Dissertation On Affordable Urban Housing

AFFORDABLE URBAN HOUSING IN INDIA
An Approach to Public-Private Partnership to the

affordable housing sector
DISSERTATION
Submitted by,
Joydeep Neogi
5th Sem, Executive M. Arch (AD)
Faculty of Architecture
Manipal University
Manipal
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Declaration
This Dissertation in subject ARM 803 E, entitled “Affordable Urban Housing in India”, is being
submitted as part of requirement for fifth semester in Executive Masters in Architecture by
the undersigned for evaluation.
The matter embodied in this dissertation is either my own work or compilation of others‟
work, acknowledged properly. If, in future, it is found that the above statement is false, then
I have no objection in withdrawal of my Dissertation and any other action taken by the
Institute.
JOYDEEP NEOGI
Reg. No. – 143705001
Date: 10 – Nonember– 2016
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Acknowledgement
The success of any venture cannot be regarded as the end result of a single factor. It requires
a harmonious unification of perseverance, inspiration and motivation; along with the right
kind of guidance working on this dissertation in a truly different perspective.
At this level of understanding it is often difficult to comprehend and assimilate a wide
spectrum of knowledge without proper guidance and advice. Hence, I take the opportunity
to express my heart felt gratitude to my respected guide panel for his unfailing guidance
and constant encouragement, and support which has enabled me to successfully complete
this task.
I would like to gratefully and sincerely thank my guide panel for this guidance, understanding,
patience, and most importantly, his friendship during my dissertation research study. Which
encouraged me to grow as an instructor and an independent thinker. I am not sure many
post-graduate students are given the opportunity to develop their own individuality and self-
sufficiency by being allowed to work with such independence.
The writing of this dissertation has been one of the most significant academic challenges I
have ever taken. Though the following dissertation is an individual work, I could never have
reached the heights or explored the depths without the help of books published by various
authors, the e-books available on the internet, the research papers published by various
authors and the various organizations and websites providing information related to my
dissertation topic.
I express my sincere thanks to all the teachers who have helped me throughout this
process, my parents and my friends for their kind cooperation and help at various stages,
which has made my work possible.
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INDEX
Table of content Page No.
Declaration ………………………………………………………………………………………………………………………… ii
Acknowledgement …………..…...…………………………………………………………………………………………… iii
Table of contents ………………………….….………………………………………………………………………………… iv
Table of figures …………………………………………………………………………………………………..……………… vi
Table of Tables ………………………………………………………………………………………………………………….. vii
Abbreviation ……………………………………………………………………………………………….…………………… viii
Abstract ……………………………………………………………………………………………………………………….….…. 1
Chapter 1
1.1 Introduction……………………………………………………………………………………………………………….…. 2
1.2 Research Gap………………………………………………………………………………………………….………….…. 4
1.3 Research question…………………………………………………………………………………..………………….…. 4
1.4 Aim ……………………………………………………………………………………………………………………………….. 4
1.5 Focus……………………………………………………….……………………………………………………………………. 4
1.6 Objective……………………………………………………………………………………………………………………….. 4
1.7 Scope & Limitation……………………………………………………….……………………………………………….. 5
1.8 Methodology……………………………………………………….………………………………………………………… 5
Chapter 2
2.1 Concept and background…………………………………………………………………………………………….… 6
2.2 Definition and parameters………………………………………………………………………………………….…. 7
2.3 Affordability and it’s concepts.…………………………………………….……………………………………….. 7
2.4 Demand and supply constraints……………………………………………………….……………………………. 9
2.4.1 “Affordable housing “and its demand drivers ……………………………………………….………….. 9
2.4.2 The key supply constraints for AH ………………………………………………..………………………… 10
2.5 Difference between Affordable and Adequate Housing………………………………………….….… 12
2.6 Affordable vs. Low priced Housing…………………………………………………….…………………………. 14
2.7 Affordable Housing and market……………………………………………………….………………………….. 14
2.8 Policy Interventions in Housing Market……………………………………………………….………………. 16
2.9 Reasons for Limited Success……………………………………………………….……………………………….. 17
2.9.1 Planning policies…………………………………………………….……………………………………………….. 17
2.9.2 Legislative Policies……………………………………………………….………………………………………….. 18
2.9.3 Monetary and Fiscal Policies……………………………………………………….………………………….. 20
Chapter 3
3.1 Issues in the development of urban housing……………………………………………………….……….. 21
3.1.1 Factors restricting private participation in urban affordable housing development…. 21
3.1.2 Reducing Cost……………………………………………………….………………………………………………… 22
3.1.3 Cost of land……………………………………………………….……………………………………………………. 22
3.2 Architectural Design……………………………………………………….…………………………………………… 25
3.3 Reducing Construction cost……………………………………………………….………………………………… 26
3.4 Achieving efficiency and economics of scale……………………………………………………….………. 27
3.5 The Government as a facilitator and enabler……………………………………………………….………. 29
3.6 Tribunal for debt recovery and resolution of another dispute…………….………………………… 31
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Chapter 4
4.1 Promoting “Affordable Housing” by PPP as a tool …………………………………………….…………. 35
4.2 Role of PPP in “Affordable Housing”…………………………………………………….………………………. 37
4.2.1 Land Availability & Cost……………………………………………………….………………………………….. 37
4.2.2 Construction & other Costs……………………………………………………….……………………………. 37
4.2.3 Connectivity & Infrastructure……………………………………………………….…………………………. 38
4.2.4 Credit Delivery & Risk……………………………………………………….…………………………………….. 38
4.2.5 Others……………………………………………………….……………………………………………………………. 38
Chapter 5
5.1 Strategies for “Affordable Housing” using PPP…………………………………………………….……….. 39
5.2 Strategic initiative for further impetus……………………………………………………….……………….. 40
5.2.1 Grant infrastructure status to the “Affordable housing sector”……………….………………. 40
5.2.2 Form a nodal agency for coordinating efforts of various stakeholders………….………… 40
5.3 Make strategic investments……………………………………………………….……………………………….. 40
5.3.1 Promote the PPP framework efficiently to address major issues…………………………….. 40
5.3.2 Channelize long-term funding in urban housing………………………………………………………. 42
5.4 Simplify structural and procedural frameworks……………………………………………………….….. 42
5.4.1 Decentralize decision-making and enabling ULBs………………………….……………………..…. 42
5.4.2 Ease of approval process by making “Single window clearance…………………………..…… 42
5.5 Introduce legal and regulatory reforms……………………………………………………….………………. 43
5.5.1 Reframe “Building development norms”…………………………………………………….………….. 43
5.5.2 Revise on “LARR Act 2013”………………………………….………………………………………………….. 44
5.5.3 Promote rental housing……………………………………………………….………………………………….. 45
5.6 Empower the consumer for greater affordability…………………………………………………………. 46
5.7 Strengthen housing program delivery……………………………………………………….…………………. 48
5.7.1 Enhance project delivery capabilities……………………………………………………….……………… 49
5.7.2 Bridge the human resource gap to deliver ‘housing for all by 2022’ vision………………. 49
5.7.3 Policy support for promoting mass housing construction technologies…………………… 49
Chapter 6
6.1 Reforms and suggestion ……………………………………………………….……………………………………… 50
6.2 Conclusion……………………………………………………….………………………………………………………….. 50
6.3 Further research……………………………………………………….…………………………………………………. 51
Annexure – 1 ……………………………………………………….…………………………………………………………… 53
Policy imperatives to promote innovation along the value chain for housing e improving
affordability, transparency, sustainability and growth: Discussion
Annexure – 2……………………………………………………….……………………………………………………………. 64
Case study’s
Reference……………………………………………………….………………………………………………………………… 67
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List of Figure
Figure 1: Year wise demand-supply gap projected……………………………………………………………… 02

Figure 2: Demand-Supply analysis based on income groups………………………………………………. 02
Figure 3: Methodology process……………………………………………………………………………………….….05
Figure 4: Demand-Supply constraints………………………………………………………………………………… 09
Figure 5: Projected urban population by 2030…………………………………………………………………… 09
Figure 6: Share of population in each income bracket……………………………………………………….. 10
Figure 7: Approval of statutory adds 2-2.5 years to the Pre-Construction Process…………….. 11
Figure 8: Compression after removing regulatory and supply constraints…………………………… 12
Figure 9: Conceptual diagram of Affordable housing regulation and Supply network in India.13
Figure 10: Distance of Major Affordable Housing Location from the city center………………… 15
Figure 11: Demand shift due to subsidy…………………………………………………………………………….. 17
Figure 12: Relation with capability approach and casual linkage of policy…………………………. 18
Figure 13: Casual Linkage among policy component………………………………………………………….. 18
Figure 14: Vicious cycle of economic slowdown, slow urbanization, and declining housing
affordability………………………………………………………………………………………………………………………. 19
Figure 15: Residential property rates during the quarter ending March 2016……………………. 22
Figure 16: Land conversion procedure and its involvement with different government
sectors………………………………………………………………………………………………………………………………. 24
Figure 17: Push and Pull Factors for Entry of private players in Affordable Housing…………… 36
Figure 18: Conceptual Strategies……………………………………………………………………………………….. 39
Figure 19: Growth and investment in real estate sector through PPP……………………………….. 41
Figure 20: Multiple factors leading to uncertainties and delay in the approval process……… 43
Figure 21: Timeline for acquisition of land using the LARR Act, 2013…………………………………. 44
Figure 22: Decline in rental housing…………………………………………………………………………………… 45
Figure 23: Demand and supply of Human resources………………………………………………………….. 49
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List of Table
Table 1: Indian housing demand by 2022…………………………………………………………………………….. 3

Table 2: Indian urban housing investment by 2022………………………………………………………………. 3
Table 3: Different income groups and projected land required……………………………………………. 6
Table 4: Cost of housing to income-expenditure ratio…………………………………………………………. 7
Table 5: To pay EMI/Rent (% of income) …………………………………………………….………………………. 8
Table 6: Affordability to pay EMI/Rent per month……………………………………………………………….. 8
Table 7: Comparison between low-cost vs Affordable housing…………………………………………… 14
Table 8: Timeline of economic, and social environments of India since independence 1947. 16
Table 9: Factors restricting PPP and impacts………………………………………………………………………. 21
Table 10: Time between default and actual recovery by loan granter………………………………… 32
Table 11: Time between default and actual recovery by banks………………………………………….. 32
Table 12: Central and state level- laws, rules, and regulations making a longer approval
process.…………………………………………………………………………………………………………………………….. 42
Table 13: FSI scenario analysis……………………………………………………………………………………………. 44
Table 14: Percentage of social housing stock across globe………………………………………………….. 46
Table 15: Affordability gap minimization……………………………………………………………………………. 47
Table 16: Various tax paid in development of housing……………………………………………………….. 48
Table 17: Program management office and its function…………………………………………………….. 48
Table 18: Reforms suggested……………………………………………………………………………………………… 50
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Abbreviations
AH-Affordable Housing
ATP-Affordable to Pay
BDA- Bhubaneswar Development Authority
BPL- Below Poverty Line
BSUP-Basic Services to Urban Poor
BBMP-Bruhat Bangalore Mahanagar Palike
BDA-Bangalore Development Authority
BMA-Bangalore Metropolitan Area
CLIA- City Level Implementation authority
CLTC- City Level Technical Cell
CAGR-Compounded Annual Growth Rate
CBD-Central Business District
CITB-City Improvement Trust Board
CRIS CRISIL-Risk and Infrastructure Solutions Limited
CRISIL-Credit Rating and Information Services India Limited
DA- Development Authority
DDA-Delhi Development Authority
DU-Dwelling Unit
EWS- Economically Weaker section
EPC-Engineering, Procurement and Construction
FAR- Floor Area Ratio
FSI – Floor Space Index
FCF-Free Cash Flows
GoI- Government of India
H&UD- Housing and Urban Development
HUDCO- Housing and Urban Development Corporation
IHSDP- Integrated Housing and Slum Development programme
ISHUP – Interest Subsidy Scheme for Housing the Urban Poor
IRR-Internal Rate of Return
JnNURM- Jawaharlal Nehru National Urban Renewal Mission
LIG- Low Income Group
MIG- Middle Income Group
MoHUPA- Ministry of Housing and Urban Poverty Alleviation
NBO- National Building Organization
NGO- Non-Governmental Organization
NHB- National Housing Bank
NUHHP- National Urban Housing and Habitat Policy
NPV-Net Present Value
O& M- Operation and Maintenance
PIU- Project Implementation Unit
PMU- Project Management Unit
PPP- Public Private Partnership
RAY- Rajiv Awas Yojana
RIT- Regional Improvement Trust
SLNA- state Level Nodal Agency
SHB- State Housing Board
SPA- Special Planning Authorities
TDR- Transferable Development Right
ULB- Urban Local Body
USHA- Urban Statistics and HR Assessment
WHSHG- Women Housing Self-Help Group
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Affordable Urban Housing in India
Abstract
With about one in six urban Indians living in informal squatter settlements, the need for an
additional number of affordable housing in India is growing exponentially. The Indian
department of “Housing and Urban Poverty Alleviation” (MoHUPA) launched its ambitious
“Housing for All” scheme under Pradhan Mantri Awas Yojana(PMAY) in September 2015
with the goal to make India slum-free by 2022. This scheme is based on similar former
programs and shows promise regarding the number of houses that will be built with the
help of the government’s credit-linked subsidies for all incomegroups in India. However, the
program has many shortcomings, especially from a people-centered perspective:
beneficiaries are often perceived as passive, there are few empowerment measures in the
scheme, access to benefits is exclusive, and long term effects are neglected. It is concluded
that PMAY 2014 is mainly an image campaign for the government and lacks sustainable
elements. Even there are many issues like a private partnership and investment which are
neglected in a broader perspective.
This dissertation intends to suggest possible backdrop from this Housing for All scheme and
suggest reforms on policy and also to increase private partnership investment in the
scheme. The focus lies on potentials found in decentralized municipal policies, public-private
partnerships for upgrading existing housing, as well as provide the housing shortage and
providing basic facilities, and on beneficiary’s empowerment. These elements are discussed
based on an inclusive and people-centered approach to development to speed up the
scheme. The results of this discussion, analysis, and inference will then be abstracted into
tentative suggestive guidelines on how to approach affordable housing in a developing
country with private partnership and investments.
Keywords: Affordable housing, Affordability, Policy, Government Laws, Housing shortage,

strategic investments, Public-private partnership, rental housing, Urban land, Urban reforms,
demand and supply of housing etc.
1
Dissertation- Report
Chapter 1
1.1 Introduction
In Censes of 2011, the country had a blasting population of 1,211.96 million, among that
378.11 million (Approx. 31.15 %) stayed in Urban Areas. In last decade 2001-2011, the urban
Indian population exploded at a compound annual rate-growth of 2.9%, resulted within the
compounded enhanced level of urbanization from 27.81% to 31.15% and still increasing
until date. This speedily growing population of individuals in Urban-Areas has led to the
difficult downside in housing deficit, land scarcity, and engorged roads & has additionally
many issues of the present basic amenities like electricity, water and green areas of the
cities and city. The projected demand is given below:
Figure 1: Year-wise demand-supply gap projected
According to the 2011 censes, urbanization within the metro city has created individuals
more and more staying in “squatter settlements” and conjointly decreased-housing
condition of every income groups in India. this can be essentially reasoned by the sky-
moving value of land and major real-estate players in Urban-Areas of the town which have
forcibly made affordability to occupy marginal land-typified by degeneration and housing
stock shortage. The demand and provide analysis in income groups are given below:
Figure 2: Demand-Supply analysis based on income groups
2
Considering this factors of existing a large range gap between the provision and demand of
homes within the term of quality and similarly as amount in Urban Bharat. throughout the
start of “12th Five-year Plan” the present shortages in Urban-Areas are 19 million units, with
an extra housing demand of 28 million units and because of affordability issue, 9 million
units are still vacant. which boosts the core demand of the urban housing to 37 million
units.
Table 1:Indian housing demand by 2022
In urban Indian cities and towns, Private-Developers targets majorly; high end-luxury, HIG
and MIG housing segments. because it collects a high-premium over LIG and EWS housing in
India. that ends up in the constant-supply for the precise segments, and increasing market
aggressiveness for the developer and generated lobby system in real systems and creates
difference for other income groups. On the opposite hand, housing for lower income cluster
is essentially provided by the govt. for “welfare purpose” and restricted to vote bank
purpose solely. So, it's the Urban-housing demand of the MIG group that is majorly
neglected, and exists a huge-gap within the offer of reasonable homes. the subsequent
below is that the analysis of the housing need by the various income groups in Bharat,
typical space provided as per policy, current housing stock investment and investment
required for additional development in housing.
Table 2: Indian urban housing investment by 2022
3
1.2 Research Gap
In the affordable urban housing, many types of research is being done on the following and
need to be further researched:
a) The minimum volume of habitation.
b) Provision of the cost-effective amenity on site.
c) Cost effective construction.
d) Land economics of affordability of urban housing.
e) Housing delivery systems by a credit agency.
There is very limited research is being done on the Issues restricting private participation,
investments, in the development of urban “affordable housing” and giving a
recommendation on the policy reforms to make it affordable to our Indian urban society. In
many developing countries like china, brazil, and south Africa etc. had adopted private
partnership investment to overcome their housing problem. Which is a topic of research in
India.
1.3 Research question

