RENTAL HOUSING: SOLUTION FOR HOUSING URBAN POOR?

INTRODUCTION

Rental housing is a form of housing tenure which was proposed in year 2007 by MHADA (Maharashtra housing and development authority) with the purpose of providing social housing to the urban poor in which the property is owned by a government authority, which may be central or local. Social housing is an umbrella term referring to rental housing which may be owned and managed by the state, by non-profit organizations, or by a combination of the two, usually with the aim of providing affordable housing. Social housing can also be seen as a potential remedy to housing inequality.

Although the common goal of public housing is to provide affordable housing, the details, terminology, definitions of poverty and other criteria for allocation vary within different contexts.

STATISTICS

• India’s urbanization is only around 30 per cent while in other Countries, it is much higher

• According to MC Kinsey Report 2010, 70 per cent of all jobs in the Next 20 years will originate in urban areas.

• In urban India, the share of rental housing is low compared to Developed countries where is it around 40-50 per cent.

• Share of rental housing in urban areas is 30 per cent, according to  NSS 65th Round, 2008-09.

• In most cities in India, over 30 per cent of the population live in  Slum like conditions.

• The housing shortage is around 24.7 million DU s

• The residential property accounts for 80 per cent of the overall real Estate market in India in terms of volume and has been growing at 34 per cent annually, as per NHB estimates.

• Housing is a major contributor to the GDP of the country. As per CSO estimate, housing contributed 4.5 per cent to India’s GDP in 2003-04.

Policy Overview

• In various countries, clear cut policies have been framed for rental (Social) housing. In India, we do not have a comprehensively stated Rental Housing Policy.

• In India, the National Housing and Habitat Policy, 2007 states “a Model Rent Act will be prepared by the Government of India to Promote rental housing on the principle that rent of a housing unit Should be fixed by mutual agreement between the landlord and the Tenant for a stipulated lease period prior to which, the tenant will Not be allowed to be evicted and after the expiry of the said lease Period, the tenant will not be permitted to continue in the said Housing unit”.

• The Government of India gives some tax incentives under the Income Tax Act so as to encourage investments in rental housing.

• Under JNNURM, one of the items on the reform agenda is reform Of Rent Control Acts in various states of India.

 WHAT IS AFFORDABLE HOUSING

Affordable housing normally covers both low cost market and subsidized housing (irrespective  of  tenure,  ownership  –  whether  exclusive  or  shared  –  or  financial arrangements) that is available in perpetuity to people who cannot afford to rent or buy a house generally available on the open market.Most studies on affordable housing define that Affordable Housing is a segment of  market  where  a  proportion  of  the  housing  is  targeted  for  those  people  who  have a special  housing  requirement  and  /or  who  are  unable  to  compete  in  the  exiting  local market  for  housing.  It  covers  a  spectrum  of  providers  and  tenure  including  housing associations, public sector , joint venture and own occupations.

In England, Affordable Housing includes social, rented and intermediate housing, provided to specified eligible households whose needs are not met by the market. Social housing is rented housing, owned and managed by local authority and targeted rent is determined through the national rent regime. Intermediate affordable housing is housing at a price and rent above those of social rent but below market price or rent.

In  United  States  and  Canada,  a  commonly  accepted  guide  line  for  housing affordability is a housing rental  cost that does not exceeds 30 per cent of a household‘s gross  income.  This housing cost includes taxes and insurance for owners.  When the monthly carrying costs of home exceeds 30-35 per cent of household income, and then the housing is considered unaffordable for the household.

Department of Housing and Urban Development (USA) defines Affordable

Housing as a home which costs less than 30 per cent of a family income in either rent or monthly mortgage.

HOUSING SCENARIO IN INDIA

India‘s population has already crossed a mark of 1 billion and it is estimated that by  the  year  2021,  350  million people  will  be  added  with  further  concentration  of population in urban center up to 12 percent. According to Census of 2001, India had total residential housing stock of 187 million with only 51 percent permanent dwelling units. Furthermore, out of this housing stock 54% have no sanitation facility, nearly 85% do not have  electricity  and  more than  22%  do  not  have  drainage  facility.  The lack of basic infrastructure  facilities  in  present  housing  stock  and  the  shortfall  indicates  chronic shortage of  dwelling units              with  basic needs.  Moreover,  it  is estimated  that  by  the year 2021 the population of urban poor will be nearly 180 million.

This  indicates that  with present  pace of  growth, urban  centers  will  face chaotic conditions for housing provision and the shanty image of our cities will create a question over  environmental  sustainability  of  human  settlements. To  ameliorate  housing conditions  in  deteriorating  slums  radical  changes  are  required  in  present  land  policies assuring tenure security. However, by and large government strategies on slum relocation or redevelopment have failed. Furthermore, it was recognized that private sector housing market  excludes a large  segment of  population  under poverty  line in  the urban  centers due  to  limited profitability.  This  implies  that  there  is a  need  for  a  reorientation  in  the present notions  of housing  provision  by public intervention,  which  becomes  an  urgent need to provide housing for all.

