Affordable homes: Is government serious?

News Posted - 2010-04-10

Are our policy planners and key stakeholders of realty sector serious about providing affordable homes to lakhs of Indians? This is really a very key question given that these days, talking and discussing affordable homes has become a fashion, practically among everyone even remotely associated with realty sector. It goes without saying that the term 'affordable housing' sounds alluring.

But when we talk about affordable homes, we must ask — affordable for whom? Is it affordable for those earning Rs 8,500 to Rs 40,000 per month, who comprise 44% of our populace and fall both in the formal and the informal sectors? And if so, where are the flats for these 44%? Where are the builders? And, critically, where are the banks which will dole out the loans? The answer for all these questions is the same — as good as none. These are some of the key questions, which have been discussed by Arun Mohan, a senior advocate and writer, in his latest offering "Affordable Housing: How Law and Policy can make it possible".

He also tries to grapple with some of the answers. Arun Mohan has tried to prove that all the advertisements, whether by the builders or the local development authorities, bank finances is for the top few - about 4%! While the lower 52% will have to wait for the country to develop further, the 44% of the population, or the great Indian middle class, is a victim through absence of laws and they have denied what is their due — an opportunity for an ownership of flats. At whichever strata or class a person is born, housing must be notionally considered a fundamental right — a right step has been taken with regard to education by making it a fundamental right. The rest depends on his skills, labour, determination, and also, to an extent, on his destiny.

A basic flat as a shelter is a prerequisite for proper education. In his endeavor in moving upwards, the laws of the land should not fail a citizen, but encourage and support him.

The issue has perforce to be addressed from the standpoint of annual household income. Presently, only those with Rs 5 lakhs plus annual income (or less than 4% of the population) are attended to. Unless we attend to the 'middle class' (44%), which we easily can, we can never hope to attend to the 52% poorer masses.

Arun Mohan argues in his book that there are three areas that deserve urgent attention to provide affordable homes: One, availability of land for housing; two, availability of flats which are affordable; and, three, availability of bank finance.

There is another problem and because of that prices are so high and the market is restricted. And that is there is crisis of confidence. And what is the answer to these issues? According to him, after analysing this problem, he believes a "certifying-cum-performance guaranteeing company" [or a regulator] is needed, which keeps a control on the builder and issues a "wide-guarantee certificate" to the flat buyer that he will be delivered the flat he pays for. With this guarantee in hand, a flat buyer will be willing to part with his money and a bank will also be willing to finance it.

While making sufficient land available for affordable housing is important, one has to cater to the flat buyer who is not willing to part with his life savings and assume a liability because he does not trust the builder. There is the bank that is not willing to lend. And there is the builder, who, in the absence of a large market, cannot have the economies of scale and pass that benefit on to the buyer in terms of lower price.

Mohan writes that it is this "crisis of confidence" which is one of the major factors that has stifled growth of affordable housing in the country. So large is this sector and so important is housing, both for the citizen welfare and for nurturing and education of the young ones, that attention to this section, who comprise 44%, will hopefully propel national growth.

Once this crisis of confidence has been overcome, the housing sector will see a boost. It will also enable modern housing in rural sector, as serving a cluster of villages.

Talking about some of the main points of his research, Mohan says that pricing is unnecessarily high, when it need not necessarily be so. If we divide the population of our country into sectors according to income, it is only the top 4%, in fact less, and who are attended to by the banks for home finance. Only those at the top can afford houses.

He notes that 44% of our middle and upper-middle class, which earns more than Rs 1 lakh a year or even Rs 5 lakhs a year receives no assistance for housing primarily because the flats that they can afford are not worth the money and, two, the bank finance is not available to them.

Source: ET 10/4/10