Factors restricting public-private participation in an urban affordable housing development
and what strategies can be adopted to overcome the urban housing problem.
1.4 Aim
Understanding urban housing regulations policy and guideline reforms on private
participation investment in urban affordable housing, to overcome housing shortage by
2022 in India.
1.5 Focus
How laws and policy reforms to ease private participation, can lead to the development of
affordable urban housing.
1.6 Objective
a) Definition of affordability in the housing for urban India.
b) Affordable urban housing parameters.
c) Issues related to urban regulation and acts (NBC, Bylaws, UDPFI, NHB, HUDCO, RERA
and MoEF etc.) to overcome the shortage in Affordable urban housing.
d) Understanding issues of direct and indirect policy on affordable urban housing (i.e.
FDI, HFCs etc.).
e) To Simplify structurally and procedural frameworks.
f) Direct and indirect Taxation and registration of property to make affordable.
g) Introduce legal and regulatory reforms (i.e. FSI etc.).
h) Strengthen housing program delivery.
4
1.7 Scope &Limitation
a) How to simplify structural and procedural framework.
b) Analysis and reform suggestion on policy and regulation.
c) Housing delivery systems reforms.
d) Reforms can be introduced in taxation.
e) How to Empower the consumer for greater affordability.
f) Interview and data sampling of the questioner to get inference.
1.8 Methodology
The research approach is Teleological (where the process is important) and hybrid
methodology is adapted, of both quantitative analysis and qualitative analysis for the
research in the Affordable urban housing for high-income group. The research approach will
be as follows:
a) Literature study and data collection on urban housing.
b) Definitions, explanation of present scenario in affordable urban housing.
c) All acts, policy, and regulation in urban housing in India with a deep analysis and
graphical representation of statistics, charts, graphs etc., to support my objective.
d) Identification of issues and problem in the context.
e) How other policy intervention can affect the urban affordable housing.
f) Case study and its inference.
g) Determining sampling design and prepare questioner.
h) The fixing parameter of Survey questioner questions on urban affordable housing.
i) Analysis of data and conclude inference.
j) The framing of the recommendation of the guideline as per inference.
k) Conclusion and give further research question.
Figure 3:Methodology Process
5
Chapter 2
2.1 Concept and background
In the housing circles associate “Affordable Housing” is that the fuzzy word. Since the
beginning of “the recession within the real-estate market, there exists an enormous pile-up
of inventories” in “ambitious-luxury” housing-projects initiated throughout the growing
period within the real-estate Sector. To survive within the Indian market, the developers
had choice however to scale back the costs of their merchandise. Since then the real-estate
private-developers have been saying the launch of AH projects. Majorly of those projects
aims to supply DU in a pricing vary of INR 25-35 lakh with an area ranging of 800-1400 sq.ft.
This projects are targeted towards MIG and higher MIG groups. sadly, alongside a discount
in value and budget, there has been a generally reduction in specifications of the
construction.
Table 3: Different income groups and projected land required
AH gets outlined actually in parameters of what reasonably social unit, in several income-
ranges will do the affordability and if urban housing provided in market is in this price-range
regardless of the standard of DU. an equivalent parameter applies to DU for the urban
sector poor. Since their “affordability-levels” are terribly low, the non-public real-estate
trade provides them with DU, that is specified by little size, not-grunted tenure, non-
existent infrastructure and unhygienic-environment.
Also, few-availability of AH is as much a tangle of the MIG groups as it is of the LIG. As

unable to seek out acceptable DU as per their needs and wish, several belongings to MIG
and Lower-MIG are forced to get sub-standard DU. several of them encroaches cheap-
subsidized DU provided by the govt for poor individuals, therefore negating-govt. efforts to
elevate living standards in the EWS/LIG. the difficulty of AH must be checked out in a very
comprehensive and analytic manner.
6
2.2 Definition and parameters
There is no-accurate outline of the term “Affordable”. Therefore, this can be a
comparatively kind of idea and might be having many-implied meanings in many relative
contexts. “Affordability” in page of the urban-housing means that the providing of
“adequate-shelter “or “minimum-habitable area “on a parameter basis, making certain
security for tenure with-in the means that of the usually urban unit. In different
straightforward definition, that AH is that; DU providing to those, whose needs don't seem
to be meeting by the market.
Internationally, housing affordability is outlined in multiple ways in which. one in all the
foremost normally accepted definitions of affordability refers to housing affordability which
might be taken as a measure of housing expenditure to income-group within the family. this
is conjointly accepted by the Indian govt. that states “AH refers to any housing that meets
some variety of affordability criterion, that might be income level of the family, size of the
dwelling house unit or affordability in terms of EMI size or magnitude relation of house
worth to annual income” [High-Level Task-Force on AH for All, Dec - 2008, page. 7].
Whilst most of the definitions for AH take into account the area-range, price-range, and
affordability-range of the occupier, the key major ideas of constructing AH go through
providing adequate civic-amenities and appropriate-location stay un-answered. As per my
analysis, AH should be outlined as per builder’s perspective on the idea of the subsequent
criteria:
a) Necessity of minimum volume of habitation required for the income groups

b) Provision of amenities
c) Cost of house
d) cost of construction
e) Location of the house
f) High land-prices
g) Cost for purchases and transaction
h) Legal, Taxes and professional charges
i) Private operators and Profit margins
2.3 Affordability and its Concepts

“Affordability "can be typically seen as a magnitude relation of value or rent of DU to the
income of the social unit. The magnitude relation could disagree on completely different
income-groups. LIG will “afford to pay abundant less quantity of their earned-income for DU
expenditure than that of different income groups”. “Deepak Parekh Committee” reports
outline the “affordability” magnitude relation for various income-groups as follows: -
Table 4: Cost of housing to income-expenditure ratio
7
It would be very applicable for us to filter out the EWS and LIG from the MIG/HIG. The
quantitative relation of EWS is being down to no more than 20 % of EMI or Rent and three-
times household’s Total-annual financial gain for the value of the house, whereas keeping
the “affordability” quantitative relation for LIG or MIG as given by the “Parekh Committee”.
There is a sub-category of urban poor that is additionally a part of governments inclusive-
policy of providing AH for all specifically Below the Poverty-Line people. This section
conjointly needs to be considered singly rather than as sub-part of EWS. The “affordability-
level” of households in this specific category would be not more than five-percent of the
earned-income. This sub-income class and its affordability levels will be outlined below: -
Table 5: To pay EMI/Rent (% of income)
Taking income-group classification on different income-groups are outlined by the GOI, the
affordability--levels shown below;
Table 6: Affordable to pay EMI/Rent per month
It is understood that all kind of DU in each income-category won't be concentrating at the

upper end of the income-group. “Affordability-levels” of mostly of the poor population
could be much under what's being explained by the figures in Table 6. it's additionally
quietly treated, that at given price-levels that cannot get a house in most of the Urban-
Areas. Hence, it's quite necessary to outline the lower limits for every income-group
category, in various to set up for providing of all lowest of income-group in every category.
additionally, “affordability” is nevertheless to be outlined not solely in parameters of
purchase price of the house possession or rent, however it should additionally embrace
alternative charges and fees of registration and additionally searching cost etc. payable
within the time of ownership and rental of the DU. It ought to be additionally consisting of
revenant price on the lifespan of tenure within the house. These would come with legal
taxes, maintenance price of DU, utility price of DU. It will be additional enclosed the “cost of
commuting” to the nearby workplace or would possibly different places by completely
different priority of members of a family.
8
2.4 Demand and supply constraints
Figure 4: Demand-Supply constraints
2.4.1 “Affordable housing” and its demand drivers

a) Urbanization: It’s an “index of transformation from traditional rural economies to
trendy industrial one.” India’s urban population is expanding at a quicker rate than
its population. At 28.83%, the spectrum of urban-growth in India has been slower
than the typical spectrum of urban-growth in Asia sub-continent. Hence, absolutely
the range of population in urban cities and cities has gone up incrementally. In
context, urban-growth could be delineated as a “by-product of demographic
explosion and poorness induced rural-urban migration”. This current scenario has
resulted the pressure on urban- infrastructure and created increase within the
population of homeless individuals living on the streets. As per the 2011 census, the
overall urban homeless population was 8, 87,600, which can be far more presently
given the “inadequate-availability of cheap and low-priced housing”.
Figure 5: Projected urban population by 2030
9
b) Raised income levels making a sizeable MIG segment: In last decade years, have
seen wonderful economic process within the region and also the implementations of
one of the foremost successful “anti-poverty programs” within the Indian history.
whereas 92 % of the gross population in year 1985 was beneath low category, this
has been declined to 55 % of gross population in year 2005 and it's more expected to
decline to 26 % the year 2025. Our economic-growth is additionally expecting to
astonishingly amendment Indian income-slabs by making a “sizeable layer of MIG”.
Particularly MIG section is expecting to be the first driver for AH.
Figure 6: Share of population in each income bracket
2.4.2 The key supply constraints for AH

a) Land Availability: It is one among vital questions escalated that Indian government
to answer, that is with relation to the “adequate supply” of land for “housing and
residential purposes”. The Govt. vision of “Affordable Housing for All” would force
land acquisition and yet as offer of huge land parcels on regular interval. As per 2011
census, the Indian urban land-mass (3 % total land mass) homes around 28.83 % the
Indian population, excluding EWS people that continue to exist the streets. As per
calculations created by the “Town and Country planning Organization (TCPO)”, to
satisfy the demand of EWS or LIG category singly would need 85,835 to 130,892
hectares of extra land. price of land is another vital parameter touching the
availability of land. the govt. is holding an enormous quantity of urban land
underneath the possession of port trusts of India, the Railways lands, the Ministry of
Defense lands, land being acquired beneath the Urban Land Ceiling and Regulation
Act, the Civil aviation and Airports Authority of India and different government and
nodal departments. this provides Rigid accessibility of land in Urban-location, it's
unviable for private developers to produce adequate cheap housing without Govt.
backing.
b) Regulatory support and Finance: This constraint has created limitation in Indian
housing sector. this funding for beneficiary’s mechanism created within the country
principally targets MIG and HIG income-groups of the society whereas the opposite
class falling underneath LIG and EWS category obtaining it troublesome to secure
formal loan and housing finance. private and commercial banks and traditional
method of housing finance usually not entertain low-income groups, whose income
10
is below the edge to confirm re-payment, or who cannot give certificate for securing
housing loans. Micro-finance-establishment are thought-about to be future best
alternative for loan within the EWS and LIG category. Further, there are several
challenges are being featured by microfinance-institutions that do forestall them
from extending housing loans munificently. the main Challenges visage during this
are primarily owing to the longer reimbursement amount of housing loans
(minimum 5-7 years) and another is because of the larger quantity of loan compared
to typical loans that is extended by microfinance-institutions. yet one more
drawback with microfinance establishments is of refinancing. whereas “National
Housing Bank (NHB)” give them with loan facility, however current interest rates are
not-fixed and reviewed timely. the shortage of developed debt-market, places add
sizeable constraints for microfinance-companies, creating them of long-run
availableness of affordable money as they presently able to manage money for a
most.
Figure 7: Approvals from statutory-body adds24-30months to the Pre-Construction Process
11
Figure 8: Compression after removing regulatory and supply constraints
2.5 Difference between Affordable and Adequate households
In the constraints on “ATP (Affordability to Pay)” of several and notably the lowest-income-
groups, DU decisions for housing are determined in terms of no matter is “possible” within
housing limits. Housing outlined as being a package of many characteristics additionally as
location, tenure, size, infrastructure etc. – it is created primarily of locations and size. In fact,
the matter of affordability, significantly for the poor is closely coupled with the case of
housing. Most of the poor stay the informal sector. Most acceptable locations for these are
near their workplaces. Since most of them get paid to keep with work done, the time
consumed in traveling from places for far from (potential) workplaces would mean fewer
hours of labor, lower income-group, and lower Affordability to Pay. The inflated value of
commutation from faraway workplaces would have an extra negative impact on "money" on
the marketplace for housing. Besides, the target of providing "affordable Housing for all" is
not only to provide housing among their “affordability limits but to provide a superior
package of housing” than what they have today. The trade-off between location and
"tenure of infrastructure won't invariably" be a most well liked chance for the poor.
12
Figure 9: Conceptual diagram of Affordable housing regulation and Supply network in India
Similar way, provision of very little size (one room) units with marginal area to suit among
the “affordability limits of the lower income groups” have to be compelled to be
reappraised. At present, the diction of the housing draw back in varied govt. documents is
not solely in terms of dilapidated housing conditions but in addition an oversize range of
households living fully (one space units) conditions. planning for providing of one-room
units is not resolution the matter of housing. it ought to even be noted that housing could
also be a durable product and once designed will signify next 40-50 years. By providing for
small size high-density DU one would be replacement one sorts of the slum with another
kind of slums. the target of Housing policy therefore need to be not exclusively to produce
AH but to provide housing that satisfies minimal adequate norms. One is to stipulate
Adequate Housing and then deliberate on the simplest way to create this housing affordable
for various income-groups.
The ATP (in terms of income prices ratio) are outlined for the country as a whole. therefore,
is that the size of housing that is among this ATP. it's quite obvious that such can't be the
case for all urban areas within the country. Thus, there may be only a few DU in Bombay
with incomes below the EWS limit however still find it not possible to afford even one sq. ft.
of land within the city. In some small cities, income levels of the poor could also be at the
lower end of EWS income limits and despite low costs of housing, the matter of un
affordability can remain. there'll be not only inter-state however additionally intrastate
variations in affordability levels of income groups. Housing could be a location specific issue.
The income limits, the affordability levels of the EWS, LIG and MIG have to be compelled to
be outlined at the native level. Formulating policies supported such “generalized
affordability norms” might not be brought about expected results.
Another vital issue that must be thought-about whether or not the outlined of "Adequate
Housing would be constant for various styles of households". It should be recognized that
households differ not solely in line with income however additionally in keeping with
household size, the composition of social unit, profession, the level of skills, stability or
otherwise of job etc. The housing demand and preferences would vary consequently. The
outline of "Adequate Housing for each household can't be constant". Thus, housing demand
(in terms of location, tenure, size etc.) of single male or female, new migrants are quite
totally different from alternative households. To plan for providing dwelling units of a
specific size among affordability limits (outlined in regard to income) for all may not be an
honest policy. it should even be noted that temperament to pay are higher for ‘a glove that
fits’ instead of a unusual person. One is to avoid process “Adequate Housing” in general,
terms of `x’ sq.ft. of the area for various income groups.
13
Outline of Adequate AH can dissent from place to position and for different categories of DU
among every income cluster. This must be outlined at the native level.
2.6 Affordable vs. Low- priced Housing

