The developer will be required to maintain the housing project during this period and transfer it back to the public sector or its nominees at the end of the period
The Model PPP (public private partnership) policy for affordable housing is out and open for public comments till June 30th, 2017!
The PMAY (Pradhan Mantri Awas Yojana) scheme was earlier confined to making affordable homes on government land. The new Model PPP policy is an attempt to rope in private developer owned land and offer the same PMAY incentives.
What this means is that the government would now grant benefits - through interest subsidy and direct per beneficiary amount - to private players even if the project is planned on private land. Under the scheme, a bonus payment would be given to the private developer for every housing unit, after an eligible allottee accepts the allotment.
A ministry document highlights that land availability and its high cost has been the big challenge for private developers to enter affordable housing segment on their own, in any meaningful way. The document also acknowledges that private sector participation will enhance access to construction capital as well as reduce construction costs and enable time-bound delivery of affordable units.
Here are six proposed ways in which private developers can now join hands with the government for the creation of affordable housing stock under PMAY:
# The first one is the Government Land Based Subsidised Housing or GLSH. Under this model, the public authority will provide land on a long-term lease to the selected private developer. The private developer will be responsible and held accountable for designing, building and financing of affordable housing stock and associated services, at a pre-determined cost and within a predetermined time. The public authority will undertake to compensate the private developer for the housing stock on the satisfactory completion and handing back of the units.
# The second model is the Mixed Development Cross-subsidized Housing or MDCH. In this model, the developer will not receive any payment from the public authority for building affordable units. Instead, the private developer will be allowed to build and sell high-end housing on a portion of the land allotted. The private developer could even be allowed to utilise the entire land for high-end housing in exchange for providing affordable housing at another location. The land for this alternate location will have to be arranged by the private developer and he will also be required to provide affordable housing free of cost.
Higher FAR, TDR, as well as fast track clearances for the development of high-end housing, is also being promised under this model.
# Under the third model called the Annuity Based Subsidised Housing (ABSH) Model, the government will provide land and the developer will receive revenue from the government in the form of regular annuity payments for a period of time (say 15-20 years) instead of a lump sum amount at the time of handover.
The developer will be required to maintain the housing project during this period and transfer it back to the public sector or its nominees at the end of the period. The public authorities will monitor the quality of the maintenance and there will be rewards and penalties linked to the long-term quality of service received by the home buyers.
# Under the fourth model called the DBFMT –Annuity cum Capital Grant based Subsidised Housing (AGSH), a proportion of project cost (say 40-50 percent) is paid to the private developer during the construction phase itself. The remaining amount is paid to the developer as an annuity during the next 15 to 20 years after the successful completion of the project. Developers will be responsible both for the construction as well as maintenance and their rewards will continue to be substantially linked to the long-term performance of the asset.
# Under the fifth model, called the Direct Relationship Ownership Housing (DROH) Model the land will be allotted by the government and that will constitute a significant subsidy. The private developer will have to recover the cost of affordable housing directly from allottee. This recovery could be a lump-sum payment at the time of transfer of housing unit to allottee or in the form of equated monthly installment (EMI) for a fixed period of time. The developer will also be responsible for the maintenance of the project for a pre-determined period.
# The sixth model is called the Direct Relationship Rental Housing (DRRH) under which the allottee will not get ownership, but only the right to rent the housing unit. Rental payments will have to be made directly to the developer. The units will continue to be owned by the developers. The private developer will undertake to recover the cost of affordable housing directly through the rentals from allottee. The developer will also be responsible for the maintenance of the dwelling units for a pre-determined period.
The real estate fraternity has said it is ready to extend support to the new affordable housing initiative. “We are excited about the government’s recent move to extend PMAY to private land as it brings each and every Indian closer to owning a home which is a basic necessity of life. Our PM's dream of Housing for All by 2022 is a daunting task taking into account the current shortage of homes and high land prices. With India housing 92 percent to 95 percent private developers who are building residential projects, we feel this is a much-needed reform and will provide a great platform to showcase sustainable partnership between public and private sector,” said Jaxay Shah, president, Credai.
He said that Credai member developers had extended support to affordable projects post Budget 2017 by committing 375 affordable projects in April 2017. “With this new amendment, we expect this number to further increase,” he added.
Parveen Jain, president of National Real Estate Development Council (NAREDCO) said that while the scheme is commendable, it needs to be seen how many states finally take it up. Getting a single window clearance is also a big challenge for developers.
“The new model PPP policy is a laudable step in the right direction as it will open new vistas and widen the opportunities for private players with land. This will also fast track the process of getting affordable houses made for the larger population. All the six proposed schemes in which the private players can join hands with the government towards creating affordable housing stock are well thought through and have good take-away for the developers. Such policies along with the ones announced recently like RERA etc. are indeed laudable but must be backed up with strong and clear implementable frameworks so that a win –win situation can be created without losing time,” said JC Sharma, managing director of Sobha Developers.email@example.com