In two months, India could have a brand new affordable housing policy, an effort to give some boost to a weakening real estate sector. The Union Ministry of Housing and Urban Poverty Alleviation is in the process of finalising such a policy in two months.
The government had already allowed external commercial borrowing for low cost houses in India in the annual Budget. But the real estate companies are not too keen on this segment because of the low margins. Hence the government is now trying to make affordable housing attractive for the developers as well.
The policy will raise the floor space index to compensate developers for high cost of land and also ease density norms, the Business Standard article says. It would give capital and interest subsidy to developers. Even government land would be auctioned on the basis of who could build maximum number of low cost houses.
The Mhupa has also built an internal committee to fast track the process of granting approvals of housing projects in a bid to reduce costs by 25-40 percent. Approvals would be given in six-eight weeks as against almost 70 approvals they require at present which typically take between two to three years.
A recent example of such a case is the allegation by the Maharashtra Chamber of Housing Industry and the Confederation of Real Estate Developers’ Associations of India that plan to construct 500,000 affordable homes in Mumbai, Thane and Raigad districts of Maharashtra is gathering dust due to “inaction and policy paralysis” on the part of the state government. Such projects could be better executed with some sort of a single window clearance system.
On the other hand, the government is also making strict riders for the ECB borrowing so that money cannot be borrowed for low cost housing and transferred to other segments. So the government could mention specific projects and developers that could access the ECB funds and also mention specific channels like National Housing Bank to borrow the funds.