Affordable and low-priced housing area unit typically inter changeably used however are
quite completely different from one another. low-priced housing is mostly meant for EWS
category and contains bare minimal housing facilities whereas AH is usually meant for LIG
and MIG and includes basic amenities like primary-schools, multispecialty-hospitals and
alternative community facilities and other civic-services.
Table 7: Difference between low-cost vs Affordable housing
2.7 Market & "Affordable Housing"

The market will answer the buying capability of various income-groups and provides some
kind of shelter to all or any. the sole disadvantage is that this housing is much from
“adequate”. the extent of inadequacy is highest within the case of the poor and is deficient
in most characteristics of housing. the explanation for high (un-affordable) value of DU
within the market lies in:
a) expensive land prices,
b) high construction cost
c) cost in transaction
d) Legal, Taxes and professional fee
e) Private-operators and Profit on cost
The price of land is that the single costliest element within the cost of housing in urban-
areas. The high worth of land may be a consequence of the shortcoming of the land market
to reply quicker to exaggerated demand for land with the expansion of urbanization. The
slow response of land market is partially owing to inherent inefficiencies and imperfections
of this market. Land or housing market is characterised by the little size of the
market(number of consumers and sellers in every submarket is kind of small); low levels of
exchangeability between houses or land plots in numerous submarkets; lack of data
regarding worth and availableness of houses or land in several areas resulting in restricted
competition. Further, it takes a protracted time to create land obtainable for residential use.
“Conversion of land from one use to a different takes a protracted time” because of
numerous state regulation and procedures.
14
Increased demand combined with the sluggish response of supply results in higher costs
setting a parameter. Even once supply is exaggerated over medium to long run, costs don't
decline. costs ar usually downwards rigid. High and increasing land costs fuel expectations
and add speculative demand to user’s demand resulting in more will increase. Excess
demand for land for brand new or existing users is additionally part answerable for the rise
in prices. very often a public sector/state comes ar provided land at the much-below market
(subsidized) costs resulting in the unplanned use of land therefore drawing away excessive
land from the market and declining supply. Low price of use of land in existing uses
additionally creates excess demand. If the value were place at “additional realistic” (near-
market) levels, land from existing uses might be free for new uses. this is able to have some
slow effect on the price of land. supply of land might even be raised if conditions might be
created for faster turnover of use of land. Land might be discharged from obsolete uses and
place to use for recently rising uses. samples of such obsolete uses in cities abound [refer
R.M. Kapoor1990]. In India, the high dealing prices of shifting homes scale back the quality
of households. several households could prefer to shift to totally different|completely
different} locations or different sized unit’s over their life cycle however still be stock-still
within the same house forever. A notable an example of such a development is old retired
persons continued to remain on in prime locations within the urban areas, that if vacated
might unharness some housing for the new working population and would have a positive
impact on costs.
Figure 10: Distance of Major Affordable Housing Location from the city center
The cost of building materials, construction labor, noncurrent technologies, high cost of
capital because of long-drawn construction method will increase the price of constructions.
numerous fees and taxes due by the developer throughout production method increase the
price still additional. These prices embrace conversion fee (for amendment of land use), fee
(for permission to hold out a project), registration fee and stamp tax (for registration of
purchase), wealth tax ashore, development fees (for getting No Objection Certificates and
approvals from numerous authorities) and tax on the sale of properties. These taxes and
charges are passed on to the buyer (partly or totally counting on the snap of demand and
market conditions) as a part of the price of production. the price of construction itself is
hiked by taxes and duties levied on construction materials and services rendered by
15
numerous professionals within the project. Sale tax, excise duty, value added tax are levied
on building materials like steel, cement, paint. varnishes etc. Further, payments created to
consultants like architects, structural engineer’s contractors, assets consultants and agents
are subject to service tax. To nullify the impact of service tax, the developer unremarkably
will increase the fee by the tax quantity (fully or partly). dealings value together with search
value, brokerage, stamp tax and registration fee. These intensify the price to the owner still
additional. within the past few years, a growing economy has given rise to a section of the
population with terribly high income. This plus low-interest rates on home loans and
financial incentives had increased their affordability levels considerably. This has given an
extra positive stimulus to demand to house by a particular section. Increasing costs have fed
expectations of continuous increments emboldening the builders to amass immense
amounts of land at inflated costs. it's because of this undeniable fact that despite this
decline in demand, builders are wary of reducing costs considerably. Reducing costs to
"equilibrium level" would mean immense losses for many of them.
2.8 Policy-Effect in Housing-Market

The effets haven't had a high rate of success. the most important reason for that being that
these instruments have seldom tried to `correct’ market failures. More often, these are
obligatory on the present market system and in making an attempt to swim against the tide
are caught in a frenzy. These ‘solutions’ have additionally introduced more distortions
within the market. The additive impact of assorted policy measures has been to worsen the
matter instead of solve it. We have a tendency to review few elite policy measures adopted
by the govt. high give cheap housing to public. a number of the instruments are directed to
scale back prize of housing as such whereas others have specifically aimed poor segment of
the population.
Table 8:Timeline of economic, and social environments of India since independence 1947
16
“Land Acquisition by public agencies and Land Banking and direct participation by the govt.
within the housing market by providing designed housing for various sections of the
population are the foremost physical instruments”. Legislative policies specifically
developed to create housing cheaper have enclosed Rent Management Act (RCA) and
concrete Land Ceiling and Regulation Act (ULCRA). Economic policies have primarily
centered on creating housing finance a lot of accessible and cheaper to the general people.
commercial enterprise incentives and directed credit by business banks are 2 major planks
of this policy.
Figure 11: Demand shift due to subsidy
Instead of all these precautions, urban housing continues to be out-of-reach for a large-
section of the population. The reason 0f cause for their limited sources needs to be
explored.
2.9 Limited Success and its reason

2.9.1 Planning of policies
Land Acquisition and Land Banking was adopted by the state with the foremost objective of
creating land offered within the market as and once needed at state-fixed costs. it had been
assumed that this may facilitate in stabilizing the worth of land within the market.
underneath this theme, town level development authority's (or Housing Boards at the state
level) would acquire giant chunks of land and unleash it as per `need’. In observe, provide
might rarely keep up with increasing demand for varied reasons, distinguished being: (i)
time taken to amass land beneath the Land Acquisition Act; (ii) noncompetitive
management on supply of land by the event authority starving the marketplace for land (iii)
slow pace of unleash of land by the authority. The impact was simply the other of meant
objective. Land costs might have increased abundant quicker than would are the case within
the absence of public sector’s effects within the land market.
17
Figure 12:Relation with capability approach and casual linkage of policy
Apart from the specific policy of creating land offered within the market at reasonable or
affordable costs, there are different town level interventions which had compact land costs.
Master plans, partitioning laws and building bye- laws are distinguished among these.
Master Plans are used by the govt. to project demand for land for various uses and assign
identical. Master Plans are long run plans and by their terribly nature cannot answer
dynamics of urban areas. By rigid allocation (through zoning) of land for various uses, they
produce additional issues than solve. Similarly, excessive norms about building codes cut
back the provision of housing and increase value. underneath Master Plans, the land has
commonly been allotted for the housing of the poor. In most cases, this land has been
usurped trouble users.
Figure 13: Casual Linkage among policy component
Land reservation for the Poor in new housing comes has been another live utilized by
several state governments. This policy additionally has not succeeded in providing land for
housing to the poor. New comers are principally (if not altogether cases) in peripheral areas.
it had been found (in case studies conducted in province and Madhya Pradesh) that plots of
land allotted by the private developers for the poor were the farthest from town space and
were poor topographically. the price of developing such land (which is to be borne by the
beneficiary) would be abundant over would be the case otherwise. These locations anyway
are inappropriate for the poor notwithstanding the land is created offered freed from value
(which isn't the case). These locations would become applicable for the poor solely when
(the completion of the project and) once the project is populous and demand for services
commonly provided by the poor (namely domestic servants, drivers etc.) emerges.
2.9.2 Legislative Policies

Legislative Policies are commonly thought of as zero-cost answer by the policymakers to
realize desired objectives. two such policies in regard to housing are the Rent management
18
act and also the Urban Land Ceiling and Regulation Act. underneath these, the burden of
subsidizing housing is shifted from the govt. to a section of the population. underneath the
Rent Management Act, the burden of subsidizing the tenant has put on the owner and
underneath ULCRA it's the homeowners of `surplus’ land who were to produce land at
extremely sponsored costs to the states for numerous functions as well as housing. Rent
management Acts are operational all told states of the country. The terms of residency
within the `controlled’ premises are ruled by the provisions of the acts. the most important
provisions of the RCA include:
a) rent revisions and control,

b) eviction restriction and,
c) landlord to maintain the property in “habitable conditions”.
Under the acts, the tenant has the statutory protection of the law and may be evicted solely
on grounds laid out in the Act. The long-run impact of this act has been shrinkage of supply
of rental housing within the market, inflated rents, quick deterioration of housing stock,
rational motive to investment in housing normally and rental housing specifically and
therefore the emergence of black cash and numerous alternative malpractices within the
rental housing market. The RCAs are solely part effective. The beneficiaries are largely
occupants of previous tenancies. The poor have rarely benefited. They neither had the time
nor money to travel to court just in case the provisions of the RCA weren't adhered to.
Figure 14: Vicious cycle of economic slowdown, slow urbanization, and declining housing affordability
19
Urban Land Ceiling and Regulation Act (the Act hereafter) was enacted in 1976 with the
target of edge speculation in land and providing a lot of evenhanded distribution of land.
The government-imposed ceiling toward land that might be command by individual
homeowners. Land in way over that was to be acquired by the govt. and assigned for given
functions. it had been assumed that this can loosen the oligopolistic management of
personal sector toward land in urban areas and can have healthful impact toward land
costs. little land was acquired and even less was assigned for housing. The Act resulted in
removing a massive portion of land from the market and created psychological science of
scarceness within the land market. Land costs spiraled when the act was brought into force.
The act was repealed when being operating for quite 23-years. Its repeal, however, is
unlikely to possess a lot of impact on downwards rigid costs.
2.9.3 Monetary and Fiscal Policies

Considering the importance of finance in rising the ATP for housing, the govt. of India had
used each financial and monetary policies to extend the flow of funds to housing as
conjointly to cut back its price. underneath the financial policy, business banks are directed
to lend a particular share of their advances for priority sector. Housing has been selected
mutually of the priority sectors. The government’s economic policy has been terribly
substantiating of housing sector since 1996. variety of business enterprise incentives to
encourage investment in housing are supply.
20
Chapter 3
3.1 Issues in the development of urban housing
3.1.1 Factors restricting private participation in urban AH development
Table 9: Factors restricting PPP and impacts
21
3.1.2 Reducing Cost
It is not reformed in law alone that is required; several other tasks, and on many fronts,
have also to be carried out. In fact, some of these issues have been detailed out in other
parts of this work. However, for the sake of completeness and continuity of reading, some
of them are reiterated here, and this accounts for the slight repetition and also some
veering away from the law as the theme of the work.
3.1.3 Cost of land

The twomain cost component of a flat or a house are: (1) land cost; and (2) construction
cost. It is the first that is more important. The issue of land cost for the low-cost housing was
addressed in sub-topic 10[Paras 363 to 371]. Continuing from there, since the reduction of
cost has to be achieved also for medium and high-end housing, the issue is furthered
addressed. Plainly speaking, the cost of the land is in the hands of the states; it depends
more on government policy. As has been witnessed in the past, by reason of faculty
planning, supply is restricted, which raises the price. The high cost of land then makes the
housing beyond the reach of the most.
Figure 15: Residential property rates during the quarter ending March 2016
22
Many of the state boards/ Development authorities focus more on selling land for profit,
which creates an imbalance. The huge surplus cash balances generated from such sales are
channeled into activity other than development of land in the suburbs and beyond, and
provision of civic infrastructure therein. Put simply, the ill-defined policy creates land
shortages and distortion in the land market, leading to price escalation. A paradigm shift in
approach is required, though it may mean taking cudgels with entrenched interests.
The state planning boards, town and country planning committee/ departmental, local
development authorities and municipality need duly adjust and tailor their planning process
– i.e., the preparation of the regional plan and other development plans on scientific lines –
to the concept of housing and development of unit hold as discussed here.
To enable supply of land, the development plan or the master plan should not be of small
areas. It will need to cover a much larger area so that the requirements of today; of 20
years, hence: and even of 50 years hence can be visualized, and the plan prepared
accordingly with the flexibility. The transport lines have, however, to be drawn for the entire
area. Based on this larger plans, a detailed plan can be prepared for the land required today,
and in terms, therefore, development of the land together with the provision of civic
infrastructure can take place. When that or the first sector gets substantially sold out, the
detailed plans for the next lot, and so on, for the sector where development takes place in
future. Some infrastructure can be provided in the stage and the complete infrastructure
can be provided only when the full development of a sector has taken place. This will enable
provision of infrastructure to be in many a way ‘self-financing’ – and also give a greater fillip
to the rural areas.
The promise of availability in future will prevent the land allocation of today from spiraling
into high prices. With satellite imagery giving 61 cm resolution, and also photo-grammetry,
the cost of planning for the future is only a small amount, but it saves a lot. The requisite
infrastructure can be provided as the areas (sectors) come under development. A stage-wise
perspective of the Development Plan is the only practical and viable approach. Proper
infrastructure with good transportation facilities, availability of civic infrastructure and
amenities, including education, health care, employment opportunities and transportation,
is necessary. The principle of public goods & services and public economics can then best
apply to yield the most out of the land.
If the land is acquired [under Act 1 of 1894] at a fair price, and then after such loading per
square meter as the cost of providing civic and regional infrastructure entails, it is made
available in sufficient quantity, the equilibrium will be maintained and the problem can be
solved. Acquisition of patches at the instance of a private developer is to be more readily
facilitated. Land laws need to provide for compulsory exchange so as to make land tracts
contiguous. Land Acquisition - points out what should be the fair compensation to the
landowner, and that to look at the value of developed land where the increase in value is
attributable to the civic infrastructure that is provided is wrong.
23
Figure 16: Land conversion procedure and its involvement with different government sectors
To explain as numbers, if the cost of acquisition as aforesaid is Rs.100 per SQ. meter
(notional), that land should be made available in such abundant supply that the market
price remains around 100 and does not - by reason of insufficient supply and operation of
market forces - rise to much beyond 100. Presently, the land is kept in short supply and,
therefore, as against a cost of 100 (notional), the Government itself transfers / sells this land
to the Developer-builders for Rs.400, i.e., at four times the cost. The Developer-builders, in
turn, take further advantage (of the shortage) and count the land cost component as 700 to
which they add the cost of construction, and it is at such price that they finally sell the flats.
Naturally, the flats cease to be affordable except by a minuscule few.
Alongside, for private land, change of land use norms as also similar issues require attention.
A hefty Development Tax (or fee) as a contribution to cover the cost of providing for the
civic infrastructure be levied. It can be a one-time levy payable in installments. The total will
ordinarily be less than one-third the escalation in value by reason of such infrastructure. See
also the discussion on [REVET in Topic 9 (Land Acquisition) at page21].
While land cost component has one connotation in metropolises or even established
townships, it has altogether a different connotation in the suburbs or the outskirts of small
towns and villages. Analyzing it, the land cost component (for each square meter of the
flat's area) as FAR/FSI can vary from Rs. 2,00,000 in a fashionable locality of a metropolis to
Rs. 20,000 in other areas of the metropolis, and Rs. 10,000 in the outskirts or Rs. 5,000 in
24
the suburbs. Even Tier-III or Tier-IV cities can have a land cost component in the region of
Rs. 3,000 to Rs. 30,000, depending on the location. New cities can be developed where the
land cost component for a flat could be between Rs. 3,000 to Rs. 10,000 per square meter.
To identify and earmark land (as part of the overall Development Plan) and make it available
in sufficient quantity is a must. The approach has to be on a larger plane. Adopting an
approach of 'Regional Planning' can help rural and urban-areas develops in a mutual
manner. So, done, the land price component will remain within the bounds of reasonable as
there will be lesser demand pressure on land in urban areas.
It will bear reiteration that to ensure AH for all segments, the policy of the State must be to
make - by appropriate Development Plans and land acquisition - sufficient (and more and
more) land avail-able for housing. So, done, it can be made available to the Developer-
builders, and through them, to the market at a price that is just above the cost and does not
- by reason of equilibrium forces of demand and supplyrise above that.
3.2 Architectural Design

