Government Releases Policy to Rope in Private Sector for Affordable Housing

Boost to Housing For All
Boost to Housing For All

The Ministry of Urban Development and Housing has released a new policy to resolve the problem of availability of low cost land for affordable housing by roping in the private sector.  The policy talks of incentivising the private sector with additional FAR/FSI in lieu of a portion of their land to be used for affordable housing. 

The draft model PPP Policy for Affordable Housing, released on Thursday talks of six strategies to address the land issue including allowing the private developer "intensive utilisation of land (giving higher FAR/FSI) or allowing them to build high end houses in lieu of a portion of land that they would hand over to the government for affordable housing".

"PPP strategies including government grants and subsidies can also be potentially deployed to unlock unutilized/underutilized parcels of both government as well as privately owned lands for affordable housing," the draft policy said. 

"Government alone cannot build all the houses. To achieve our target of Housing for All by 2022 we will need the private sector. That's why we are releasing supplementary guidelines to rope in the private builders," Venkaiah Naidu, Minister of Urban Development and Housing had said at a conference on Tuesday. 

Naidu had earlier said that the government has approved the construction of over 20 lakh houses under the Pradhan Mantri Awas Yojana (Urban). The programme has so far evinced very little interest from the private developers.

Another strategy being considered is where Government seeks to monetise its power to regulate real estate development and use it to get private sector to provide land and affordable housing. 

Under this, private builders will be required to provide affordable housing as a condition to be allowed to create high-end housing for which there is a profitable market. "It can be safely assumed that under this strategy the builder shall, effectively, pass on a substantial part of the burden  of the cost of creating affordable housing to the consumers of the high-end component of the project. Thus, the higher income customers will effectively provide the affordable housing, in the form of a cross-subsidy created under this PPP strategy, to low-income customers". 

The government also plans to introduce a systematic policy to take over all land of central and state governments lying unused or poorly utilised and hand these over to the private sector, at a low cost, to develop and build affordable housing projects using private capital and efficiencies under suitable PPP structures. 

"The housing created under this PPP strategy will effectively be in the form of a subsidy consisting of public lands provided by government to low-income clients. To enhance the provisioning of affordable housing, government interventions through financial and non-financial support as well as through policy reforms would be critical. Financial subsidies, subsidies in kind, in the form of government land as well as cross-subsidies will have to play a central role in addressing the problem of vast sections of India s population being unable to afford housing at market prices," the draft policy said. 

Availability and cost of well-located land has been a major issue that has been impacting the government affordable housing initiative. Depending on project location, land costs vary anywhere between 20-60% of the total project cost. 

The government has invited comments and suggestions from stakeholders till June 30 on the draft policy.

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