According to an estimate India had a chronic shortage of 24.70 million dwelling units. The Ninth Five-Year plan suggests that there is a need to build / upgr ade 10 million dwelling units for urban poor or EWS and 5 million for LIG in the urban centers alone. Considering the present rate of supply of urban housing, the future rate of supply has to be accelerated  three  times  to  eradicate  housing  problem  in  urban  areas.  However,  it seems  to  be  difficult for public  sector  agencies  to  accelerate  rate of  housing  provision looking  at  limited  financial  resources  of  Rs.  34,000  crore  in  comparison  to  required investment of Rs. 1,21,370 crore for urban centers.

The present crisis  in  the  housing sector and  dilapidated living  condition of  LIG and EWS segments is largely due to inappropriate government interventions.  Although, government  has  used  various  strategies  to  fulfill  housing demand,  the  current  state  of affair  indicates  alarming  level  of  backlog in  affordable  housing  especially  to  LIG and EWS segments. This along with ever increasing shortfall leads to exponential growth in housing demand. To eradicate housing shortage the National Housing and Habitat Policy (1998) aimed at providing shelter to all by 2010, which seems to be a dream rather than a reality.

Government  has  used  various  strategies  to  fulfill  housing  demand,  the  current  state  of affair  indicates  alarming level  of  backlog in  affordable  housing  especially  to  LIG  and EWS segments. This along with ever increasing shortfall leads to exponential growth in housing demand. To eradicate housing shortage the National Housing and Habitat Policy (1998) aimed at providing shelter to all by 2010, which seems to be a dream rather than a reality.

The  housing  shortage  is  still  a  matter  of  concern  in  India.  This  is  primarily because the population and the economy of  India is consistently growing and thus a huge demand  for  housing  still  exists  and  the  right  supply  to match  this  demand  is  not  yet available in the market. This demand-supply gap, for want of the right product mix, is the root cause of housing shortage in India. The housing units which are being developed by the builders cater to the premium categor y and do not service the LIG & MIG section of the society. For them these units still continue to be unaffordable. Economically Weaker Sections (EWS)  and Lower Income Groups (LIG) constitute more than 99 %  of  the  total housing shortage of 24.71 million in urban areas.

 Affordable  housing  projects  need  to  be  launched  to  service  the  need  of  this segment of the society. The projects, which have come up recently in certain parts on the country  under  the  garb  of  affordable  housing  do  not  exactly  fit the  bill  of  affordable housing. These projects are just a form of price correction in the market. Some of them who have priced  their product  in the affordable range have actually reduced the size of the apartment  drastically.  Some  have increased  the  super  built-up  area,  while in  some other cases where prices had trebled to quadrupled; a slight correction of 10-15% is being claimed and re-launched as affordable housing projects.

In  Maharashtra,  housing  shortage  as  per  census  2001  is  2.10  million  (in urban 1.37 million and .73 million in rural areas). According to BMRDA (1995) housing supply has  been  steadily  increasing in response  to  the  increase  in  house prices  from less  than 20,000 units between 1950s and 1970s to over 40,000  units during 1980s.  The average annual supply  of  housing  in  BMR  during  1984-91  was  47,417  units.  Even  after  this supply a deficit of 45000 units per annum persists.

NEED FOR AFFORDABLE HOUSING IN INDIA

Rate of Urbanization

• According to 2001 census approximately 28% of the population in India lives is urban areas.

• The level of urbanization was around 11 to 12 per cent during the first three decades of this century, increasing noticeably in the decade of independence and rising continuously thereafter from 17.3 per cent in 1951 to 25.7 per cent in 1991.

• The projected scenario indicates a rising trend. The Planning Commission’s Technical Group on Urban Perspectives and Policies has projected the urban population at 31.0 per cent of the total population in 1996-97 and 38.0 per cent in 2006-07. During the last four and half decades, some 5-6 million people have been added to urban India every year.

• The country has one of the largest urban systems with 217.6 million people in 1991, which is projected to increase to 289 million in 2001 and around 605-618 million during 2021-2025.

• There will be about 40 metro cities in the country in 2001 as against 23 in 1991.

The slow-down in urbanization in the past two decades

The slow-down in urbanization in the past two decades during 1981-91 as compared to 197181 (36.4 per cent growth as against 46.1 per cent) and the growing concentration of urban population in larger towns are other urban concerns, in the equitable and sustainable growth of the country. The tasks are challenging, for it is mainly in the mega and metro cities that land is a major constraint for undertaking development work. A large part of civic amenities, particularly housing water supply, sanitation and sewerage, are managed with assets that have outlived their operational efficiency.

Gap between demand and supply

The key urban concern is the growing gap between demand and supply of basic services. While there has been a steady growth in the housing stock, infrastructure and services, the gaps between demand and supply have been rising, even in terms of conservative norms. It is now well-recognised that these gaps are unlikely to be bridged over the next 5 to 10 years. Many goals of housing, potable water and sanitation that were to be attained by 2001 AD, may require the target point fixed 10-15 years ago to be extended.

