What Is Stopping India From Meeting Housing-For-All-By-2022 Target?

For India to reach its goal of building two crore homes by 2022, it will have to build at the rate of 30 lakh houses per year. So far, only 20 per cent of this target has been met, official data show.

What is behind this slow show?

Why are developers shying away 

Activists say the government bet too big on private developers for the success of the Pradhan Mantri Awas Yojana's (PMAY). To be fair, the incentives given by the government are hardly any help if a developer takes up work in big cities.

On its part, the Central government provides Rs 1.5 lakh per unit to build homes under the PMAY. To build homes using this kind of subsidy in Delhi, Mumbai or Chennai is quite not possible.

Why would a private entity take up a job such as that? They will have to bear all costs in case states fail to provide their part of the assistance. The States/UTs has the responsibility to decide on an upper ceiling on the sale price of EWS houses in rupees per square meter of carpet area in such projects with an objective to make them affordable and accessible to the intended beneficiaries. For that purpose, States/UTs and cities may extend other concessions such as their state subsidy, land at affordable cost, stamp duty exemption etc.

“A private developer will not be too keen if the margins are low. Trust deficit and low investor interest are the other factors impacting the programme,” says Avneesh Sood, director, Eros Group.

Private developers are, however, trying to supply affordable homes to the middle-class homebuyers minus the PMAY tag. Eros Group’s Sampoornam-I project in Greater Noida is one such project.

What really is affordable?

One size does not fit all. The same is true of pricing, too, as far as the definition of affordable in the context of the PMAY goes.  According to the official definition, units in the size range of 90 sq mt in big cities and 60 sq mt in small cities qualify as affordable housing. However, price is also a parameter. Properties within Rs 45 lakh make for affordable units.

“If one looks at the twin parameters of price point and size, the definition does not fit our on-going projects in Mumbai and prominent locations of the Mumbai Metropolitan Region. At Hiranandani Group, while we meet the ‘size’ definition of our affordable housing, our offerings do not meet the guidelines on the price point. The homebuyer will not be able to avail of government benefits and incentives of affordable housing under the PMAY scheme as of now,” says MD Niranjan Hiranandani.

Where are the funds?

Lack of funds might also pose a problem.

“Our calculations show the government will have to garner around Rs 1 lakh crore over the next three years to achieve the target of building one crore houses. This is going to be a tall ask given the current fiscal arithmetic,” Prasad Koparkar, senior director, Crisil Research, was quoted by media as saying.

Where are the incentives?

In states such as Chhattisgarh and Gujarat, the homes that have already been completed were built by a collaboration of private developers or para-statal agencies. Here developers reserved 35 per cent of their project to construct 250 sqft homes for the economically weaker section (EWS) offering them at a subsidy of Rs 1.5 lakh.  In big cities, this amount could mean almost nothing. 

Another problem is the cost of homes. The price does not match the earnings or lack thereof of a rural or urban dweller.

"The one big problem I see is the lack of supply of homes catering to this income segment. I have travelled across India and I see a dearth of quality homes in this segment," Sudhin Choksey, MD and CEO, GRUH Finance, told Forbes.