Housing may get Budget boost with infrastructure status
Jan 26, 2013
Source : Business Line

“Infrastructure status for housing is a long pending demand. Even the Ministry of Housing and Urban Poverty Alleviation pushed for such a status last year, but that could not happen. This time there is strong possibility of a favourable decision,” a senior Government official told Business Line.

The Government had, on March 1, 2012, approved the harmonised list of infrastructure sector. It has five categories – transport, energy, water and sanitation, communication, and social and commercial infrastructure.

There are 28 sub-sectors under these heads. The Cabinet Committee on Infrastructure also set terms for inclusion of new sub-sectors.

According to that decision, new sub-sectors proposed by a particular agency could be included only when the six characteristics of infrastructure are applicable.

These are — natural monopoly, high sunk costs and asset specificity, non-tradability of output, lack of alternative choices in consumption, possibility of price exclusion, and presence of externalities.

In addition, one or more of three parameters (namely its importance to the scheme of economic development, its ability to contribute to human capital and the specific circumstances under which it has developed in India) had to be met.

The apex housing industry association Naredco, claimed that housing was part of infrastructure till 1999.

Even the World Bank treats housing as part of infrastructure, it had argued. It also said that developing townships and/or housing colonies involves creation of physical and social infrastructure.

These include roads, water and electricity networks, drainage and water harvesting, sewerage treatment and disposal, solid waste treatment and disposal and educational, medical and recreational facilities, which are all part of infrastructure.

A report of the technical group on ‘Urban Housing Shortage’ estimates the housing shortage as 18.78 million units in 2012.

The highest shortfall is in the economically weaker section (10.55 million units), followed by Lower Income Group with 7.41 million.

Naredco said that the Government, on its own, is not in a position to meet the shortfall and private developers do not find it a viable business model because of huge land cost, high credit rates and poor purchasing power of buyers in these categories.

There is a feeling that infrastructure status to housing will improve fund flow to the sector, both from internal and external sources, and incentivise developers to undertake construction of affordable houses, thereby, augmenting housing supply.

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