Affordable housing: A play of finance, land, design and technology

On New Year’s Eve, Prime Minister Narendra Modi announced a set of populous measures to boost the real estate sector especially the affordable housing category. But lowering of interest rate is not the only driver in boosting the much-talked affordable housing category, but it equally needs innovation in land allocation and design and technology.

Modi announced 4 per cent subsidy on interest for Rs 9 lakh loan and 3 per cent subsidy on Rs 12 lakh loan for urban India. On the other hand, he announced the housing quota under PM Awas which increased by 33 per cent and 3 per cent off on Rs 2 lakh loan. “The recent announcement by the PM will shoot up the demand side of the real estate sector. Actually, it is a good announcement as it will kick start consumption of steel, cement and other construction material. We will also see flow of funds in rural India due to interesting schemes,” stated Vastu Housing Finance chairman P H Ravikumar to Free Press Journal, who was recently part of an expert panel in a conference ‘Innovations in Affordable Housing’.

During the conference, he covered the different aspect of finance. He pointed out that affordable housing is a business of low margin but high volume. “For over a decade and a half, the housing finance space has had low NPAs. But your margins will be lower than banking but our losses are also lower than them.”

As per various reports, there are 15-16 groups who are planning to enter the affordable space. Some of them have been already approved by National Housing Bank (NHB) and some are still waiting for the approvals. “Such numbers will lead to competition and it is good. This tends to push the price and in this case, it will be rate of interest for the consumers,” Ravikumar added.

There are various packages or options in financing space, but there is not much when it comes to land innovations. Urbanist Vidyadhar Phatak said, “In places like Mumbai, you have to invest in public transport. Once that is done you will get market functioning in better fashion.” He further added that the government should concentrate on what the people and market cannot do. “Market cannot do the large-scale infrastructure but Government can do land planning and assembly,” stated Phatak who was also member of the expert panel in previous mentioned conference.

Infrastructure built by the government will encourage the players to enter the space. He also stated that the government should step in when the Sites-and-Services’ modules are implemented. Here the government is using its own land (under the various ministries), planning and investing in infrastructure.

Yet another element of affordable housing is design and technology, and Architect Ashok B. Lall who was also part of the expert panel presented his views in a presentation. Ravikumar, Phatak and Lall, were part of the expert panel and their recommendations have been given to the government to improve the affordable housing section. Shashikala Venkatraman, publisher of My Liveable City and also organiser of ‘Innovations in Affordable Housing’, said, “We understood the three key problems in affordable housing segment and based of that understanding presentations were prepared addressing the issue of finance, land allocation and design and technology.” Venkatraman added that the recommendation prepared by the organisation have been given to the government. Their debut conference was aimed at bridging the gap between students, policymakers and the industry.

Some recommendation by Ravikumar 

• Define percentage of houses in the affordable housing space  which will be allowed to be bought by investors
• As cash has become a no go area NHB to take pro active  measures to allow HFCs take strategic equity in payment banks/ digital wallet companies and vice versa.
• NHB to consider working with MoF and regulating entities of investors to mandate that a certain per cent of their investible corpus to be directed to HFCs.
• To promote liquidity of debt instruments issued by HFCs-NHB.
• Guarantee Trust company where NHB is joint owner is an ideal vehicle to credit enhance legal ownership of such cases
• Approved market participants allowed to write options on long term leases for homes; with pre
defined structures set so that borrowers can purchase the home after 5/8/10 years.
• Lateral recruitment to be encouraged.

Some recommendations by Lall 

• Establish ‘DNA’ of affordable housing system through planning regulations
• Permit “temporary” rental accommodation for new/ temporary migrants
• Institute decentralised utility systems
• promote innovation and design of building components for resource efficiency
• Incentivise low carbon technologies
• NBC and Universal bye-laws for affordable housing

Some recommendations by Phatak

• Land for affordable housing to be sought from land market
• Policy should be of ‘enabling market to be transparent and competitive.’
• Planning should be for ‘making room for growth’ and not for containment of growth
• Regulations create obstacle to affordable housing
• Greenfield expansion through TPS – land bank for affordable housing
• Regulatory regime about use conversion may be relaxed
• Land records including maps to be automated and computerised to  provide conclusive tenure.

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