality of life of 13 crore urban people in 100 cities, has made good progress. A total investment of Rs 1,33,368 crore has also been approved in 60 mission cities, about 150 projects worth Rs 1,600 crore in 20 cities are close to completion and projects worth Rs 30,000 crore would be either under execution or awarded by June 2017. Swachh Bharat Mission, being implemented at a cost of Rs 62,009 crores to benefit 32 crore urban people in terms of improved sanitation, has already succeeded in making 633 cities Open Defecation Free (ODF) out of statutory 4041 cities and towns to be made ODF by October 2019. Already 31 lakh individual and 1.25 lakh community toilets have been constructed and a target of 100 per cent door to door collection and transportation of municipal waste achieved in 3995, out of a total of 81,015 urban wards. As part of Urban Transport Mission, about 68 km of the new metro section has been opened and 5 new metro projects, spanning over 143 km have been sanctioned in Ahmedabad, Nagpur, Lucknow, Chennai Extn and Pune, at a cost of Rs 41,571 crores. Plans are afoot to build metros in 50 cities.

That Modi government's reformist policies are on track to put India on high growth trajectory, is confirmed by Global Impact Investing Network (GIIN) which says that India is poised to see impact investment worth up to $40 billion by 2025 as the country is in a sweet spot, with high potential to deliver solutions. On the economic front, political stability and structural reforms have paid rich dividends as India continues to be the fastest growing economy. With IMF projecting that after securing a coveted place among Big Five, India is well on its way to breach the $3.5 trillion mark, overtaking Germany by 2022, to take 4th place in the world, after US, Japan & China. And a spate of real estate and housing reforms have firmly put real estate on the recovery path, with BSE Realty Index gaining 52 percent this year.

Notwithstanding all these achievements, the challenge before the Modi government is to not just ensure that the reforms undertaken so far reach the grassroots level, to benefit the common man, but also to carry out its unfinished agenda. The immediate challenge is to ensure a smooth take-off of RERA and GST. Equally significant is the effective implementation of 'Housing for All', to meet the target of building 50 million homes by 2022, ushering in new reforms like single window mechanism to fast-track clearances for promoting ease of doing business, rental housing and reforms related to labour, stamp duty and property registration.