Housing Scenario in India and suggested Action Points for the States

ByShri Susheel KumarAdditional Secretary (Housing)Ministry of Housing & Urban Poverty Alleviation6 th June, 20131

Growing urbanisation in IndiaCharacteristicsMetros (> 10Lakhs)Class I towns(1 to 10Lakhs)Class II towns(< 1 Lakhs)No. oftowns2001 Census 2011 CensusPopulation% oftotalpopulationNo. oftownsPopulation% of totalpopulation31 10.83 37.87 53 16.07 42.61410 8.80 30.77 457 10.82 28.694270 8.97 31.36 7425 10.82 28.69Total5161 # 28.60 100 7935 # 37.71 100# includes statutory and Census towns. 2

Housing Shortage in the countryTechnical Group on estimation of housing shortage hasestimated housing shortage as 18.78 million in 2012.Ten states contribute 76 percent of the urban housingshortage - UP, Maharashtra, WB, AP, TN, Bihar, Rajasthan,MP, Karnataka, GujaratCategoryDistribution of HousingShortage among differentcategoriesNo. (inMillions)InpercentageEWS 10.55 56.18LIG 7.41 39.44MIG &above8.02 4.38Total 18.78 1003

State/UTShortage (m)1. Uttar Pradesh 3.072. Maharashtra 1.943. West Bengal 1.334. Andhra Pradesh 1.275. Tamil Nadu 1.256. Bihar 1.197. Rajasthan 1.158. Madhya Pradesh 1.109. Karnataka 1.0210. Gujarat 0.9911. Jharkhand 0.6312. Kerala 0.5413. Delhi 0.4914. Haryana 0.4215. Odhisa 0.4116. Punjab 0.3917. Chhattisgarh 0.3518. Assam 0.28State/UTShortage (m)19. Nagaland 0.2120. Uttarakhand 0.1621. J & K 0.1322. Manipur 0.0823. Puduchery 0.0724. Goa 0.0625. Dadra & Nagar 0.0526. HP 0.0427. Arunachal P 0.0328. Meghalaya 0.0329. Tripura 00330. Mizoram 0.0231. Chandigarh 0.0132. Daman and Diu 0.0133. Lakshadweep 0.0134. Sikkim 0.0135. Andaman& Nic. 0.00TOTAL 18.78 Million 4

Challenges to Urban Housing Apart from huge housing deficit, the prices are well outof reach of the EWS/LIG. EWS Households are defined as having income up to Rs.1 Lakh per annum and LIG Households are those havingannual income between RS.1-2 Lakh. State intervention in the form of land / higher FSI etc.,thus becomes an imperative.5

Strategies to tackle the HousingShortages – Policy initiativesDemand Sideinterventions Increased credit flowthrough Priority sectorlending Revision of IncomeCeilings Tax Incentives toHome Buyers Facilitating HFCs andHousingCooperatives.Supply Side Interventions LandPolicyReservation Opening of ECBWindow Real Estate Regulation Streamlining PlanApproval Procedures Incentives to theprivate developers6

Strategies to tackle the HousingShortages – Programmatic interventionsDemand Side interventions Rajiv Rinn Yojana (RRY) Scheme of 1% interestsubvention Credit Mortgage RiskGuarantee FundSupply Side Interventions Central Schemes such asJnNURM and RAY Affordable Housing inPartnership Scheme Urban Housing Fund7

Strategies to tackle the HousingShortages – Demand Side interventions In order to mitigate high risk perception of theBanks/HFC wrt informal sector housing loansCredit Mortgage Risk Guarantee Fund with acorpus of Rs.1,000Crs has been established. Urban Housing Fund is also being created forincreased credit flow to the urban poor. Major intervention by MoHUPA: Rajiv Rinn Yojana (RRY) to replace the pilotscheme of Interest Subsidy Scheme for Housingthe Urban Poor. (ISHUP).8

Demand side InterventionsRajiv Rinn Yojana (RRY)Cont’dRajiv Rinn Yojana is a successor to Interest Subsidy Scheme forHousing the Urban Poor (ISHUP) undertaken on pilot basis during11 th Plan.ISHUP under pilot phase had lukewarm response and marginalprogress has been made in Maharashtra (398), Rajasthan (730),Chhattisgarh (944), MP (9) only.RRY intends to provide housing loans up to Rs. 5 lakh for EWS andRs. 8 lakh for LIG with an interest subsidy of 5% restricted up to Rs. 5lakhs.Envisages creation of demand led growth of affordable housingstockRRY will be target driven scheme with targets assigned to banks /State Governments through an MoU.9

Demand side InterventionsRajiv Rinn Yojana (RRY)Cont’dRRY will apply to all cities and towns.Loan can be availed for construction/ purchase of a DU as wellas for expansions and additions to existing units.State Governments can dovetail their State Housing Schemeswith RRY.The annual interest subsidy disbursed through the 2 CentralNodal Agencies (CNAs) viz., NHB and HUDCO.Subsidy will be passed on by the lender to the borrower in theform of reduced EMIs.To incentivize the facilitators - Rs. 100/- for every sanctionedapplication is proposed.To compensate the PLIs for the costs - a onetime compensationof Rs. 500/- per sanctioned loan under the scheme isproposed.10