After land costs, and before we proceed to the cost of construction, we must note the
difference a proper architectural design can make. While for the luxury sector, architectural
design has its own connotation, for the non-luxury sectors, it assumes importance in a
different form. Here, a short question that arises is:
What is the extent of living utility that is or can be derived by an occupier from a given
extent (sq. meters) of constructed area?
The existing housing in the country (in the non-luxury sector) is very poor in terms of
efficiency in most of its aspects. To illustrate, a 200-sq. meter living space of the older
design will churn out less actual utility to the one living in it than what a flat of 100 sq.
meters of modern design could.
Effective area utilization is especially important. Expertise and sophistication in design (or
good architecture) increase spatial efficiency, i.e., maximizes the usefulness of space or
makes small spaces feel great, which can solve many problems. If the required area of a flat
is reduced by design sophistication, naturally, the quantity (area) of land required as also
the cost of the construction shall get correspondingly reduced.
One of the primary goals of architecture is to strike the balance between structural integrity,
functional efficiency, and aesthetic beauty while keeping in view the affordability by the
potential occupier. It has to respect all the functional and ergonomic virtues. The trend
towards single households has also initiated a trend towards multi-functional rooms.
Compact living units can offer a high utilization level with all basic (and even some 'modern')
conveniences within just a small space.
The idea of effective efficiency is central to the locational theory and relates to the
organization and arrangement of space. It seeks to maximize utilization with a minimal
amount of square foot print. Quite like we determine output vis-a-vis cost input as
productivity in any economic activity / function, here we are concerned (for the flat's
productivity) with minimal 'space input' (sq. meters as a unit of measure) for the quantity of
benefits derived.
25
Functional efficiency refers to the ability of the property to best fulfil the functions it was
designed for; Physical efficiency refers to the quality of the structure & finishing; and
Economic efficiency refers to the ability of the development to command utility for a typical
purchaser, or should there need to let out, command a market-related rental, which will
generate a positive cash flow. Other known effective efficiencies play this out in more
interestingly, albeit still expected, ways: structural efficiency seeks to maximize stability with
minimal material usage.
Sustainable designing is an Eco-systematic approach that demands an understanding of the

results of our actions. it's all concerning better buildings —better for people who own and
occupy the building, and higher for the surroundings and future generations. It (sustainable
design) balances human wants (rather than human wants) with the carrying capability of the
natural and cultural environments. It minimizes environmental impacts.
A well-planned building provides savings in maintenance costs, operational costs, energy

efficiency and functional efficiency — just like the aerodynamic design of the modern motor
car gives more km to a liter of petrol, spatial designing provides more space for those
traveling inside it. The 'not up to the mark' for the design and construction may also be
referred to in terms of functional, physical, economic, or simply practical, obsolescence.
Therefore, an important step is to use architectural techniques to prepare and standardize
designs for apartments of various sizes that achieve the maximum utility out of a given unit
of area and thus reduce the extent of the land input required or the land cost component.
3.3 Reducing Construction cost

Having minimized (made the best use of) the square footage and therefore the cost of land
input — we proceed to construction. To examine the issue in practical terms, it needs to be
approached in two separate parts: (1) the cost of making the basic superstructure; and (2)
the finishing costs for the flat. The difference between these two must be recognized, for
while the former has limited scope for reduction, with the latter (finishing costs), there is an
extremely wide range where considerations of individual pocket, taste, and value for money
hold the key.
To reduce the costs, there is a need for innovative techniques of building construction. We
need to increase research and development on all aspects of building and construction
industry with a view to achieving economy, functional efficiency, productivity in
construction and environment preservation. We have to develop lower cost designs and
specifications and make an effort to use alternative building material.
Mechanized construction saves on labor as also on interest liability by reason of reduced

construction time. Technological innovation in terms of mechanizing construction together
with optimization will reduce even more costs. Changes can be made in the choice of
materials, as cheaper options, without compromising on the quality, safety or even appeal
of the finished product. An approach as this can help bring down costs of construction,
which, in turn, would mean a lower price for buyers.
To achieve this, the State should offer bigger stress on analysis & Development, to
come back up with innovative, environment-friendly and efficient technologies. It should
develop and promote standards in building parts, materials and construction strategies. the
26
trouble at the transfer of technologies and materials from science lab to field and
standardization is termed for. there's the Central Building analysis Institute (at Roorkee,
Uttara Khand), that has been unconditional with the responsibility of generating, cultivating
and promoting building science and technology. It assists the building construction and
artifact industries find timely, acceptable and economical solutions to the issues of
materials, rural and concrete housing, energy conservation, efficiency, hearth hazards,
structural and foundation issues, and disaster mitigation.
It may, however, be noted that as compared to State-run Research Institutes, it is

innovation in the private sector that is the mother of many an invention. It will be more
productive and help develop better results at lower costs. But that can only happen when
there is a huge demand for the product and the resultant competition 'drives' such R & D.
The process of transferring an innovation from the analysis and development stage to the
marketplace involves a large sort of factors. Studies have shown that the most 'push' comes
from the market competition —pure 'technology pull' innovation being terribly rare. to
create the merchandise competitive, would like to contemplate what folks need, what
they'll afford, and at constant time be price for cash. This demand adopting a user-centered
style approach within the early stages of analysis & development.
The role of the non-public sector in arising with innovations in design, construction,
operation, maintenance, fashionable mechanized construction techniques that facilitate
scale back value, and management skills should be recognized. the larger challenge before
the govt. similarly as developer’s area unit a way to run off of typical construction practices
and build homes that value less not as a result of they're smaller in size however as a result
of they're designed to price less.
3.4 Achieving efficiency and economics of scale

After controlling the land cost and reducing the construction costs, there is still room for
achieving more reduction — by: (1) standardization; and (2) economies of scale. Let us
examine this aspect, though it carries an overlap with that already discussed.
First (and land costs apart) as compared to an individual house on a, say, 100 sq. meters’
plot, an equivalent flat in a multi-unit building on a 10-hectare plus plot will cost 60% less.
The figure of '60' may appear astounding and therefore needs to be explained. When an
individual goes to purchase building material or avail a contractor's services, he is ripped off
at every stage. Thus, '30%' is the prevention of that ripping off. The next 30 is economies of
scale, which makes it 60% less.
Further, presently, a fair amount of the multi-floor construction is carried out on plots
ranging from 50 sq. meters to 500 sq. meters, or more, but is not efficient. As compared to
stand-alone structures or independent houses, a larger group housing complex is less
expensive both to construct and maintain. A number of facilities, conveniences, and
essential services for the residents can be made available within the complex. Entry of
outsiders can be controlled, and law & order - and safety - within the complex can be better
maintained.
27
In our endeavor at cost reduction, standardizing is essential. Further, using pre-fabricated
components reduces wastage, maintains quality & finish, and enables lower total costs with
faster delivery. Standardizing unit and room sizes could help reduce wastage. Another
example would be optimizing electrical circuit design within the units, standardizing the
fittings & fixtures, and quality marking of building materials. This way alone it is possible to
save 20-25% costs.
If large quantities of components are made to standardized specifications and sizes, sheer
volumes will itself spur competition to develop new techniques and provide the best at the
least cost. A number of inputs and components can then be manufactured and supplied at
still lower costs. The fittings & fixtures, equipment, household appliances, furniture and
other amenities (even at the middle or high end), when purchased in bulk, could mean
substantial discounts. So, finalized, the construction input can achieve efficiencies of both
design and economies of scale.
The difference between the cost of the superstructure and the cost of finishing is not to be
ignored. While the basics are essential, the upscale quality and pricing extend over a wide
area. Finishing (which includes basic fittings & fixtures) varies greatly and could mean 1,000
per SQ. the meter on the absolute underside to 20,000 per SQ. meter (or more) on the
upper. The flooring can be of various types, from the basic cement or sandstone to marble.
For the doors, windows, bathroom fittings, electrical fittings, etc. the range is simply wide.
The question is of finding and using the more affordable and the 'fit' range.
In the discussion, here, the referring to the basic finishing or some-thing more, though the
same principles will also apply to luxury finishing. Further, the costs and saving addressed
are from the point of view of professional builders who would be able to turn out the same
thing at still lower costs, which savings can be passed on to the purchaser.
Examining from the point of view of present wastage and the possible efficiencies, proper
development of, for example, a million square meters of floor area - say, 7,000 residential
flats along with support infrastruc-ture41 - carried out scientifically will mean a higher
quality of development at a lesser cost to the ultimate owner. And, if it is done on a nation-
wide scale, the savings would exceed 30%.
Where land cost component is not an issue, and as compared to multistoried structures, a
design of ground plus three floors saves on structural, fire-fighting and elevator costs.
Opting for semi-stilted basement parking can be a saving. Here, the cost of making the basic
structure is around Rs. 6,500 per SQ. meter (of constructed area), which on bulk
construction could be reduced to Rs. 5,000 per SQ. meter. With the former (multistoried),
the cost per sq. the meter of making the RCC shell is around Rs. 10,000, which on bulk
construction could be reduced to Rs. 9,250.
Housing colony design plans - with residential flats of varying sizes and finishing quality
levels together with basic civic amenities such as playschool, primary school, local shopping
Centrefor 10-hectare plus plot sizes are already in circulation, but these needs to be further
developed, standardized and made available in public domain. A properly designed housing
complex on a ten-hectare plus plot is more efficient in terms of: (1) land utilization; (2)
construction costs; (3) living utility per square meter; (4) energy consumption; (5)
28
maintenance costs; (6) environmental loading; and (7) safety & security. A housing complex
of a size less than that loses out on the efficiencies.
Availability of land at lower cost, scientific regional and zonal plans, standard construction
designs and specifications as also inputs /raw material conforming to those specifications,
when produced on a mass scale, could mean substantial cost reductions, and make housing
affordable. Stated simply, economies of scale would be achieved. Together with attention
towards land costs, it will bring proper housing within the reach of many.
3.5 The Government as a facilitator and enabler

Finally, there is the role of the govt. as a "facilitator" and an "enabler", both of which come
in two forms: (1) law; and (2) policy. These are the two main tools. Each of them is heavily
influenced by the discipline of 'Public Economics', which, as distinguished from Economics as
generally understood, is the study of economic issues concerning the functioning of the
Government and its policies, public finance, distributional effects of taxation and
government expenditure, and the resultant utility for the Rupee spent. It includes the
application of modern economic theory and methods of quantitative analysis for the
fulfillment of the needs of each sector while taking into account the cascading and long-
term multiplier effects of Government expenditure. Emphasis is on practicality rather than
ideology with an outcome-based approach defining the focus.
The aim is to strike a balance between the free market forces (as determinants of
equilibrium in the economy) so as to maximize wealth creation and welfare economics - as
the government's endeavor for a balanced distribution of welfare and growth opportunity
to every citizen. It is also to be remembered that it is only the private sector that can deliver
the required efficiencies, but it too needs laws and systems to support. An ingenious
application of these two tools could work wonders and it will not be long before we see a
completely changed landscape.
It is not that the Government has not taken any steps. Reference may be made here to the
National Urban Housing and Habitat Policy 2007, which makes an endeavor in that
direction. To bridge the rural-urban divide and achieve balanced socio-economic
development by providing physical and social infrastructure, market connectivity,
educational & training institutions, etc. in rural areas, so as to further their growth potential,
the Government (Ministry of Rural Development) in 2003-04 came up with a scheme for
Urban Amenities in Rural Areas (PURA). While schemes as these are well meaning, it needs a
statutory framework that enables Unit-hold development of real estate, and for every
sector from the metropolis Centre to the rural hinterland.
Also as a support to housing, there is the National Building Construction Corporation

