— Lalitkumar Jain, writes about the urgent need for housing that is within the reach of middle and lower middle class in Maharashtra. Purchase of a house is the most important and the costliest investment and Indian makes and the scene is no different in Maharashtra.
Unfortunately, despite the government's and various political leaders' oft repeated statements, roof over one's head still remains a dream by and large in the State which is otherwise supposed to be one of the most progressive states in the country. The population is ever increasing so is the pressure on the land, particularly in the cities. According to the Economic Survey released by the State government recently quoting the latest census, the population of the state is projected at 11.52 crore as against 9.69 crore as per the 2001 Census. This picture is scaring indeed!
The existing cities are bursting at seams and the more and more new cities and satellite townships are taking shape rapidly. The rapid urbanization and shrinking sizes of families obviously call for massive housing that is within the reach of the middle and lower middle class.
Affordable housing means different things to different people. We have to clearly define the meaning of Affordable Housing. The expression which is meant for middle and lower middle class family is highly misunderstood.
The most important component of house is land; unless the land prices are affordable to builders they in turn cannot make houses affordable to the buyer. Then, there are so many taxes, unrealistic registration charges and the time, money and afford involved in obtaining as many as 40 NOCs (no objections certificates) from various government departments and further more the cost of other inputs like cement, water, electricity, sand etc have to be kept low to make the cost of construction affordable for all. Mckansey report to GOM in 2001 says "land approval related hurdles are costing 40 per cent higher to home cost. If tracked well removing this hurdle Real Estate can add 1.5 per cent to GDP growth.
Unfortunately, a developer is always at the receiving end for high cost of housing. Let me explain the cost structure so that the misunderstanding is cleared. There are five key elements that go into the cost of building a house - material, labour, official approvals, taxation and land costs. Of these, the first two costs are ever increasing. The remaining three are to be dealt with the governments in centre and state. Approval cost contributes to 10 to 25 per cent of sale price. This also brings stigma of non transparency.
I have taken up "mission Transparency" as the priority agenda for my team as President and got in to exercise of finding the cause and its solution. This involves a two-fold process - The approval process and the practices of Real Estate Developers CREDAI has suggested a solution of single-window system for approvals with a practical approach. The Taxation amounts to anything between 30 per cent and 36 per cent, which includes excise, customs, stamp duty and service tax etc. The government will have to define affordable housing projects and create tax heavens for such projects. Then comes the land cost. The whole world talks of saving agricultural lands and not to reduce green cover. In our country there is an added taboo of FSI. This makes land costlier and harms the environment as the green cover keeps disappearing.
A builder like any other business man is in the business to make profits. You cannot blame a builder for not making houses affordable where the cost of inputs is so high. As a developer community we at CREDAI are working on ways and means to work with the government on this count. Developers will, of course, have to work towards achieving higher efficiency to reduce costs.
The cost of building a house is sky rocketing and the entire ambiance makes it impossible for the developer community to meet the demands of the average salaried employee. Even the government agencies like MHADA and CIDCO have made the cost of housing highly prohibitive. We need to flood the market with supply of tenements by increasing build ability and providing incentives. In addition, we also need to strengthen mass affordable housing in satellite towns with strong mass transit system.
As I explained above, a developer cannot alone guarantee affordable housing or reduces the purchase price. On the contrary I would say a developer is the victim of high input cost and he cannot get funds at low cost. The government, the urban planners and the developer community have to work together to find out the solution. I am not denying that there are some unscrupulous elements even among developers. This is exactly why CREDAI is insisting on everybody adhering to a code of conduct. We are also trying to set up grievance reddressal machinery in all cities so that the customer complains can be addressed effectively and promptly.
The construction industry has also been burdened with taxes from every corner. The government can get even more money if they rationalize the taxation and encourage the developer community with the same facilities and concessions that are given to any industry. CREDAI has also been trying to impress upon the government to give an industry status to the real estate sector. In fact, real estate sector, directly and indirectly, supports over a hundred industries like cement, steel, energy, water and it is labour intensive. Yet, we get a step-motherly treatment and the government finds it convenient to label us as being corrupt! We have been making representations to the government and we hope one day government will realize the need to have a rationalized structure.
The tragedy is that the real estate is a State subject and even if the Centre issues guidelines, States will have to show political will to implement them.
Let me point out here that CREDAI has come out with another practical solution for ensuring that a shelter is within the reach of a vast majority of the people who want to own a house. We suggested Special Housing Zones on the lines of SEZ with tax and other concessions. All the facilities and services provided in an SEZ come at a very low cost. Taxes are also very minimal.
There are enough land parcels available in the peripheries of cities where large areas can be demarcated for developing SEZ or housing special zone and we could also work simultaneously on a mass rapid transport system to facilitate the commuters to reach their places of work.
Sometime ago a hovercraft services was provided between Navi Mumbai and Mumbai. But this was discontinued. Now the government should work out alternative modes of transport. The government could also encourage industry in business including non-polluting industries like IT and ITES to in the vicinity of Special Housing Zones so that one can walk to work and reduce pressure on public transport. The housing project coming near Hinjewadi IT zone in Pune is a classic example of this endeavor.
The urban boom and migration to employment catchment areas also calls for creation of rental housing which is again should be affordable for the average salaried. Otherwise, the threat of slum explosion will continue to stare at us. The ever growing slums all across Maharashtra is a glaring example for the urban planners. India - and Maharashtra - has predominantly a young population. Those who want to settle down in life cannot afford to buy a house at a large amount. Moreover, most jobs are transferable. Many would like to move from city to city to try their luck before settling down. This is why such class of people has to be provided with rental housing on a large scale. I don't think that the government has framed any such policies in this respect. Mass rental housing should be encouraged with all the possible concessions so that the employee can work with peace of mind. This improves the national productivity at large. There is an old saying "Ghar mein Shanti toh Bahar Kranti"
The cost of construction can also be brought under control with the help of the advanced technology from the west and using appropriately locally available raw materials. Technology allows saving time and money. Multi-storied buildings can be built in a matter of days and months, and not years.
Finally, I very strongly feel that the developer community, urban planners, social scientists and the various authorities should come together to provide answers to those millions people and the emerging salaried class so that they can fulfill their dream of affording a house.
(The author is the National President of CREDAI and Chairman & Managing Director Kumar Urban development Limited or KUL)
source:http://www.projectvendor.com/ArticleDetailsByCategory.aspx?aid=464
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