Housing industry seeks infra status
25 February 2015
The real estate and housing industry is looking at the government's affordable housing policy to secure infrastructure status for the sector and thereby derive the benefits that go with it.
For this, the finance minister should ensure that the budget looks at treating affordable housing as an activity for 'public purpose' and should include it under the definition of infrastructure.
This, in turn, will ensure that banks are mandated to increase funding towards affordable housing and real estate companies have access to a bigger pool of funds from NBFCs, external commercial borrowing (ECB) and insurance companies.
In the process, it will also bring about more transparency and clarity, which will go a long way in protecting consumer interests as well.
The government's Sardar Patel Urban Housing Mission, which aims at ''housing for all by 2022'' is set to open up huge opportunities for the private sector.
Building 30 million affordable houses through the public-private partnership (PPP) model will ensure provision of interest subsidy and increased flow of resources to the housing sector.
While the policy is one of the government's most important undertakings, there is a need to find resources – both land and capital – for schemes of this magnitude.
Against the target of 30 million affordable houses to be constructed, the actual demand for such houses is projected to touch 38 million by 2030. Also, as per the National Housing Bank (NHB) Residex, housing prices in major cities have doubled in the period of 2007 to 2014
While the issue of land costs can in part be met through development of new township projects, the financing issue remains. The housing industry wants the government to open all routes for funding housing projects, especially, affordable housing projects.
In fact, the industry wants the government to open the ECB route to all types of real estate projects rather than restricting it to only affordable housing.
The total market size of the real estate construction sector stands at nearly $100 billion and is expected to touch $180 billion by 2020. The government has already decided to open up construction for FDI.
Now, the industry wants the government to follow a simpler and more transparent approval mechanism to attract investors and prod existing investors to activity.
Lastly, and more importantly, the industry wants rules and procedures to be taken out of an archaic system that only favours entrenched interests and lets in only vested interests into the industry.