An affordable housing policy is in the works to attract developers and to meet the shortage of around 25 million houses in the country.
The Union Budget had announced access to external commercial borrowing (ECB) for affordable housing but the industry wasn't excited due to low margins in this category. Now, the Union Ministry of Housing and Urban Poverty Alleviation (Mhupa) is in the process of framing an affordable housing policy, expected to be finalised in two months.
"We realise that ECB will work only if affordable housing is attractive. Therefore, we are coming up with this policy as a package, along with ECB, in the segment on the lines of what the Rajasthan government has done," said an official at Mhupa.
The policy will include increasing the floor space index (FSI) and easing of density norms. Compulsory parking lot norms will also be relaxed. "The policy will have provision for interest subsidy and capital subsidy to builders," the official said.
The policy will also say that government land will be auctioned and given to those developers who promise to build the highest number of units for the economically weaker section (EWS) and for the low income group (LIG). The ministry defines affordable housing at 300 sq ft for EWS, 500 sq ft for LIG and 600-1,200 sq ft for the middle income group (MIG).
Also, a mechanism to get clearances will be simplified, in place of the present 20-25 separate clearances.
Recently, Mahindra and Mahindra's realty arm, Mahindra Lifespaces, announced plans to venture into affordable housing with homes priced between Rs 7 lakh and 15 lakh in Maharashtra and Tamil Nadu. Others offering units in the affordable segment are Tata Housing, the Usha Martin Group and Jerry Rao's Value and Budget Housing Corporation. Other developers stay away from affordable housing due to low margins.
Anurag Mathur, managing director, Cushman & Wakefield India, said the need of the hour was a more holistic approach, rather than intermittent measures as now. "It is a matter that needs very urgent attention and a unified action plan to address some of the fundamental issues plaguing this sector, such as availability of developed land and its cost, multiple and layered taxation on input materials as well as the finished product, multiplicity of approvals, etc," he said.
