The cities act as magnets for livelihoods and employment. The natural growth of population along with migration has led to rapid urbanisation. The World Urbanisation Prospects estimates that more than 50 percent of India will reside in urban areas by 2050. According to the report by Technical Group (TG12) on urban housing shortage, around 19 million (18.78) families in cities grapple with housing shortages. This has posed a challenge for the provision of affordable housing to the incoming and existing growing population.
Unpacking ‘Affordable’ Housing
An affordable housing is deemed affordable to those with a median household income. The housing choice is a response to a complex set of economic, social, and psychological impulses which include expenditure, economy, and transportation. The market prices of land and access to finance are crucial determinants of house prices. Due to rising land prices and a lack of finances, housing has become unaffordable for several million households and the gap between housing prices and incomes is widening day by day. Housing is considered ‘affordable’ when a family has access to a decent housing unit with amenities at 20 to 40 percent of gross monthly household income earmarked for either rent or mortgage.
Government Intervention
In 2015, the GOI launched the Pradhan Mantri Awas Yojana-Urban (PMAY-U) to provide affordable housing. It has four verticals designed to address specific problems in an urban context and adopts a demand-driven approach wherein the housing shortage is decided based on demand assessment by states/UTs. The scheme also provides central assistance to implementing agencies for providing houses to eligible beneficiaries by 2022 through the following programme verticals:
- Beneficiary Linked Construction (BLC): Subsidy for beneficiary-led individual house construction /enhancement.
- Credit Linked Subsidy Scheme (CLSS): Promotion of affordable housing for weaker sections through credit subsidy.
- Affordable Housing in Partnership (AHP): Creation of houses by both public and private sectors.
- In-Situ Slum Redevelopment (ISSR): Rehabilitation of slum dwellers with the participation of private developers using land as a resource.
The PMAY-U is a Centrally Sponsored Scheme (CSS), except for Credit Linked Subsidy Scheme (CLSS), which is a Central Sector Scheme. Under PMAY-U, the government has sanctioned 123 lakh houses, of which 60 lakh houses are complete. While 40 lakh houses are in various stages of completion and 23 lakh homes are yet to be completed. Simply put, 51 percent of the dwellings are either incomplete or their construction is yet to commence.
The implementation of the scheme is lagging; the delay can be attributed to COVID-induced lockdowns. However, for a holistic understanding of the scheme’s performance each vertical needs to be analysed in detail.
Beneficiary-Linked Construction (BLC)
Beneficiaries who own land, and are identified by the demand survey, are provided central assistance of INR 1.5 lakh for the construction of the house. The states provide subsidies from their end which varies state to state.
Many potential BLC beneficiaries face challenges with land ownership documentation. In many Indian cities, principally in the old city habitat, there is ambiguity in the revenue titles of land. This withholds many people from taking benefits.
The government has launched the Survey of Villages and Mapping with Improvised Technology in Village Areas (SVAMITVA) scheme which involves the provision of property cards to households living in rural areas where land ownership is ambiguous. A similar type of scheme is missing in urban areas. Land ownership is a vital criterion for being a beneficiary under the BLC component. Therefore, the need of the hour is to take majors in line with the SVAMITVA scheme from to ensure the land documentation issues get resolved in urban areas.
Credit Linked Subsidy Scheme (CLSS)
The government provides interest subsidies on home loans to economically weaker/ low-income and middle-income group beneficiaries under CLSS for the purchase, construction, or enhancement of houses. The aim is to address the housing needs of this segment in urban areas by enabling the beneficiary to buy or construct the house. The status of the CLSS scheme is currently unclear. The guidelines mention March 31, 2022 as the deadline, and there is no official extension from the government side.
When the CLSS was in operation, it reduced the payment burden of beneficiaries; however, it did little to expand the reach of housing loans, especially in the EWS segment. The EWS beneficiaries from informal income-earning groups still struggle to access formal housing finance. The GOI’s Credit Risk Guarantee Fund Trust Scheme has also failed on this front.
Affordable Housing in Partnership (AHP)
The AHP is a supply-side intervention. The aim is to increase the supply of houses to ensure affordability. The intervention aims to increase the supply of affordable dwelling units by enabling the public sectors’, private players’ and parastatal agencies’ potential. The government provides central assistance of 1.5 lakh INR per unit to Economically Weaker Section (EWS) houses in affordable housing projects where 35 percent of constructed residencies are reserved for the category. The states also assist in AHP projects. The assistance varies from state to state. The off-take of the Affordable Housing in Partnership (AHP) vertical depends on multiple stakeholders and the private sector is a crucial one. Its participation, however, has been limited and fraught with many challenges ranging from insufficient incentives and project delays to information asymmetry between the state and private developers. The strategies attempted so far include directing private land for affordable housing in exchange for permission for the intensive utility of land or exchanging permits to build high-end housing. The potential of leading privately owned land towards affordable housing at a low cost is limited.
However, appropriate PPP structures can attract the private sector in this direction. Other benefits like tax relaxation, lower GST rates, and stamp duty can also make AHP attractive to private players.
In-Situ Slum Redevelopment
In India, slum rehabilitation is plagued with dispossession, illegal subletting, corruption, and exclusion. The objective of the ISSR vertical is to cater to decent housing for all the slums. The government provides INR 1 lakh assistance per unit for a private developer to develop decent housing at the same spot. The private players can then use the land as a resource to generate profits.
The ISSR is the most underperforming vertical amongst all the PMAY-U verticals. It comprises a mere 3.52 percent (4.44 lakhs) of the sanctioned houses. According to Urban Affairs Ministry, 2019 data presented in Rajya Sabha shows that 6.5 crore people live in slums. In this light, the 4.4 lakh ISSR figure is too short of fulfilling the aim of housing for all.
In many cases, the state governments do not notify an area as a slum. It is a principal hindrance in the ISSR vertical. The first step for slum development and redevelopment is ensuring all the slums and slum-like settlements in urban areas are enumerated. Second, their characteristics like land ownership, planning, zoning classifications, and the utility for other activities should be marked. Third, the marking should include civic and primary services. Fourth, the tenability and feasibility of each slum must be ascertained. All the above steps are crucial for an intervention strategy at the slum level.
Way Forward
The PMAY-U has successfully ensured housing supply to over 4.8 million households; however, slum rehabilitation has to make headway. A focused approach is necessary to address the challenges in slum redevelopment. Government subsidies are not a long-term sustainable option for housing delivery and access to robust finance mechanisms is required to ensure beneficiary financing. These may include the availability of low-cost loans for low-income borrowers with informal income sources, risk guarantees, and long-term low-interest rates.
An enabling environment for lenders needs to be created to promote financing as there is an urgent need to improve the width and depth of access to formal housing finance. Rental housing availability needs expansion to take care of the needs of migrants and other sections that need such facilities.
(This article first appeared in the ORF)
Akshay Joshi is Deputy Manager, Chief Ministers Good Governance Associate Program at Ashoka University. Views are personal, and do not represent the stand of this publication.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