(NBCC), incorporated in 1960, and there is also the Housing and Urban Development
Corporation (HUDCO), incorporated in 1970. These are fully owned enterprises of the
Government of India, formed with the objective of implementing construction and housing
schemes. While bodies as these are receiving huge Government allocation of funds and
other facilities and have been doing their task, how successful they have been being another
matter.
29
Adverting, once again, to the primary issues, the land cost component (as cost per square
meter of the flat) depends more on Government policy than on market rates.46 Funds
raised through the sale of land transactions by State Boards / local Development Authorities
must be ring-fenced, with a outlined proportion re-deployed only for: (1) providing civic
infrastructure; (2) AH; or (3) transportation corridors to the suburbs so that new mini-cities
can come up.
Provision for schools, health care, market and transport terminal is necessary. Road
connectivity is important and if railway connection is provided, it could make all the
difference. A scientific approach to land allocation and construction patterns can help
reduce the overall costs plus facilitate the availability of bank finance. In sum, a proper
policy assisted by tailored laws can make all the difference to the final cost.
In rural areas, for a township for a cluster of 5 -10 villages, the land cost component could
range between Rs. 150 to 250 per SQ. m. Such planned townships could mean a basic land
cost of Rs.100 per square meter plus infrastructure development cost contribution of Rs.
250 per square meter, though where land is inexpensive and the infrastructure is only
rudimentary (more with a provision for the future), it could be much lower.
The ideal will be new planned townships of which residential complexes of varying levels are
an integral part. Inasmuch as funds for the entire civic and other infrastructure may not be
readily available, what we can do is to make plans suitable for tomorrow, provide the basics
today, and in future (when the flat owners contribute money as development tax) provide
the remaining civic infrastructure within that township.
For the rural housing sector where private players do not find it lucrative, it is necessary for
the Government to ensure the induction of science and technology inputs on a continuous
basis. Dissemination of information (even training) on cost-effective and environment-
friendly technologies, materials, methods, etc. as also skill upgradation for rural housing can
be carried out by making available DVDs.
A set of modern and scientific Building Codes as suited to our country and duly tailored to
the various regions has to be developed and enforced as law. There also need to be
developed and put in place national 'umbrella standards', which can then be fine-tuned for
regional variations.
"To promote sustainable development of habitat in the country", the Government will need
to create a supportive environment. A Central Body (on technical issues), which receives
public input on a website and carries out research on cost reduction and design efficiencies
for housing, will be required.
Controlling the land costs, enabling smaller 'sized' flats to deliver more in terms of utility
and reduced construction costs, will mean substantial lowering of costs as compared to
today - more than 50 % in actual terms. This together with bank finance will bring housing
within the reach of much more. Whichever way we may look at it, alongside policy, it is the
right laws & rules and support systems - as the 'facilitator' and 'enabler' - that can bring
housing within the reach of the bulk of the citizens.
30
3.6 Tribunal for debt recovery and resolution of another dispute
As with any type of transaction, here also, a component of disputes will arise. However,
before we proceed to adjudication, the effort must be to reduce the room for accrual of
such disputes. Proper documentation as to title to the land (and the flat), the mortgage and
the respective rights of the parties as discussed earlier is one major field, where
improvement will reduce the incidence of litigation.
Attention will also be required towards accounting systems where computerization can
help. The jugglery of accounting, which a typical flat Buyer / borrower does not understand,
should be open to scrutiny by the. authorities to prevent 'over calculation' of the equated
monthly installment (EMI). Presently, some of the lenders avoid issuing, at the end of the
year, a statement of account, which gives the necessary information in a manner easily
understood by the common man.
A 'Form' for the issue of the statement of account with full details of payments received,
amounts debited, interest charged, rate applied, balance due, details of the property
mortgaged, and other information, can be prescribed. The computer enables all information
to be contained in a single A4-sized page at negligible cost. The statement will also contain
details of the mortgaged property; the balance outstanding; the persons liable personally;
and also, the details of any bank / institution holding mortgagee rights under securitization.
A statement on these lines prepared as of the close of 31' March every year is imperative.
Dispatch of this printout by the 10th of April each year be made obligatory for every
financier / bank with further obligation on the borrower that unless it is signed and
returned, or discrepancies pointed out, on or before the 10th of June, a charge @ 2% per
annum on the amount of the debit balance in the account can be lawfully levied every
month till it is so confirmed.
Any objection should be answered by giving reasons. There may be a debit to the account to
cover the cost of entertaining and responding to baseless objections. In the same strain, a
wrong debit or miss-information or insufficient information should call for a penalty upon
the bank / financier. Further, a dispute as to the 'owning' ought to be adjudicated before the
(proposed) Tribunal without recalling the home loan.
Reiteration here is not necessary except that with home finance, for the default period,
penal interest (a higher rate of interest) be made lawful and recoverable. It removes the
incentive and prevents default. Further, it enables a temporary default to be paid for and
the account regularized, and not allowed to drift into one which turns into litigation.
The problems will be many, and wide and varied. Hence, there has to be an ongoing effort
at identifying areas that give rise to problems, receiving suggestions, processing them and
then putting in place systems that give rise to the least quantum of disputes and facilitate
quicker resolution of those that still do. Before we proceed to courts and tribunals, a more
important issue - the need for speedy adjudication and recoverymay be addressed.
For the defaults that do occur, recovery systems that enable quick recovery, including
dispute resolution systems, need to be provided. Court delays in sale and recovery drive up
the costs, which ultimately tell upon the interest rate and inadequacy of the security as also
31
of the Banks' reluctance to advance the loan. Proper laws and systems in this regard will
mean a quick recovery of the value of the property, which will benefit one and all.
As the figures in the table on the right would depict, it is simply a case of court delays and
related difficulties making it imperative for a higher down payment, before the HF Bank is
willing to finance the purchase. It may, however, be clarified that, at present, the misuse of
post-dated cheques as security enables the grant of a loan to select borrowers with lesser
down payment than that stated in this table.
Time between default and Down money
actual recovery
Three months 25%
Six months 30%
One year 35%
Three years 50%
Table 10: Time between default and actual recovery by loan granter
The effect of court delays is not only on the extent of down payment required but also on
interest rates. This is explained by the table below, which assumes the basic rate (cost of
money) to the bank as 7%.
Time between default and Down money
actual recovery
Three months 7.75%
Six months 8.00%
One year 8.50%
Three years 10.00%
Table 11: Time between default and actual recovery by banks
The reason is that the losses incurred by the Bank — in non-recovery, or in delayed recovery
without full interest, or in `settling' with defaulters for less (and with benefit from delays
operating as an incentive) — result in a 2% increase in general interest rates. This (2% rise)
could make all the difference to the success of housing or otherwise. It is simply a case of
honest borrowers having to pay higher rates for the shortcomings of the adjudicating and
recovery systems in dealing with the defaulters and the not so honest. [See Topic 2 (Paras
34.4 at pp177) of Chapter 4]. Further, as noted earlier, unless there is as peedy recovery and
with surety, the bulk of the aspirants will not be acceptable as borrowers to the bank.
Under the existing laws and procedures for recovery of a mortgage loan, it takes a long time
to recover the money, and the process is inefficient. At the same time, using post-dated
cheques is wrong.
On the lines of the Securitization Act, the Bank can have a right of possession with an 'x'
number of defaults taking place. The system is the same as with motor car financing. If there
is a default, notice is issued to the defaulter, requiring him to pay up (with penalty) within a
certain time, with a caution that if he still fails to do so, the house could be repossessed and
put up for sale. [See Paras page 352]. The proposed statute can thus, theoretically, enable
the lender-bank (insurer, reinsurer or any assignee) to itself take possession with the aid of
the district police.
32
Here, however, one factor may be noted, that with housing, instead of enabling the bank,
insurer or re-insurer to itself recover possession, it may be more practical to route it
through a judicial tribunal. To protect the mortgage and keep the interest rates low, it is
essential that there be two more provisions: (1) each one of those who occupy the flat after
the notice is served on the flat will, in addition to the borrower, also become personally
liable to pay profits; and (2) any damage which is caused to the flat and is not compensated
for forthwith ought to be defined as an offence. So, should the non-payment of bills for the
utility services being provided to the flat or the property tax dues.
Procedures for sale will need to be provided where a greater say for the flat owner
(mortgagor) in finding/bringing a purchaser must be ensured. Law also needs to enjoin
cooperation with the HF Bank in the process on the UHE and the RWA, by ensuring lesser of
services to that flat and further, assisting in repossession and thereafter sale of the
property. The HF Bank as mortgagee shall (upon repossession) also have a right to lease as,
at times, grant of a lease is more beneficial than a distress sale.
The properties so re-possessed may be quite a few in number and this will also require a
system to ensure that there is no distress sale, but a sale at the best price, for any sale at
less than the fair market price is being unjust to the borrower. A proper set-up for that in
each district and also a Body that keeps a watch on the rise of abuse/malpractices is called
for.
The reluctance of the courts in not dispossessing a person from his home is misplaced
because while it operates as sympathy to one, it has its effect on raising general interest
rates and thereby denying housing to thousands more. Further, of the 100 claimants to
sympathy, only 2 or 3 are genuine and the rest are only seeking to profit by obstructing the
process. The law for repossession in the case of a default has to be stern and firm.
Injunctions and stays by courts against repossession by the bank (except in a clear case of
fraud and with appropriate safeguards), and absence of support by the local police for
immediate possession and sale does much more harm to the system than otherwise
thought of.
It may also be noted that for the lower cost homes, to foreclose and take possession is one
thing in law and theory, and quite another in actual practice. The local populace and local
politics make it difficult for the creditor to take possession and resell. Law & Order problems
arise. The inability to do so does great harm to the low-cost segment. The laws, the Tribunal
/ Court, the District administration and the local police have to ensure that the Tribunal /
Court's orders to repossess are complied with, without any delay. Laws and systems on this
score have to be given the necessary teeth. It also needs a public education that obstructing
possession works towards denial of housing to this sector.
Once again, the delay will manifest itself as an increased differential between the value /
usufruct of the money and the rate at which home loans can be advanced. Unless we keep
this recovery period52 minimal, we cannot keep the rate of interest for advancing home
loans just 1.5% above that paid by Banks as interest upon Fixed Deposits or 1% above the
cost of money, and this differential of 2% in the interest rate could affect the acceptability
of the concept of Unit-hold.
33
Laws, systems and procedures have to ensure that in such a transaction, the process of
foreclosure, sale, and recovery of value should not consume more than three months from
the final default and six months from the initial default. The new statute will also need to
enable the lender-bank (insurer, reinsurer or any assignee) to pursue the balance of the
debt against the individual borrower and the guarantors by (execution) proceedings before
the district Collectorate or the city civil court. Otherwise, the whole system or one may say,
housing in the country, is the loser.
In sum, before we proceed to judicial tribunals and procedures, it may be reiterated that
every effort at making laws and putting in place systems that ensure minimal room for
disputes and reduced accrual of litigation must be made. Further, the importance of speedy
adjudication and effective recovery is to be understood as a basic requirement, without
which the goal of housing cannot be achieved.
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Chapter 4
4.1 Promoting "Affordable Housing" by PPP as a tool
The public-private partnership model in Republic of India has attracted large private sector
investments in sectors like Roads and Highways, Railways, Power, and concrete
infrastructure. With investment in infrastructure expected to double to the $ 1 trillion
throughout the Twelfth 5 Year set up (2012-17), the PPP story in India’s infrastructure
development are going to be of major consequence. regarding half of the targeted
investment within the twelfth plan is to be achieved through non-public sector investment.
Still, there exists an enormous untapped potential for PPPs in real estate projects within the
mass housing area. Currently, the housing shortage within the country is to the tune of
regarding 6 crores units with the amount of annual investments within the housing sector
being about $ 110 to 120 billion at this time. Indian would need about eleven crores housing
units on a pan India basis by 2022 to attain the government’s vision of “housing for all”.
To meet this bold housing agenda, investments of over $ 2 trillion or regarding $ 250 to 260
billion annual investment till 2022 would be needed. concerning 85 to 90 % of the whole
investments required to satisfy the country’ housing agenda would move into developing
urban housing, wherever development prices area unit high thanks to factors like land costs,
construction value, fees, and taxes.
To make the PPP model productive within the mass housing section, the govt. would wish to
deal with many structural problems initial. These embraces liberalizing urban coming up
with method, providing access to adequate funding sources for private players, setting up
place a mechanism for fast clearances of licenses and approvals in order that price overruns
and project delays are often decreased.
The PPP framework are often efficiently accustomed address vital problems in development
like land availableness, approval delays, funding, and affordability by the poor. Among a lot
of obvious blessings of the PPP model in AH are:
Easier land acquisition and consolidation – it's calculable that to satisfy the requirements of
urban housing, about 1.7 to 2.0 lakh hectare of land would be needed till 2022. speeded up
and easier land acquisition, created potential by the general public sector, may change are
managing in project lifecycle and project prices. The central and state governments ought to
give the land non-heritable, at competitive costs to the personal sector, that is usually
higher in term of managing construction risks and project delivery. A deep analysis of those
PPP policies in housing saying that a PPP policy ought to aim at aggregating land for
development, whereas the non-public sector ought to target managing operation risks
(construction and finance). Land cost, that is anyplace between 20 to 60 % of total project
value (depending on project location), and lack formal financing channels for land
acquisition (both debt and foreign equity), are major bottlenecks limiting overall
development within the country.
a) Faster regulative approvals – problems concerning project implementation,

observation and dispute resolution are among the key considerations of the
35
developers. PPP mechanism will facilitate guarantee timely clearances of restrictive
approvals, which might scale back the risk of value and schedule overruns.
b) Improved funding — A joint pool of personal and public funds is also more practical
and economical in funding housing comes. Further, a PPP project with government
guarantee might facilitate secure loaning from institutional lenders at a lower price.
c) Improved affordability – With some relief on taxation and development fees, and tie-
up with banking establishments, the affordability of homes by EWS/LIG sections may
be improved.
d) For instance, to encourage PPP in AH house, Rajasthan has drastically reduced the
taxation within the case of EWS or LIG houses from 8% to mere Rs.10 within the case
of EWS and Rs.25 within the case of LIGH. As a result, so far, over 75,000 homes
(60% of budgeted target) for EWS or LIG groups are delivered through PPP in
locations like world town, Neemrana, greater Bhiwadi and New Jaipur.
Figure 17: Push-pull Factors for Entry of private players in "Affordable Housing"
States like Haryana and Tamil-nadu have created smart use of transferable development
rights and a liberalized FSI approach to encourage PPP within the AH sector. In fact, Tamil
Nadu offers 50 % further FSI for comes aiming EWS in Chennai, Metropolitan area, and 30 %
additional FSI for projects targeting MIG. Haryana includes a proposal to extend the density
norms from 300 people/ acres to 900 people/ acres, permitting developers to extend the
most range of units per acre from 60 to 180. Cities like Delhi and Ahmedabad have written
administrative division Development Schemes or “Land Pooling Policy” (a form of PPP
models) to encourage AH developments through PPP route.
36
4.2 Role of PPP in “Affordable Housing”
4.2.1 Land Availability & Cost
4.2.2 Construction & other Costs
37
4.2.3 Connectivity & Infrastructure
4.2.4 Credit Delivery & Risk
4.2.5 Others
38
Chapter 5
5.1 Strategies for “Affordable Housing” using PPP
The non-public play to AH in Republic of India Encouraging private sector participation in
urban AH development might need a coordinated effort from central and state
governments. A key role of the central govt. within the “Housing for all by 2022” vision
would be that of an assistant by making some enabling surroundings through:
a) Introducing statutory and regulative reforms in land acquisition, and a true estate
regulator, and review archaic laws governing the real estate sector.
b) Streamlining clearances and approval procedures needed by central government
agencies like the Ministry of surroundings and Forest, and also the Ministry of Civil
Aviation.
c) Channelizing higher and long-run investments within the sector by providing
necessary tax and non-tax incentives.
The execution responsibility would lie with states as in keeping with the Indian constitution,
housing, and urban development could be a state responsibility. States ought to take into
account the subsequent suggestions to expedite urban AH development:
a) Decentralize decision-making by giving power to ULBs.
b) Streamline the approval method by introducing a single-window clearance
mechanism.
c) Develop PPP framework to encourage non-public participation.
d) Rationalize numerous indirect taxes levied on housing.
Some attainable measures round the following key themes is also enlarged by the
governments (either Central and state) to more encourage private sector participation and
expedite affordable development.
Figure 18:Conceptual Strategies
39
5.2 Strategic initiative for further impetus
5.2.1 Granting infrastructure status of “affordable housing sector”
Housing development involves enterprise massive scale urban infrastructure
development comes. It involves buying of land and developing it for the aim of
construction of homes, multi-storied buildings, and also the creation of physical
and social infrastructure. Hence, development has dramatic similarities to the
infrastructure Area.
Granting infrastructure standing to the housing area, particularly AH, may assist
in gap certain additional funding avenues additionally to taxation advantages
obtainable to the infrastructure sector. This move could facilitate the sector
attract funds from insurance corporations, who are mandated to take a position
15 % of their funds in social and infrastructure sectors (as per the Insurance
regulative and Development Authority regulations). it should take into account
qualifying AH comes to boost funds through tax-exempt infrastructure bonds.
5.2.2 Nodal agency formation for coordinating various stakeholders