Poor residing in urban areas

According to Census 2001 23.6 % of the urban population resides below the poverty line. The fact that the numbers of the poor have declined in rural areas, and increased in urban areas over the last three decades suggests that to escape rural poverty, the poor migrate to urban areas. In fact, the total number of migrant workers in India in 1999–2000 was 10.27 crore—a staggering number. The number of seasonal or cyclical migrants in India may be 2 crore or so. But migration, both rural–rural (from relatively poor to relatively richer States and districts) and rural–urban, has the effect of disenfranchising the poor, leaving them without a safety net. Nevertheless, rural–urban migration will, and should continue; the policy imperative is that migrants are provided the basic social services that all citizens are entitled to according to the Constitution of India. Four States account for nearly 58% of India‘s poor population in 2004–05: Uttar Pradesh (19.6%), Bihar (12.23%), Madhya Pradesh (8.3%) and Maharashtra (10.5%). In 1983, these States (including undivided Bihar and Madhya Pradesh) accounted for 49% of India‘s total poor population.

CONCLUSION

Definition of Affordable Housing

• Various schemes have been released at central as well as state levels to address the issue of affordable housing for the urban areas. However, there is no single definition of affordable housing binding across all the schemes. This is a more difficult task considering the fact that the perception of affordability changes from place to place depending on living conditions. Therefore, the local bodies must endeavor to define the term regionally.

• Rapid urbanization and rise in the population of the affordable poor has led to an expanding gap in the demand and supply of affordable housing in urban areas.

Recommendations for Reforms Required in Policy

• The success of the above policies depends on the successful adoption of them by the states/ parastatal bodies/ local bodies and the developers. The cities must be pushing them to ensure reservation of developed land for EWS/LIG categories in both public and private housing projects. Private builders and developers in the city will have to make space for accommodating the poor in their housing projects.

• Budget 2010 has witnessed that sale of an under-construction residential property is proposed to be brought within the gamut of service tax. This could result in effective cost increases and impact demand. This coupled with the proposed increase in rate of excise duty on cement may result in a reduction in the bottom-line of the real estate sector and accentuate the existing liquidity issue. This has an impact on affordable housing too. The policies must include exemptions from these service taxes and excise duties

• People with irregular income such as vegetable vendors, tea shop owners, buscleaning contractors, milk suppliers are excluded from finance from bank. These people earn well enough to borrow Rs. 10 lakh to buy a house. Typically they do not have bank statements, IT returns or other such documents that a regular finance company would want before sanctioning a loan. But they are credit-worthy

• The FDI and ECB rules need to be modified to encourage investment in affordable housing. The norms currently allow 100 per cent FDI in construction development projects including housing, commercial premises and resorts subject to conditions minimum capitalisation, and area for development. The limits of 50,000 sqmetres or 25 acres could be relaxed for this sector.

• ECBs should be permitted for the real estate particularly for completion of all ongoing projects where there is already equity in form of FDI. Currently, the ECB is prohibited for real estate development.

• The monetary policies of the RBI for real estate projects and home loans by Indian banks, closure of ECBs and rise in interest rates together with stock market crash have led to a situation where credit has dried up and buyers are hesitant to invest despite a strong demand.

• In cases where the land is purchased from Government agencies, banks should be allowed to finance the land cost in addition to construction costs.

• The benefits under RAY should be made available directly to the developers rather than through the ULBs to encourage private participation

• Health n living standard

• Help from social organization.

• This all schemes such as jnnurm should be taken out in large quantity by local government bodies like municipal corporation, Nagarparishad ,and non-government organisation in country like India to make slum free country with sustainable environment .

• Improving Access to Social Services: Basic services of health, education and access to credit are crucial for human capital development and reduce the incidence of poverty. Improved access to social services would also help building up the capacities of poor and empowering them to improve their own living conditions and quality of life

• Modify Existing Planning Framework: All existing planning instruments such as Master Plans, Land Use Plans etc. should be modified to ensure that slums and informal settlements can be properly integrated into the wider urban area.
• Consultation with slum dwellers to better understand their needs and lifestyle as end users.

•  Co-ordination of roads, storm drainage, and sewerage to natural gradients resulting in economy and improved function, simple and inexpensive topography management measures such as cut and fill, site grading, and appropriate landscaping ensured gravity based services operated efficiently.

• Designed infrastructure networks helped basic services to reach entire population in an equitable manner.

• Ensured minimum disturbance and relocation of existing housing and slums.  Infrastructure network is easy to maintain, repair and upgrade

• Ensured that the design provided for further growth and expansion of the slums.

• Worked with a long term vision before creating the facility at the designing stage.

•  Provided flexibility to enable upgrading when resources of the slum dwellers increase e.g. by making provisions for private toilets and house to house water supply, the slum dwellers are able to invest in the option when they can afford it The success of the project depends on the information available to those designing it. Data banks and drawing archives were established prior to design so as to ascertain the need and existing provision, as well as physical conditions of the site.

• Professional approach is a prerequisite in all aspects of the work, since slum upgrading is more complex to plan and implement than conventional engineering projects.

• Used appropriate and innovative technologies. For example, small earthenware gully traps were used instead of conventional expensive brick manholes which did not work in the narrow and twisted lanes of the slums

• Setting realistic standards and workable specifications.

• Balanced the standards along with affordability