Housing plays an important role in accommodating high urban growth in India. However, several structural issues are bottlenecks, restricting desired growth in the housing stock.
The NAREDCO-KPMG in India study, Decoding housing for all by 2022 - India's commitment to inclusive, sustainable, and affordable development, launched at the NAREDCO convention recently highlights some key concerns and strives to provide an agenda that needs action by Central and state governments, and urban local bodies, to meet the vision of Housing for All by 2022.
"The government's vision of Housing for All by 2022, requires about 11 crore houses (about 35,000 houses each day) to be developed with an investment of more than US$2 trillion. With the compounded annual growth rate in investment of 5% to 6% in the housing sector witnessed in last few years, a short fall of about US$500 to 600 billion in investments is envisaged to meet the vision by 2022. About 70% of the housing needs until 2022 are estimated to be concentrated in nine states, with Uttar Pradesh and Maharashtra accounting for 18% and 9% respectively," it says.
Further, it is the urban affordable housing (houses for EWS/LIG households) where major support is required. Several requisite policies and regulations promoting better coordination between housing stakeholders; delegation of power to urban local bodies; rationalisation of statutory charges and taxes; a relook at development norms; and steps to help reduce project cost and schedule overruns need to be introduced, says Neeraj Bansal, partner and head of real estate and construction, KPMG in India.
The KPMG study estimates that 70% of the housing needs would be concentrated in the states of Uttar Pradesh, Bihar, Maharashtra, West Bengal, Madhya Pradesh, Andhra Pradesh (including Telangana), Rajasthan, Tamil Nadu, and Karnataka.
To achieve the vision of Housing for All by 2022, the governments (Central and state) need to accelerate these efforts to a broad base and significantly augment public-private-partnership programmes. Accelerating the growth in the sector may also help turn around the sluggish GDP growth witnessed in the last few years.
About Rs. 9.5 trillion (US$ 150 billion) is currently invested in the real estate sector annually, of which about 80% or Rs. 6.6 to 7.2 trillion (US$ 130 billion) is invested in housing development.
Thus, investment in housing needs to be doubled, which can be achieved if investments are steadily increased by 12% to 13% per annum through 2022.
To attract higher investments, the government could consider increasing institutional lending to the sector, introduction of long-term housing bonds to attract households and private savings, and strengthening of domestic equity and debt markets.
Also, granting infrastructure status to the housing sector, especially affordable housing, could assist in opening certain additional funding avenues in addition to direct tax benefits. This may help the realty sector attract funds from insurance companies, who are mandated to invest 15% of their funds in the social and infrastructure sector.
In the last decade, there have been reforms in reference to the wide spectrum of real estate issues such as land acquisition, regulation to protect customer interests, opening the doors to foreign investors, and the introduction of Real Estate Investments Trusts (REITs).
India would require about 11 crore housing units to achieve the 2022 vision. Therefore, to enable the country to achieve this vision, the government needs to strengthen the real estate sector by streamlining the archaic norms and procedures of urban local bodies and by incentivising stakeholders to make it lucrative.