The central government may explore forming a nodal agency below the Ministry of Housing
and concrete poorness Alleviation to facilitate agency development of AH projects. This
nodal agency might be a coordinating agency amongst the non-public sector, consumers,
loaning establishments, investors, numerous housing regulative agencies and infrastructure
sector ministries, and state governments and ULBs.
This special nodal agency may act as a help in streamlining approval procedures for housing,
formulating PPP policy, and coordinating the efforts of various ministries for large-scale
housing comes. It may conjointly assist in directive funds towards the AH sector by
coordinative the trouble the of the National Housing Bank (NHB), Housing and urban
Development Corporation (HUDCO), banking establishments, housing finance corporations,
Foreign Direct Investments (FDI) and External Commercial Borrowings (ECB). It might be
more accountable for distinctive the accessible land assets with central and state
governments, ULBs and public sector enterprises, that are appropriate for developing AH.
5.3 Make strategic investments
5.3.1 Promoting the PPP framework efficiently to address major problems
PPP projects will play a very important role in bridging the gap between the housing would
like and provide as they will be instrumental in attracting non-public capital for financially
viable AH projects. The PPP framework may be effectively accustomed address some
problems in development like land accessibility, approval delays, funding, and affordability
by the poor.
40
Merits of PPP model in “Affordable housing”:
a) Land acquisition and consolidation – As per our estimate, urban housing

requirement would need regarding 1.7 to 2.0 lakh hectare of land to fulfill the
housing need till 2022 (refer annexure 2 for details). accelerated and easier land
acquisition, created potential by the general public sector, might modify are
reduction in project lifecycle and project prices.
b) Regulatory approvals – PPP mechanism will facilitate guarantee timely clearances of

regulative approvals, which may scale back the chance of price and schedule
overruns.
c) Improved finance — A joint pool of private and public funds could also be more
practical and economical in finance housing projects. Further, a PPP project with
government guarantee could facilitate secure loaning from institutional lenders at a
lower-cost.
d) Improved affordability – With some relief on taxation and development fees, and tie-
up with banking establishments, the affordability of homes by EWS/LIG sections
might be improved.
For instance, the PPP model within the housing sector introduced by the Rajasthan
Government has resulted within the large-scale development of affordable homes. several
different states and city development authorities like Gujarat, Old Delhi and Vijayawada
have written township Development Schemes or “Land Pooling Policy”. A deep analysis of
those PPP policies in housing reveals that a PPP policy ought to aim at aggregating land for
development, whereas the non-public sector ought to target managing operation risks. Land
cost, that is anyplace between 20 to 60 % of total project price and lack formal funding
channels for land acquisition are major bottle-necks proscribing overall development within
the country.
Figure 19: Growth and investment in real estate sector through PPP
41
5.3.2 Channelizing long-run finance in “Urban housing”
Annual growth in housing investments has slowed considerably within the last few years. to
draw in higher investments, the govt. may think about increasing institutional loaning to the
sector, introduce long-run housing bonds to draw in households and personal savings, and
strengthen domestic equity and debt markets. Further, the govt. may think about permitting
funding of land parcels by either foreign investors or through institutional loaning. the govt.
may think about increasing fund support to the AH. At present, each central and state
governments combined investments are within the vary of $ 5 to 6 billion annually whereas
the sector contribution is considerably high. The taxes on property and total capital dealings
alone amounted to $ 16 billion in FY-14.
5.4 Simplify structural and procedural frameworks

5.4.1 Decentralize decision-making and enabling ULBs
A delegation of power to ULBs may facilitate deconcentrate decision-making sanctioning
introduction of reforms at the native level. this might facilitate expedite decision-making
and scale back prolonged procedures of introducing reforms. However, despite 74th
amendment within the Constitution of Republic of India, guiding states to delegate powers
to ULBs, many states haven't taken the mandatory steps. A push to decentralise decision-
making is needed from central government which may be done by either persuasion or
providing incentives to willing states. These measures may be done by using numerous
housing and urban infrastructure programs like Rajeev Awas Yojna (RAY); Indira Awas Yojna
(IAY) and national leader National urban renewal Mission (JNNURM).
5.4.2 Ease the approval process by making “single window clearance”

The current approval mechanism in many states may be a complicated method, as on a
mean a developer needs 30 to 40 completely different approvals from central; state; and
ULBs. Further, multiple factors increase the present complicated method resulting in
uncertainties and delay in building approvals. it's calculable that it takes concerning 2 to 3
years to get necessary approvals that increase development value by 20 to 30 %. The delay
is primarily because of factors like duplicity as a result of the overlapping regulative
jurisdiction of varied authorities, lack of institutional clarity that is receptive individual
interpretation, the involvement of multiple departments, weak allocation of responsibilities
and answerability, etc.
Table 12: Central and state level- laws, rules, and regulations making a longer approval process.
42
Figure 20: Multiple factors leading to uncertainties and delay in the approval process
Development of ‘One-stop-shop’ or ‘single window clearance’ system connecting regulative

authorities at the central, state, and ULB level, supported by a strong technology platform,
may facilitate scale back the complexities and delay in approvals. This single window
platform might be operated either by the state or ULBs (either the municipality or native
development authority). Development of technology-enabled single-window clearance has
conjointly been suggested by a committee on “Streamlining Approval Procedure for real
estate projects (SAPREP)” in January 2013. it's suggested that the central and state Govt.
implement the recommendations to expedite development of housing.
5.5 Introduce legal and regulatory reforms

5.5.1 Reframe “Building development norms”
India’s FAR or FSI norms are a lot of lower compared to international cities (refer the
subsequent table) leading to horizontal growth of cities, and so limiting the scarce urban
land within the cities. The density norms in India might not be adequate facilitate economic
development of EWS homes. there's a pressing ought to relook at the present development
norms, particularly from EWS housing perspective. Further, further development norms like
internal roads and parking zone can be relooked at, and if attainable, relaxed for EWS
housing to facilitate movement of accessible land parcels towards the event of exaggerated
EWS housing.
43
Table 13: FSI scenario analysis
5.5.2 Revision on “LARR Act 2013”

Un-availability of land, particularly in urban areas, may be a grave issue moving the event
of housing. With the clearance of the Land Acquisition and resettlement &
Rehabilitation Act, 2013 (LARR Act), the complexities within the acquisition of land have
additional enhanced. it's calculable that the acquisition of land underneath the new
technique wouldn't solely increase land acquisition price by two to four times (in urban
and rural region respectively), however it might take a minimum of 3 years to acquire
land. The LARR Act, 2013 is anticipated to own a significant impact on the event of large-
scale townships and AH projects. it's advised that some provisions of the LARR Act 2013
are cut to create it a tool to attain the expansion in infrastructure and housing.
Figure 21: Timeline for acquisition of land using the LARR Act, 2013
44
The Rajasthan government has recently written its land acquisition bill. The bill is a takeoff
version of the LARR Act 2013, and it's urged that the central government considers creating
relevant and applicable changes to stimulate not simply housing, however the general
infrastructure growth. a number of the most important variations within the planned
“Rajasthan land acquisition bill with the LARR Act 2013” are:
a) Marginally reduced upward ceiling of compensation for getting land in urban areas
however raised for semi-urban and rural areas. underneath the LARR Act, two to
four times the compensation (Land price and also the assets connected to land),
relying upon location (urban or rural), needs to be paid to the land homeowners.
b) Consent from land homeowners isn't needed for PPP comes. within the LARR Act,
consent from 70 % of the landowners is needed, which might be exempted in sure
vital projects to assist guarantee speedy execution.
c) Watering down of many Rehabilitation and resettlement (R&R) provisions.
d) Will not conduct Social Impact Assessment (SIA), that might save 1-2 years’ time in
land-acquisition.
e) Urgency clause has been maintained within the Rajasthan (further details awaited).
within the LARR Act, it absolutely was removed and an urgency clause are often used
given that the land is to be acquired for defense purpose, emergency arising out of
natural calamities, or the other emergency with the approval of the Parliament.
5.5.3 Promote rental housing

A mix of rental and possession housing is needed to deal with AH desires effectively. Rental
housing is vital for addressing the requirements of low-income residents within the context
of a speedy rise within the urban population. However, rent management policies aimed
toward protective tenants have had their consequences of deterring investments in rental
housing in India, inflicting the share of rental stock to decline from 55 % in 1961 to 28.5 % in
2011 that drove EWS or LIG households into slums. Further, the govt. housing programs
promoted possession housing and didn't explore making rental stock, a feasible initial
possibility for EWS or LIG households.
Figure 22: Decline in rental housing
45
According to the census 2011, the urban rental housing stock within the country stands at
28.5 % of the overall housing stock that is low compared to world standards. The magnitude
relation for India ought to be a lot of higher as fast urbanization is leading to migration of a
major variety of youth population with very little income to support house possession. a
replacement rental law that is balanced in favor of each the tenant and therefore the
landowner may be written by the central government. A balanced rental law might facilitate
with the event of a proper rental market in India, and to some extent improve occupancy of
the unoccupied homes calculable at concerning 2 crores. Further, the rental housing stock
ought to be classified as a commercial real estate to facilitate its listing on REITs. It may
facilitate channelize higher investments in rental properties expediting development.
Table 14: Percentage of social housing stock across globe
5.6 Empower the consumer for greater affordability

Empower EWS/LIG/MIG households with subsidies, lower loan interest rates, micro-
financing: The present annual income level of EWS (up to INR one lakh) and LIG households
(INR 1 to 2 lakh) might not be sufficient to ATP a house (EWS and LIG homes are usually
within the range of INR 5 to 7 lakhs and INR 15 to 20 lakhs respectively). the problem is
additional gathered as a result of low access to credit by these segments. consistent with
our estimates, an EWS social unit will afford a house cost accounting up to INR4 lakh and LIG
households will afford homes priced up to INR 8 lakh.
46
Table 15: Affordability gap minimization
It is, therefore, essential to bridge the gap between affordability for these households. this
may be achieved by a two-pronged strategy. initial of all, the govt. ought to work towards
reducing the price of development. Secondly, the govt. ought to try to plug the affordability
gap by empowering households to have a house. Some suggestions during this direction are:
Increase penetration of banking services: The access to credit by EWS/LIG households is

typically weak as a result of employment in informal sectors. Firstly, several of those
households typically don't have correct identity proof, address proof, and income proof
creating it troublesome to access credit. Secondly, several banking and housing finance
corporations are reluctant to lend to those households as a result of a perceived risk of
loaning to a section that has unsteady financial gain and better price of union. Lastly, low
monetary attainment of those households, particularly in matters of taking and repaying
loans from formal institutions increase risk. it's necessary that micro-housing finance
corporations are reinforced to allow the flow of credit to those households. Further, the
state governments, ULBs, banking establishments, and developers ought to work along to
teach and facilitate credit flow to those households.
Interest subsidy on “affordable housing loan”: The central government presently provides
interest grant of 1 per cent on INR1 lakh housing loan to LIG and EWS family borrowers. The
limit during this scheme is incredibly low and ineffective because the minimum value of an
EWS home is concerning INR5 lakh. it's urged that the loan quantity is expanded to a
minimum of INR5 lakh for EWS homes and INR10 lakh for LIG homes. A moratorium of
concerning three years in payment of Equated Monthly Instalments (EMI) can also be
thought-about to alleviate the EWS/LIG households from the burden of paying EMI and
house rent at the same time whereas the housing is under construction.
A key area of thought in AH can be a group of concessions associated with taxes and costs.
it's calculable that taxes and fees and prices of land charges account for concerning thirty to
thirty five percent of housing cost. Reducing this burden might change developers to supply
AH. many charges like external development charges, building arrange approval fees, land
conversion charges, stamp duty, price added taxes, service tax, tax advantages, etc. ought to
be reviewed and rationalized for AH development.
47
Table 16: Various tax paid in development of housing
5.7 Strengthen housing program delivery

Multilayered Program Management workplace (PMO) to drive the agenda for housing to
effectively manage the agenda for cheap housing, the govt may take into account
establishing a multilayered Program Management workplace (PMO) at the central level,
state level, and at the city or district level. whereas the central level PMO may drive, the
policy making and observation framework at a national level; the state level PMO may
coordinate housing initiatives inside the state authority and moving towards efficient
implementation of policies, and at last, the PMO at city or district level may facilitate resolve
the bottom level problems faced by AH projects.
Table 17: Program management office and its function
48
5.7.1 Enhance project delivery capabilities
Promoting preparation of effective Project Management techniques (by numerous
development agencies, PMOs) like project planning, project budgeting, risk management,
periodic-actionable and consistent project standing coverage, highlighting achievements
and bottlenecks visage within the implementation of housing comes, will facilitate scale
back the value and time overruns in housing projects. Effective Project management
techniques may conjointly facilitate effectively manage resources (labor, equipment, etc.)
sanctioning their deployment across multiple projects during a timely manner, contributive
to the success of the projects and therefore the housing mandate.
5.7.2 Bridge the human resource gap to deliver ‘housing for all by 2022’
vision
As per the KPMG-PMI study on project schedule and price overruns, it's that ninety-two
million resources would be needed within the housing industry by 2022. to assist deliver the
mandate of more than eleven crore homes, specialise in training would have to be
compelled to be spearheaded by the govt and private sector to bridge this gap.
Figure 23: Demand and supply of Human resources
5.7.3 Policy support for promoting mass housing construction technologies

Improved construction technology and methodologies will facilitate execute housing
projects a lot of with efficiency and in lesser time. Construction techniques like prefab and
modular construction and innovative construction materials will more facilitate execute
projects in lesser time and with reduced resources. additional impetus, however, would
need to be provided to push the utilization of those initiatives. Some due suggestions during
this direction are:
a) Offer subsidies and waive off import duty on special construction equipment’s,
technologies, and materials.
b) Provide incentives like waived off excise duty, price additional tax, etc. on prefab
construction components.
c) Promote active Research and development during this for the development and
promoting of newer, more practical technologies, materials, etc. domestically.
49
Chapter 6
6.1 Reforms and suggestion
Table 18: Reforms suggested
6.2 Conclusion
A range of coming up with and monetary mechanisms are available to help within the
provision of, and accessibility to, AH. planning mechanisms embrace mandatory needs like
betterment taxes, development contributions, and linkage fees, and inclusionary zoning;
voluntary tools like negotiated or voluntary designing agreements; and incentives like
versatile development standards, designing bonuses, fast-tracking and dispensations from
traditional planning laws. monetary mechanisms embrace monetary help, subsidies and tax
exemptions to developers and rent assistance to eligible low-income households.
Un-affordability of desired housing may be a drawback featured by an outsized section of

the population. The un-affordability of housing of minimally acceptable norms may be a
downside faced by the poor. However, a housing policy that addresses the housing
drawback of the poor in isolation has a lot of fewer possibilities of success than a policy that
takes an integrated view of the housing downside of all segment of the population. grant
policy for housing has to be viewed during this area.
50
The land has become the foremost valuable element of housing price in urban India. an
applicable land policy can have to be compelled to be an important part of the housing
policy. The second vital part may be Tenure. Focus of debate on housing policies should shift
from après occupation with ownership housing to different types of tenure appropriate for
various income, professional and age groups.
The role of noun- housing policies and methods additionally can't be unnoticed. These might
include transport policy, regional planning etc. during this context, it's necessary to require a
re-look at govt. existing commercial enterprise and financial policies, particularly those
directed towards housing.
Various programs to create cheap housing accessible to the poor, adopted by the Central
and State governments are smart indicators of relative success and failures in achieving
desired objectives. Incorporation of lessons learned from these programs within the new
programs would enhance the probabilities of success of the new programs.
A prime part of the availability of AH would be a additional economical functioning housing

market which might reply to changes in demand as quickly as potential and with the
smallest amount price. The easing of state regulation must be the primary step during this
direction. Improved quality of households by reducing dealings price of moving house (sale
or purchase or renting) are another. it's necessary that there are a multiple of choices out
there to match the distinct necessities of various classes of population and there's quality
between differing kinds and sizes of housing. it's not necessary to think about individuals or
households solely in terms of income categories and so conceive to offer (say) larger sized
homes for MIGs as compared to those for EWS or LIG. Non-availability of most well-liked
housing results in suboptimal (read wasteful) decisions. Thus, single males or females or
recently married couples (belonging to MIGs) could also be happy with studio flats or one-
and half room residences however be forced to `opt’ for 2 room houses. Similarly, previous
retired people might like better to live in some congenial surroundings of `retirement’ or
old-age homes instead of be forced to still stay in congested cities. This artificial increase in
demand (in the primary case) and freeze on supply (in the second case) leads to a synthetic
increase in costs. there's a necessity to think about making housing for special groups. this
may be a additional value effective housing resolution not just for these groups however
additionally for the society as a full.
6.3 Further research

