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“Govt must use surplus land for affordable housing”: Real Estate Research expert at IIMB

Dr Venkatesh Panchapagesan says what the country needs is consistent policy, lower transaction cost, release of govt land through long-term leasing, credit guarantees, social rental housing, zoning reforms and innovative land titling for slums 

09 SEPTEMBER, 2022: Professor Venkatesh Panchapagesan, Chairperson, Real Estate Research Initiative (RERI) and faculty in the Finance & Accounting area at IIM Bangalore, spoke on ‘Inequality in the Housing Market’, in the eighth lecture in the series, ‘Inequality Conversations’, hosted by the Centre for Public Policy at IIMB, here this evening.

Prof. Arpit Shah, faculty, Centre for Public Policy, introduced the speaker, set the context for the lecture, and moderated the discussion.

Using two powerful images – one of the demolition of twin towers in Noida and the other of flooding in Bangalore where uber expensive villas and slum dwellings are under water, to talk about the challenges of urban housing, Prof. Panchapaesan began his talk by giving a background on why housing matters to individuals and the economy, and the legal structure related to housing in India. He highlighted the economic dimension of inequality in housing and reiterated that his focus for the talk would be urban housing.  Listing the benefits of housing, including improvement in health and education outcomes and increase in productivity of individuals, improvement in access to livelihoods and access to credit, and provision of social security.

“From a macro perspective, in India, real estate and construction is the second largest employer (after agriculture) ad job creator. It also has a multiplier effect on the economic output. It also improves individuals’ stake in the community, say, by bringing down crime. So, it is necessary to nurture this sector,” he explained.

Legality of housing

Following the call by the United Nations in 1948 to recognize the right to housing, India included the Right to Property as a fundamental right, but later changed it to a Constitutional right in 1978.  Quoting the case of Rajesh Yadav vs the State of Uttar Pradesh, he said the Supreme Court called out that right to shelter is a fundamental right and State has to provide it. However, the right to shelter is not right to land and the Government is not obligated to provide housing for all. “There is a dichotomy in the governance of land and housing because of our federal structure. While land, housing and urban development predominantly falls under the control of the States, the Centre is responsible for formulating and implementing social housing schemes. Land acquisition, given its importance to a growing economy, is on the concurrent list,” he said.

Inequality dimensions

Prof. Panchapagesan explained that income, religion, caste, gender, sexual orientation and disability are all factors that contribute to inequality in housing in India. Defining affordable housing, he quoted from the Deepak Parekh Committee (2008) Report that classified EWS, LIG and MIG housing. “In reality, housing prices have gone out of hand relative to the income.”

Focusing on urban housing shortage, based on the first detailed study undertaken in 2011 by a Committee constituted by the Government, he noted that a majority of the shortage comes from people living in sub-standard or no housing, and in income category, a majority of the shortage comes from EWS and LIG groups. Moving on to the ‘Housing for all’ policy that the Government wanted to implement by 2022 (now extended to 2024), he said there is a 44 million shortage if we go by a recent report. “This is a significant challenge for any government.”

Tracing the Government approach to housing from where it went, in the 1950s and 1960s, from treating housing as a welfare good to creating financial institutions, in the 1970s and 1980s, like HUDCO, HDFC and NHB, recognising the role of the private sector in housing. “Post liberalisation, the focus was that the Government can only be an enabler and not a provider.”

On the Prime Minister’s Awas Yojana (PMAY) launched in 2015, to incentivize states to take up housing, he spoke of in-situ slum development, credit link subsidies, affordable housing in partnership and beneficiary-led construction. “Not surprisingly, except for the credit link subsidy scheme, the progress on the other three verticals has been very slow,” he remarked. “Many of the houses generated through PMAY ended up being in the higher categories and this means it did not succeed with low income housing,” he said, pointing out that the State housing schemes too have suffered similar setbacks.

Fundamental problems

Listing land cost and availability as a major challenge, Prof. Panchapagesan said affordable housing is the last priority for any developer. “This is compounded by an inefficient approvals process. There is no single-window for affordable housing projects. This frustrates the developers.” Incongruous zoning and development norms and poor infrastructure to support distributed development (where people live on the outskirts and commute with good public transport – a model popular in China) are other challenges. “Developers argue that the business model is highly sensitive to economic shocks which cannot be passed on to the affordable housing beneficiaries,” he said, adding that high taxes, limited incentives for developers and financing constraints are the other challenges.

Way forward

Governments have taken either demand (reduction of stamp duty or GST) or supply side (income tax deduction, priority sector lending, etc) interventions  to deal with the challenge of affordable housing, he said a lot more can be done. “The Government can do more to protect developers from economic shocks. Government need to make land available for affordable housing stock by using excess government land and creatively repurposing existing land. For instance, what is the need to have army cantonments in city centres?”

He continued saying, “When I look at land use in India and see that urban centres constitute only 2 per cent of this bank, I believe we must optimize the use of agricultural land and put in place systematic policies that can repurpose agricultural land in place of the ad hoc dangerous way in which it is happening now.  In fact, the self-reported surplus land of government agencies like defence, railways etc. can take care of more than a quarter of the land needed for our urban housing shortage.”

Offering examples of strategies adopted by China and Mexico to ensure affordable housing,  Prof. Panchapagesan said what India needs is consistent policy, lower transaction cost, release of government land through long-term leasing, credit guarantees, social rental housing, zoning reforms, innovative land titling for slums. 

Watch here: https://youtu.be/RFb87WKG8_g