Housing for All by 2022: Govt must stimulate supply by tackling the issue of land acquisition

DDA Housing Scheme

Rahul Nahar

India’s housing challenge has rapidly risen up the political agenda, with those in power finally acknowledging the importance of addressing India’s affordable housing crisis. The government’s flagship campaign to provide housing to all its citizens by 2022 is noble - but what is needed to make this happen?

The reality is that India is on the verge of large-scale demographic change, and delivering on this promise is no easy task. With more than 10 million people migrating to cities and towns each year, India’s urban population is expected to reach an unprecedented 810 million by 2050. To house this population by 2022, 110 million houses will likely be required that is estimated to cost approximately USD 2 trillion.

The scale of the challenge is daunting, and the government has quickly got to work announcing a swathe of reforms in the housing sector. Demonetisation, RERA and GST have all been introduced to increase transparency and accountability, and reassure homeowners that they can trust real estate developers. At the same time, PMAY has significantly reduced the costs of buying a house and expanded the possibilities of homeownership to a greater number of individuals and families.

While these demand-side initiatives are welcome, the government needs to help the real estate sector build on an unprecedented scale if it is serious about achieving housing for all. Indeed, the strength of the real estate sector should not be underestimated - it is the second largest employment generator nationwide and contributes about six percent towards GDP.

There was some positive news in the Union Budget, though. The affordable housing fund freed up much-needed finance for developers to build affordable homes at scale. Similarly, the finance minister’s commitments to invest in transport infrastructure may open up less connected areas of our cities, easing pressure on overcrowded - and overpriced - city centre building plots.

These changes alone will not be enough to house India’s rapidly urbanising population and the government needs to accelerate and advance its efforts to increase housing demand. This will require working more closely with those in the industry to clear up bottlenecks that continue to stifle growth.

One way in which the government can stimulate supply is through tackling the issue of land acquisition. This issue remains a major challenge for developers, as the shortage of buildable land across Indian cities has steadily pushed up land prices. In the long-term, transport infrastructure is key, but other initiatives are also needed in the interim. Easing building density restrictions would be one way to ease pressure immediately, allowing housing to be built in locations where they are most desperately needed.

Incentives that would have had an immediate impact were also missed in the Union Budget. For example, a tax exemption for Indian investors in Real Estate Investment Trusts (REITs) would have encouraged investment - going some way to acquiring the USD 2 trillion needed to meet the demand. The budget also fell short of granting the real estate sector the industry status - a move which would have enabled developers to obtain funds at reduced rates of interest.

The commitment to have housing for all by 2022 is ambitious, but not impossible. What is certain is that the government can’t do it alone. Public-private sector collaboration is vital to realising the nation’s dream of complete homeownership.

The author is founder, Xrbia Developers