The government’s key urban mission’s promise is a significant piece of creating an overall
social security net for the population. Development of 2-2.5 million houses a year is
required to realize this vision by 2022.This also presents a huge commercial opportunity for
the industry and the sector can trigger multiplier effect. The present landscape presents
execution risks to fulfill the ambitious targets which would require coherent policy
responses:
a) Regulatory and policy frameworks have to be synchronies to speed up the process of

land acquisition and resettlement. The Government must provide fair and consistent
land value data for rating, compensation and taxation purposes. This is a small but
crucial step before undertaking the long-term vision of building 100 SMART cities.
51
b) Clarify and organize institutional roles and responsibilities of key actors and cluster
policies to effectively channelize funds towards AH.
c) Single Window Clearance: Streamline approval process to ensure timely delivery of
projects.
d) Supply-side incentives to developers for housing specific to EWS and LIG population.
e) Creating an ecosystem for impact investing into the AH can help in delivering houses
at INR. 15-25 Lakh - opening the housing dream for slum dwellers.
f) Linking the employment and skill-development for EWS and LIG with housing
schemes can also improve access to credit.
Cities have a vital role to play in the realization of socio-economic goals of the country. In
the wake of massive housing shortage plaguing the country, it is imperative to take
immediate steps to foster sustainable habitat development for inclusive development.
Given the challenges, staring at a situation of unmanaged urban sprawl and diminishing
greens threatening the sustainability of Indian cities. Implementation of Geographic
Information System (GIS) can serve as an effective tool for mapping, spatial analysis,
modeling, design optimization and data management at the level of urban local bodies.
Establishment of single window clearance, easier land acquisition, rationalized direct and
indirect tax structure and other tax-based incentives for the real estate sector will enable
competitive pricing for the end-user. Granting ‘infrastructure’ status and the introduction of
innovative financing models are needed to bolster the role of private sector in developing
AH infrastructure. This will also lay the foundation for development of 100 new cities,
catering to the rising demand of migrant populations and economically weaker sections.
52
Annexure - 1
Policy imperatives to promote innovation along the value chain for housing
improving affordability, transparency, sustainability and growth: Discussion
Panellists
V Balasubramanian former Additional Chief Secretary, Government of Karnataka, and

currently Chairman, Centre for Policy and Practices.
P G Ganapathy, Senior Consultant and Advisor, the Indian Institute of Human Settlements
(Moderator).
Vikram Jain, Monitor Inclusive Markets, Monitor Deloitte.
S.V. Kamath, General Manager, Projects, Housing and Urban Development

Corporation(HUDCO), Bangalore.
Rajesh Krishnan, Founder, and CEO, Brick Eagle.
Pramod Kumar, Director, Value & Budget Housing Corporation Pvt. Ltd.
Ashok Lall, of Ashok B Lall Architects, New Delhi.
Srinath Mukherji, Management Consultant, Cofounder of India Shelter Finance Corporation.
The discussion centered around three critical points: land, finance, and urban
utilities/amenities.
V Balasubramanian
Rural housing
I was struck by a point made in the morning’s session, where according to the Directorate of
Census, 69 percent of India’s population is in rural areas and 31 percent in urban areas.
However, we seem to be concerned largely with urban housing affordability. Migration from
rural areas to urban areas is continuing in a slow manner, but because of population
increase even in rural areas at around 1.8 percent or 2percent, this percentage difference
will continue. A mention was made of the architect Laurie Baker in the morning’s session e
we would do well to look at his recommendations for rural housing. Rural housing and
affordable rural housing, in particular, is a very important area. We need to look into the
needs of 70 percent of the rural population.
The criticality of water supply
The second point I want to make is with reference to Bangalore, where it is said that a large
number of houses and apartments are vacant because there are no takers and that they
have largely been constructed for reasons of speculation. However, they’re not being
occupied could be for an entirely different reason e the lack of infrastructure, the most
important of which is water. Unlike other cities, Bangalore is situated on top of a rock with
no perennial river source. In Bangalore, the per capita per day availability of water is about
75-80 L, whereas the Government of India norm is 142 L per capita per day. This land was
53
considered to be the land of a thousand lakes by the East India Company when the British
first came. Now, these lakes have been contaminated with the sewage that is flowing into
them. And sewage water does not simply stand, it keeps percolating. There are around four
lakhs bore wells which pump out around 3.7 times more water than the rainwater recharge.
Therefore, the wells run the risk of drying up in a few years’ time. This is the reason behind
the water levels going down. The vacuum which is being created is filled up by the sewage
water percolating from these lakes. Around 60 percent of the water supply in Bangalore is
not potable; around 18 percent of the water supply in Bangalores affected by Escherichia
coli (E. coli). Awareness about these matters is low. These things must be considered before
increasing the housing capacity of Bangalore.
Planning of Greater Bangalore
There is still a lot of land in Bangalore under the government. The Burhan Bangalore
Mahanagara Palike (BBMP)covers about 772 sq km, the Bangalore Development Authority
(BDA) covers about 1300 sq km, while Bangalore urban district is about 2194 sq km. About
1,50,000 acres of government land is still available as the Bangalore Metropolitan Regional
Development Authority area. This land could be used to create a master plan for housing
and small industries in Bangalore. There are around 8000 tanks and lakes in this area and
since they are outside Bangalore, they have not been contaminated. They need to be
preserved, in which case housing in this area of Greater Bangalore of about 8000 sq. km can
be very well planned.
Vikram Jain
Monitor Inclusive Markets in the affordable housing Sector
Monitor Inclusive Markets has been working on loans for low-income housing to help
developers get into the affordable housing sector. When schemes with houses under Rs.
10lakhs came up, we found that customers in this segment were not getting housing
finance. We built business models and got a number of housing finance companies to start
in this segment. Today the key housing finance problem for customers probably is the high
pricing. We have worked with several governments and helped with affordable housing task
force recommendations. Our key strength is understanding the customer segment which
earns Rs. 15,000-25,000 per month, formal or informal income. What is the impact we are
trying to create? We are trying to help move our customer segment from cramped
conditions to a decent house. While the size of the house may not be much bigger, it is a
formal property with utilities. To differentiate our approach with what the government
focusses on, the government is looking at housing for people who are earning typically
under Rs. 16,000 per month. What we are talking about is the opportunity in which you can
include the 15,000-25,000 per month income group. Itis a slightly higher segment where the
private sector can be player and if this segment is not addressed, housing offered to the
poor people will be snapped up by the segments above because there is a big shortage even
there.
Evidence-based research on affordability: the supply end
We recently did a study against the background of the policy debate and the discussion
around affordable housing today. We found that while there was a lot of anecdotal
54
evidence, there were not many facts on the affordable housing scenario in India. So, our
perspective was to scan where low income was coming up in India and at what price point.
Our definition for affordable housing was housing less than 10 lakh rupees which can be
afforded with a mortgage from housing finance company for customers earning Rs. 15,000-
25,000. We found that about 30,500 units of low-income housing are coming up in India in
152 projects across 22 cities. (These figures pertain to supply in June2013.) While the supply
was encouraging it was still a drop in the ocean compared to the demand. The market
initially picked up in cities like Ahmedabad and Mumbai, where clusters were forming.
Projects in Ahmedabad such as Om Shanthi Nagar were hugely successful e 450 units,
9000application forms sold. Indore is another city where a lot of affordable housing, well
located, is coming up. We had conducted a similar study in May 2013 and the change
between the 2013 study and the recent one was that while the amount of housing has not
increased significantly, the number of projects has gone up. Initially, we found something
like 29 projects in India. Today there are132 projects. Some cities have over 20 projects
offering to house under Rs. 10 lakhs. The market is picking up and responding well which
means from the customer’s perspective, you have a choice not only of the location but also
of the developer.
Housing finance
Between 2012 and the present about eight or nine new housing finance companies have
come up and are serving low-income customers whether they have income proof or not. A
number of banks do not lend to this segment base because there is no formal
documentation of income. Most of these new housing finance companies have grown; their
portfolio is about Rs. 1000 crores in total, reasonably well spread across India, though
predominantly in western and central India. They have reasonably good finance level, good
loan portfolio. Their average ticket size is between Rs.5-10 lakhs. Their business is based
predominantly on low-income customers. Their non-performing assets (NPAs) are near zero,
as also their delayed payment. For the customer, thesis the opportunity to access formal
housing. The alternatives to rent housing and face poor living conditions and he does not
want to go back to such housing.
P G Ganapathy
To re-cap, the topic is policy imperatives to promote innovation along the value chain for
housing improving affordability, growth, sustainability, and governance. Two key points:
first, policy imperatives e is it all common from policy perspective? Second, to promote
innovation, how do we come up with innovative ideas to solve problems? I will highlight a
few questions important for debate and then direct them to our panelists. Is the problem
one of policy or is it one of governance/implementation of policy? The land is a big issue
especially with respect to affordable housing projects. We will explore the subject of
regulating land cost and making land more easily available to affordable housing projects.
We will also cover financing for Economically Weaker Sections (EWS), Low Income
Group(LIG)-A, LIG-B and lower than Rs 10,000 income group. What is the innovative idea
here? Is there any policy question? On product, itself, we should focus on methods to create
good, habitable houses for the poor. Are they sustainable in terms of meeting user
requirements? How innovative is product design and construction to make it more
affordable? How do we overcome the huge governance challenges particularly in land,
55
building plans, approvals.? How do we view rental housing? I think all of us would agree that
bulk of cost today is from land. I would like to hear from Pramod and Rajesh since both have
a developer background and they deal with these issues on a daily basis. Do you have any
suggestions on how to regulate land cost? How to make more reasonably cost effective land
available for affordable housing?
Pramod Kumar
Land availability and pricing
The biggest challenge we face in land acquisition is the title and that is because of lack of
proper land records overgeneration’s. We have depended on the village accountant to
testify that these are the owners of the land. There are situations where one year later,
suddenly someone claims his name did not figure in that list. I don’t know how this can be
regulated unless the government machinery maps land holdings. Some states have done it
and there is affair amount of progress compared to what there was 15 or 20years back.
Land registration is computerized now, but we still have a long way to go. Landowners today
have become quasi-developers because they want a share of the developer’s profit without
going through the risk and the pain of developing a project and delivering it. While buying
land in the periphery of urban territories of various cities, you are dealing with so-called
villagers who are fully aware of how this business done and therefore they are very clear
about the price of land. They compare their land to something located close to a railway
station, bus station or where transportation is available. Their land may not have the same
facilities yet their aspiration is joint development where the benchmarks a 40/60 sharing.
Now, if it is a 40/60 division, you should also be able to sell at a certain price. If I am selling
an apartment at Rs. 1500 or Rs. 2000 sq. ft., how can I give a 40/60 division? The math does
not add up. These are the challenges with no definite solution.
P G Ganapathy
Land banking and EWS housing
The Affordable Housing Task Force talks about earmarking and allotting 10-15 percent of
land in the master plan for affordable housing. There is this idea that government should
start banking land before a new area comes up for development and should release at
special rates for affordable housing projects. There is also the new policy about mandatory
15-20 percent for EWS housing and policy level interventions.
Pramod Kumar
Affordable housing policy in the states
The Government of Haryana, for example, has announced an affordable housing policy
based on the certain size of the apartment and they have fixed a fair selling price. The lower
end was Rs. 3000 sq. ft., going up to Rs. 4000 sq. ft. I don’t know how affordable these are
going to be. Already one hears that the prices have gone up but it’s a step in the right
direction. In Karnataka, for example, the Karnataka Industrial Areas Development Board
acquires land and then allows to industries. Similarly, if the government can step in and
arrive at clear guidelines as to what affordable housing should be and make land available
then yes, develop is the developer’s responsibility; the next thing is approval, which is a
56
different story. If these two things are taken care of then the onus is on developers to apply
ideas and deliver a truly affordable house to customers.
Rajesh Krishnan
Three critical factors
I agree with Pramod and it would be nice if our wish list came true. I think land is there in
abundance, we just have to knowhow to go after it. However, for affordable housing to
happen, three things need to come together. First is capital in real estate, second is ability to
deal with the local reality in India (land, approvals, sand mafias and so on) and third is
mindset for affordable housing, where low cost and high-volume production is the focus.
The disconnect is that frontline developers who have a local presence and the capital do not
have the mindset for affordable housing development. We have several modern developers
who have the capital but struggle to deal with local realities. The bulk of the activity is
coming from local developers, who are doing 20-50 units each but are unable to scale.
These are the people who have access to land at the right price. So, the important thing is to
connect these three things together.
V Balasubramanian
Some innovative initiatives
If the land is in abundance and it is available, then someone has to locate it and deal with it
appropriately. For example, about 12 years ago, during the regime of the Marxist
government in West Bengal, I had an opportunity to visit 20acres of land in Salt Lake City
located on the way to the airport e it was vacant land. The government wanted to develop
low-cost LIG housing but they found that they had to invest a lot of money. So they
approached Ambuja-Cements on a PPP model. The company was asked to develop the land
with 50 percent of the 20 acres to be given to LIGK. Gopalan, M. Venkataraman housing, 5
acres for the MIG (Middle Income Group) housing and the balance for HIG (High Income
Group) housing. In those days, the LIG was sold for Rs. 1 lakh and you made money from the
HIG. The landscaping was given to the eminent architect Mr. Doshi. The whole company was
managed by a joint board. The chairman was from the government, while the managing
director was from Ambuja-Cements and that worked very well. In Bangalore, in BBMP
related sites we have about 1800acres of BDA lands available, excluding the parks,
playgrounds, etc. These lands are classified as “other lands” and if they have not encroached
upon these lands are still available. One should identify these lands and then on a policy
basis it has to be taken up as a meaningful joint venture.
P G Ganapathy
Higher FSI as an incentive?
Professor Lall, one-way developers try to overcome this increasing land price is to try and
build to higher floor space index (FSI). Governments also talk about increasing FSI and
making land more affordable. From an architect’s perspective and a product design
perspective, what is your view on this approach towards high FSI to compensate for land
cost and building high rises for affordable construction?
57
Ashok Lall
Environmental sustainability and housing design
Housing design and housing in urban areas are subjects of research globally. Considering
environmental sustainability on one hand and social viability on the other, certain levels of
density is found to be more or less optimal. If you go beyond those densities, you have to
take recourse to very high technologies to make those housing systems work. Those are
affordable and also socially viable only in well-developed and richer societies. So, if you are
talking about affordable housing would say an FSI of 1, 1.2 is maximum. It gives you a good
density. There are lots of people willing to share that land at four stories high or maximum
five stories in a multi-store block since they would be close to the ground and have access to
open ground as a compensation for their small home. In this case, pumping water is not an
issue. You are not dependent on high quality for safety against earthquake, wind, and fire.
You can deploy decentralized methods for utilizing water, treating the waste and re-using it.
There is also sufficient open space and soft ground to facilitate water to percolate into the
ground. It also becomes cheaper to do it this way and it is robust as a system. As things
stand, 60-70 percent of the cost is related to land cost. Construction cost is much less, but if
you look at just construction cost, building four to five stories is optimal. The moment you
go to eight stories, it’s another 15percent, and so on proportionately. That’s an immense
cost, literally moving away from affordability. When you allow that high an FSI, you are
actually pushing up costs. It goes contrary to the idea of sharing the land cost. The clear
indication is high density, low rise.
P G Ganapathy
Affordable construction technology
Professor Lall, when you talk about improving affordability from a “planning and design”
and a “construction and technology” perspective, where are the opportunities to innovate?
Are there any policy constraints coming in the way of innovation, whether it is building bye-
laws, road widths, parking norms and so on? As a designer, have you felt any constraints
which could be altered by policy? What are your thoughts on improving affordability and
improving sustainability for affordable housing?
Ashok Lall
Innovative measures
From the policy standpoint, there is certainly something that has to be looked at very
carefully. All development authorities have building and development controls. One of the
development controls is what we call the set back from the street. It is a hangover from the
idea of a bungalow with a garden in the front never had it in the old cities. It seems to be a
fundamental belief of planners that the bigger the parcel of land the more space you should
leave between the building and the street. That actually takes away usable space from
community use. There is definitely a need to look at building regulations and finding
regulations to use the available land much more positively for community purposes and you
could extend it to other aspects of building control. We found that if you have long buildings
like row housing, three to four stories, with connecting passages then you could put a lift at
one corner and another at the other corner shared between fifty homes, instead of having a
58
staircase for every four houses or six houses which make lifts unaffordable. But the building
regulations specify a certain distance between buildings; they say you can’t connect the
buildings with a bridge. These regulations, completely against commonsense, come in the
way of innovation. There are lots of options for technological innovation, space innovation,
and ways of economizing while giving a lot of flexible space to the owner. When a developer
talks about thetechnology he speaks about buying a method of production of homes from
some company in Mexico, Thailand or somewhere else. But he never speaks about evolving
a method of construction that is inherently low capital investment and high return, one that
follows the principle of industrial production but can give greater efficiencies. We need such
innovation and we need to work out the incentivization required for that.
Question and answer session
Consolidation of land fragments
Audience Q: A problem arises when you have parcels of land that are fragmented e how do
you consolidate them? That is one of the constraints to well-planned development for high
density, low rise apartments.
Ashok Lall: There is some misconception about high density, low rise. If you look at the
Georgian houses in England, which are four to five stories high, with a basement and even
an attic, they are actually only 20-25 feet wide, independently built, exhibiting efficient use
of land. So it’s actually not about land allocation, it’s about urban homes, it’s about urban
grain. If you look at the typologies of housing form that will get you the densities, I am in
favor of making the smaller man the entrepreneur. Why become dependent on the larger
man here? I think there is also a contradiction. There is an assumption that the large scaling
up and larger numbers of production will bring down unit cost. That is done by the larger
corporation whose inherent costs are very high. An analysis of urban housing typologies
enables small entrepreneurs to move into the affordable housing space more effectively.
Land finance
P G Ganapathy
We will now move from land to financing. The question is with respect to improving
affordability and the policy enabling it. From a micro-financing perspective, how much
financing is actually happening? Is there some solution for the household income of Rs.
15,000 and below? The Affordable Housing Task Force visualizes several possible incentives
to improve financing in this space. What are major issues you face in financing? Mention
two or three policy steps that will improve financing and reduce cost.
Srinath Mukherji
Before I answer that question, I raise a question to the audience. Suppose this gathering had
happened in 1998, what would have been the theme of this discussion about real estate?
How to keep prices up! Prices were falling at that time in India, including Bangalore. That is
the nature of the land. It is a commodity that goes through ups and downs depending on
mass market behavior which could be rational or illogical depending on the state of the
market. Governments can try to regulate land prices but they usually meet with little
success. The fundamental driver illiquidity. There is a strong co-relation between consumer
59
price inflation (CPIs) and expectation of land prices. People invest in land, buildings, houses
or flats as a hedge against inflation when inflation is running high. Inflation in India between
2005 and 2010 was running at around 10 percent. Nobody talked about land or affordable
housing problems because nobody bought flats or land as an inflation hedge. In 2010 it
picked up to 12-15 percent and everybody wanted to buy land, buy apartments even if it
meant keeping them empty. Investors too were in a frenzy. But this too shall pass. Because
this is something that has artificially been kept up by sentiment. Sentiment cycle lasts for
about 20 years or so. That is in the nature of the beast. The question is how hard an
intervention should the government do and that is always a dilemma because if the
interventions outlined by the task force were executed, there would be no need for
anything further. So, in answer to your initial question, is it policy or execution, it is
execution. However, in that execution, there are people who are part of this frenzy as well
so whether they will do anything to reduce land prices is open to question.
V Balasubramanian
In answer to the question raised by the previous speaker, I recall a model which combines
land and financing with entrepreneurship of the small man. The members of this roundtable
must be aware of the Magarpatta Township on the outskirts of Pune, developed from
around 430 acres of land sold by 120 farmers. One of the farmers, Satish Magar, organized
this as joint stock, sharing the profits in proportion to the land that was contributed. They
approached a professional architect and the model was ground plus three or four, and it
was developed as a township with residential areas, commercial zones, restaurants and so
on. The Magarpatta project would provide an incentive and quality direction for farmers
selling land to organize similar models.
Srinath Mukherji
To answer the question on micro-financing, the task force has looked at recommendations
in terms of making cheaper housing finance available. Companies such as ours borrow from
banks or other sources and on-lend it. Our own lending rates are dependent on the costs at
which we borrow. Today there is a secular rate prevailing in Indian banking which is
between 12 and 15 percent. To get below that, you have to stand in a queue, get rationed
by a bank or someone else. If you agree to the terms you will get preferential rates but the
question is, will it be directed towards affordable housing or will the benefits be passed on?
If cheaper money were made available to us through tax-free bonds, or National Housing
Bank (NHB) money, housing finance will become cheaper. But the dilemma we face is, apart
from flats if we were to give cheap money for self-construction, where would it end up in
household? It gets diverted. Ifwe have to police it, it brings up the cost, so we are back to
the level of 12-15 percent to be able to deploy. So, you can’t subsidize for particular use in a
milieu that has high-interest rates; it gets diverted. We do home equity loans which are
about 5 percent more than home construction loans to stop diversion. So, while policy wise
there is room, with the present inflation situation there is very little room to bring down
rates. Any subsidy will get diverted.
60
Role of HUDCO in affordable housing
P G Ganapathy
Could you tell a little bit about HUDCO’s role in affordable? Housing? Are you involved in
publicly funded projects like the government projects, or are you operating independently?
Are you financing the private sector? Could you highlight your experiences?
S V Kamath
HUDCO’s association historically has been with the state government initially with state
government agencies, housing boards, development authorities, municipal corporations,
and all along HUDCO’s mandate and thrust has been on financing economically weaker
sections and lower income groups at subsidized rate of interest. We have been doing this
through subsidization from operations in higher income segments, commercial segments
and of late, in infrastructure. Basically, our association has been with implementing
agencies, larger programse project funding has been our area. From 1985 onwards in the
initial decade, the thrust was on low-cost housing. A decade later, quality and cost effective
housing became important. In the context of urban awakening, this is getting a new label e
affordable housing. If we look at it in the right perspective, we can identify opportunities
and create markets out of it; that is where the need and requirement demand is.
Public versus private housing
P G Ganapathy
Do you have something on the public side, Monitor, or have you only looked at the private
side of affordable housing? If you take the entire spectrum of up to Rs. 25,000/- household
incomes or even below Rs. 10,000/- do you have an estimate of the percentage being
catered to by the private market?
Vikram Jain
I have no data on the contribution of the public sector. In the last 5-8 years, about 78,000
low-income homes, below Rs. 10 lakhs, were catered by the private sector, with
about30,000 coming up in the last few years. In the last few years, there has been uptake
but it has been marginal compared to the huge demand.
Public purpose and the role of the state
Audience Q: As a general reaction, one could say that the beast has grown much bigger
since the 80s. It was a similar approach, the consumption index related to investments in
gold or real estate which brought about the crash in 2008 in United States housing. I amnot
financing person but in my own understanding, I believe that’s how it goes. We too might
hit that and trip over badly. Secondly, housing is not purely a market thing. There is a sense
of public purpose. There is a history of deprivation and exclusion in the country. I see the
risk of collapse of the market as well as the risk of ingrained exclusion becoming worse. If
the government is not going to step in and do something substantial, then we are in trouble.
61
Srinath Mukherji
You are right. This is a dilemma that not only India but every country faces. In a situation
that is market driven such as mass commodities, shares, stocks, bonds, real estate, and gold,
what are the mechanism and the degree to which the government should intervene?
Governments should ideally take counter-cyclic measures.
Customer preferences
Srinath Mukherji
Further, in real estate, there is the question of customer aspirations. We found that people
who may be struggling to buy a one bedroom home and did not have a car wanted a car
park. People want more bedrooms. We are finding it very difficult to make it affordable.
Audience: So, it seems as if there is an increasing “switch-up” situation in the market and
steps should be taken to tackle affordable housing both from the supply side and in terms of
the customer’s preferences.
Srinath Mukherji
We have to understand that apartments and homes are also assets. The apartment dynamic
has a dual aspect. One is that of living in it and the other one is for its re-sale value.
Rajesh Krishnan
I think marketing has a lot to do with this. It is not just about cheap homes. When the
Maruti 800 first came to market, it was cheap but it was an aspiration product. If we can
position cheap homes as an aspiration product the customer who wants to buy a home will
want to buy these Rs. 10 lakh homes. In my mind marketing and positioning has a lot to do
with the rate that the customer perceives and takes this product for. There is huge demand
for small format homes, and the small format sells quicker.
Affordability
Audience Q: When it comes to affordability, there are two things eland component and
building component. The land component is fixed. In building component, we need to do
research and innovation. Compared to other fields there seem to be minimum innovation
standards in affordable housing.
Srinath Mukherji
We figured that lot of housing or room stock in India other than in metros is not going to be
necessarily builder built. It will be done by people like you and me or people with freehold
plots, who would have constructed a room and are adding another room because their son
is getting married, for a third party, for rental and so on. That is where rooms are being
added in India and it is not in the builder constructed apartments. Urbanization is happening
in places where people are constructing with a contractor or amazon. We call it self-
construction. We do most of our financing for self-construction or own construction which
has it risks and challenges. At that level, there is no easy way to do innovation even in
building construction material because leave aside technology, you don’t even have a
regularized mason registration. If innovation has to happen it has to be in mason training.
62
The National Skill Development Corporation has to take up the issue as to who is going to
train the masons of India on new technology and material. So, let’s be pragmatic about the
issues on the ground.
P G Ganapathy
A very straight question -Is it possible, in Bangalore, for the private sector to provide an
affordable home of 500 sq. ft. at rupees 8 lakhs, meeting all the requirements?
Rajesh Krishnan
This is where real policy innovation comes in. Today when developers ask for financing, the
only financing comes from equity where investors are expecting 30 percent annualized
returns. Unless I provide that I can’t get financing. But if there are people willing to give you
money at 5e10 percent, you can use the benefit of low cost of financing to subsidize housing
for the poor. There are several CSR investors, banks and others who are willing to give you
money at 5-10percent. If you structure this, you can get access to financing at 10 percent.
This means instead of selling a house at Rs. 3000 per sq. ft. you can sell it at Rs. 1000 per
sq.ft. Instead of getting land at market price, if somebody is saying do social growth but give
my money back with 5-10percent returns, we can pursue that option.
Audience
Further, to tackle the problem of low-cost building projects that are far from the city Centre,
we need to have a densification program, inclusive zoning and so on. The master plan
should look at that.
V Balasubramanian
In conclusion, I would say that to be more effective in policymaking, we need to have a