Demand side InterventionsRajiv Rinn Yojana (RRY)Cont’dStates and Banks/HFCs would be allocated specific targets forwhich necessary annual subsidy will be computed in advanceand 25% of it will be provided to banks in advance forimmediate transfer of benefits to the borrowersBeneficiaries will be identified by the State agencies includingULBs who will also mobilize/coordinate sufficient loanapplicationsPLIs to simplify the forms, KYC norms etc.The States and Banks will monitor the implementation byregular meetings of the State Level Bankers Committees andDistrict Level Bankers Committees.11

Demand side InterventionsRajiv Rinn Yojana (RRY)Cont’dSuggested Action Points for the States Tentative targets under RRY forthe 12 th Plan Period: (20% ofshortage for the State) :Pondicherry – 0.14 LakhAndhra Pradesh – 2.54 Lakh Karnataka – 2.0 Lakh Kerala – 1.1 Lakh Tamil Nadu – 2.5 LakhMadhya Pradesh – 2.2 Lakh States are requested todistribute the targets to ULBsand identify the beneficiariesand also to undertakepreparatory work of incomecertification, plan approval etc.,with at least 20% of the abovenumbers for this year.Issue may be discussed with theSLBC convener banks to furtherdistribute the targets amongstBanks for quick action when thescheme is rolled out.12

Strategies to tackle the Housing Shortages– Supply side interventionsEfforts made so far through Priority Sector Lending andPrivate Sector Participation has not yielded desiredresultsMore focus on providing housing to EWS and LIGcategories is needed4 broad interventions needed:Jawaharlal Nehru National Urban Renewal Mission(JNNURM)/ Rajiv Awas Yojana (RAY)Affordable Housing in Partnership (AHIP)Concessional loans to State agencies through HUDCOInvolving private sector in Affordable Housing Projects13

Supply side interventionsCont’d Suggested Action Points for the States –I. Activate Public Housing Development agenciesFor Public Agencies available land bank be used andconcessional loans at 8.0% to 8.5% pa be availed fromHUDCO. Further for EWS & LIG housing schemes HUDCOprovides for public agencies:Waiver of application feeWaiver of front-end-fee for EWS & LIG categories14

HUDCO’s Security Package for Govt./Public sectorPresent Security Package - Government Agencies (any one of thefollowing) State Government Guarantee Bank Guarantee Equitable Mortgage of land and building with 125% security coverageon loan amount with no lien account for the project receivables.Decision on the package is based on project viability and the valuationof properties by approved valuer. Equitable Mortgage can be eitherproject property or any other property of the agency Equitable Mortgage of ‘land and buildings’, and/or hypothecation ofmovable assets like buses, equipments/machinery, computers, furnitureand fixtures, office equipments etc. (125% coverage). In case of direct borrowing by the State Government, Government ofIndia permission for borrowing the loan Negative lien may be accepted in case of Government of IndiaMaharatna/Navratna/Miniratna companies.15

Security Package for Govt./Public sectorAny one of the following can be additional securityStructured repayment through budgetary provision(RBI/Treasury Account) Any other additional security depending on risk perceptionbased on project appraisal. In case of consortium, thesecurity prescribed for the project will be on pari-passu basis.Structured Escrow Mechanism against identified receivablessuch as taxes/fee/ charges etc. with coverage of 150% as passthrough revenue (Electricity Boards, Corporations,Local Bodies etc.) can be considered as special casebased on financial health of organization and dedicated flowof receivables with one quarter/ principal interest of theloan drawn as long term debt reserve.16

Supply side interventionsCont’d Suggested Action Points for the States –II. Engage with the Private Developers forAffordable Housing Projects.implementingDefinition of Affordable Housing – Individual dwelling unitswith a carpet area of not more than 60 Sq. mtrs. and preferablywithin the price range of 5 times the annual income of thehousehold as notified, either as a single unit or part of abuilding complex with multiple dwelling units.Affordable Housing Projects – Housing projects where at least60% of the FAR / FSI is used for dwelling units of carpet area ofnot more than 60 Sq. mtrs. The project shall also reserve 15% ofthe total FAR / FSI or 35% of the total number of dwelling unitsfor EWS category. 17

Strategies to tackle the HousingShortages – Supply side interventions Encourage/ facilitate Private developers to undertakeaffordable housing projects. For Private sector players encouragement can begiven under Affordable Housing Policy to be preparedby the State ECB and FDI are some of the cheaper sources ofproject financing especially for a private developer. HUDCO can also fund these projects18

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Other initiatives needed - Affordable HousingPolicyDevelopment Related ChargesCriterion andCoredefinitionsSupply sideIncentivesDemand sideIncentivesFinancialNon FinancialFinancialNon FinancialService Tax ExemptionDirect Tax RebatesDirect Capital Grant SupportReduced Timeline for ApprovalInventory of State/City LandHoldingsIncreasing Land AvailabilityIncreasing FSI and TDR FacilitiesRevision of the Building CodesPolicy Support for Promotion ofMass HousingInterest SubsidyReduction of Stamp DutyPriority Sector LendingAccessing Low Income GroupSupport New “know your client”Procedures20