Experts say high land prices, inadequate infrastructure and funds access are major hurdles to providing accommodation for the average citizen; they believe the government can do more
If you drive through the city, the most frequent image you will see is that of construction work, whether it is infrastructure like flyovers or the metro rail, commercial structures like business parks or shopping malls, and quite a lot of residential projects. But amid the thousands of projects in progress, very little is being done in the area of affordable housing for the majority of urban dwellers.
In Mumbai, new, more lavish residential projects are being launched every week, but there doesn't seem to be even a single private player working on an affordable residential project in the island city for the average citizen.
There has been much talk about housing having become unaffordable, but very little is being done to change the situation. Affordable housing is understood as a one bedroom, hall and kitchen flat, or at the very least a one room and kitchen accommodation costing in the range of Rs20 lakh to Rs8 lakh.
"The intention of most developers is to fetch maximum profit per square feet and premium residential projects are the largest profit-generating segment, so builders avoid taking up affordable housing projects," a Mumbai-based industry expert told Moneylife.
During the recession a couple of years ago, some considered changing their product profile to be able to generate whatever income possible to keep business going. Even big developers like Unitech and DLF announced affordable housing projects. But no sooner did the global economy begin to show signs of recovery, these developers gave up lower cost housing plans and returned to premium projects to extract maximum profit.
"Neither central nor state government is serious about affordable housing, let alone private developers," said Pankaj Kapoor, managing director, Liases Foras. "The government should take immense interest to launch affordable housing projects. We should not expect this from private developers. In the National Capital Region, all affordable residential projects are introduced by government bodies."
In 2007, the Maharashtra state government announced its first-ever housing policy, to address the issue of providing affordable housing for the economically weaker sections, low income and middle income groups. It emphasised the need for reforms and liberalisation in the housing sector, whereby the government would not play the provider but the facilitator. However, hardly any steps have been taken so far towards the goal.
"Currently, there are no affordable housing projects in Mumbai or the outskirts of the city by the Maharashtra Housing and Area Development Authority (MHADA). We have been waiting for the government's GRC on development of affordable housing on private land," a senior officer of MHADA told Moneylife. The official refused to discuss the matter.
In 2009-10, MHADA had a target of 18,700 housing units and plots on an investment of Rs1,060 crore across the state. Of this, a little over 40% was for Mumbai. That target has been increased in 2010-11 by 30% to 21,800 units and plots with an investment of Rs1,590 crore across the state. MHADA is the principal channel for housing, mainly for the economically weaker sections.
Also, there are a few private builders who are engaged in developing affordable housing projects, but all of these are outside the major urban centres. Some prominent names are Tata Housing, Puravankara and Shriram Properties. The trouble, however, is that while some projects are categorised as affordable housing, they are far from affordable for the average citizen. For instance, affordable housing projects by Shriram Properties in Bengaluru start from Rs24 lakh (plus a lumpsum for registration fees).
"There are a few affordable housing projects on the outskirts of the city, but they are quoted very high. Residential property rates in locations like Kalyan and Badlapur (outside Mumbai) are more than Rs5,000 a square foot, which is out of range of the common people and cannot be called as affordable. There is unaffordablity in all micro markets," said Pankaj Kapoor.
A major problem is land rates in the metro cities. "Land costs are by far the greatest hurdle to affordable housing. Availability of cheap and clear title land with adequate infrastructure is a major deterrent for developers to take up affordable housing projects in cities like Mumbai," Brotin Banerjee, managing director and chief executive officer of Tata Housing, told Moneylife.
He explained that Mumbai is facing huge strains on infrastructure due to growth of urbanisation and increase of immigrants to the city. "The large population puts further pressure on infrastructure and social services. As a result, the city has grown far into the mainland, with the proliferation of residential, commercial and retail developments," Mr Banerjee said.
Mr Kapoor believes there is still scope for affordable housing projects in cities like Mumbai. "If the government wants it can definitely bring affordable projects; there are salt pan lands and a lot of slum redevelopment work that can be undertaken," he said.
Mr Banerjee also listed some steps that the government can take in this direction. "There is a need to develop physical and social infrastructure, improve connectivity and linkages, access and ease to funding, simplification of regulations and processes, subsidies, encourage private-public partnerships and providing land at concessional rates," Mr Banerjee said. "Moreover, we believe that the government needs to promote and support the micro-finance sector to provide loans to consumers belonging to the informal sector."
Anuj Puri, chairman and country head, Jones Lang LaSalle India, said in a note that various government bodies, such as railways, hold land parcels in central areas of the cities. If land from these parcels would be released exclusively for low-cost housing, we would have some real-time solutions."
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