dialogue between politicians, bureaucrats, academics and experts, and the industry.
Organizing policy workshops and inviting these stakeholders may initiate a free exchange of
views that educates everyone, especially those who rule us.
P G Ganapathy
Thank you all for participating and making this a rich and insightful discussion.
63
Annexure - 2
Case study’s
64
65
66
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AFFORDABLE URBAN HOUSING IN INDIA

An Approach to Public-Private Partnership to the

Table of content Page No.

Figure 1: Year wise demand-supply gap projected……………………………………………………………… 02

Table of content Page No.

Table 1: Indian housing demand by 2022…………………………………………………………………………….. 3

Keywords: Affordable housing, Affordability, Policy, Government Laws, Housing shortage,

Figure 1: Year-wise demand-supply gap projected

Figure 2: Demand-Supply analysis based on income groups

Table 1:Indian housing demand by 2022

Table 2: Indian urban housing investment by 2022

1.3 Research question

Figure 3:Methodology Process

Table 3: Different income groups and projected land required

Also, few-availability of AH is as much a tangle of the MIG groups as it is of the LIG. As

a) Necessity of minimum volume of habitation required for the income groups

2.3 Affordability and its Concepts

Table 4: Cost of housing to income-expenditure ratio

Table 5: To pay EMI/Rent (% of income)

Table 6: Affordable to pay EMI/Rent per month

It is understood that all kind of DU in each income-category won't be concentrating at the

Figure 4: Demand-Supply constraints

2.4.1 “Affordable housing” and its demand drivers

Figure 5: Projected urban population by 2030

Figure 6: Share of population in each income bracket

2.4.2 The key supply constraints for AH

Figure 7: Approvals from statutory-body adds24-30months to the Pre-Construction Process

2.5 Difference between Affordable and Adequate households

2.6 Affordable vs. Low- priced Housing

Table 7: Difference between low-cost vs Affordable housing

2.7 Market & "Affordable Housing"

2.8 Policy-Effect in Housing-Market

Figure 11: Demand shift due to subsidy

2.9 Limited Success and its reason

Figure 13: Casual Linkage among policy component

2.9.2 Legislative Policies

a) rent revisions and control,

2.9.3 Monetary and Fiscal Policies

Table 9: Factors restricting PPP and impacts

3.1.3 Cost of land

3.2 Architectural Design

Sustainable designing is an Eco-systematic approach that demands an understanding of the

A well-planned building provides savings in maintenance costs, operational costs, energy

3.3 Reducing Construction cost

Mechanized construction saves on labor as also on interest liability by reason of reduced

It may, however, be noted that as compared to State-run Research Institutes, it is

3.4 Achieving efficiency and economics of scale

3.5 The Government as a facilitator and enabler

Also as a support to housing, there is the National Building Construction Corporation

a) Faster regulative approvals – problems concerning project implementation,

4.2.2 Construction & other Costs

4.2.4 Credit Delivery & Risk

Figure 18:Conceptual Strategies

5.2.2 Nodal agency formation for coordinating various stakeholders

5.3 Make strategic investments

5.3.1 Promoting the PPP framework efficiently to address major problems

a) Land acquisition and consolidation – As per our estimate, urban housing

b) Regulatory approvals – PPP mechanism will facilitate guarantee timely clearances of

5.4 Simplify structural and procedural frameworks

5.4.2 Ease the approval process by making “single window clearance”

Development of ‘One-stop-shop’ or ‘single window clearance’ system connecting regulative

5.5 Introduce legal and regulatory reforms

5.5.2 Revision on “LARR Act 2013”