Update on September 4, 2019: If media reports are to be believed, the government is planning to expand the scope of ‘affordable housing’ by including housing projects costing up to Rs 50-55 lakh in metros from existing Rs 45 lakh. This will allow buyers in cities to avail of the subsidy being offered for such houses. Speculations are rife that this move is also expected to revive the real estate sector, which is sitting on hundreds of thousands of unsold housing units in major cities.
Government extends affordable housing subsidy to units built on private land
The centre, on September 21, 2017, announced a new public-private partnership (PPP) policy, to boost private investment in affordable housing that allows extending central funds of up to Rs 2.50 lakhs, for each house to be built by private builders even on private land. The policy, which also aims to open up immense potential for private investments in affordable housing projects on government land parcels in urban areas, gives eight PPP options, for developers to invest in the segment, said the newly-appointed Union Urban Development and Housing Minister, Hardeep Singh Puri.
“This policy seeks to assign risks among government, developers and financial institutions, besides leveraging underutilised and un-utilised private and public land parcels, to meet the Housing for All target by 2022,” Puri told an industry summit organised by real estate lobby NAREDCO.
As per the new policy, the two PPP models for private investments in affordable housing on private land banks, include extending central assistance of about Rs 2.50 lakhs per unit as interest subsidy on bank loans, as upfront payment under the Credit Linked Subsidy Component of the Pradhan Mantri Awas Yojana in urban areas. Under the second option, he said, central assistance of Rs 1.50 lakhs for each house built on private land would be provided, in case the beneficiaries do not take bank loans.
“The eight PPP options, including six for promoting affordable housing with private investments using government land, have been evolved after extensive consultations with the states, promoter bodies and other stakeholders,” Puri said. The other models include developing houses on design build and transfer model on government land, cross-subsidising this segment from revenues from high-end houses or commercial development and annuity-based subsidised housing where builders will invest against deferred annuity payments by the government.
The minister also said developers can also opt for annuity-cum-capital grant-based model, where builders can be given a share of the project cost as upfront payment, or choose cost recovery by builders through rental incomes from houses built on government land. Another option available with the private sector says that against government-mediated payments to builders and transferring houses to beneficiaries in the above four models, promoters will directly deal with buyers and recover costs.
“Based on these PPP models, beneficiaries can avail of central assistance of up to Rs 2.50 lakhs per house as provided under different components of the scheme. Beneficiaries will be identified as per the norms of the scheme,” he said. Puri further said that the government was reviewing FSI/FAR norms in 53 cities with a population of 1 million and above and in state capitals, to enable better utilisation of scarce urban land parcels.
“A view would soon be taken on allowing urban housing projects in peripheral villages and talks are going on this regard, with the union rural development ministry. Online mechanism for time-bound approvals for building plans and construction permits, have already been introduced in Mumbai and New Delhi and the same will happen soon in 53 more cities, with population of above 1 million each,” Puri said. He further said the Model Tenancy Act and the National Rental Housing Policy would be announced shortly.