meltdown is talking of getting into this segment that involves putting up houses for the masses.
Not everyone, however, is impressed. Deepak Parekh, chairman of HDFC, the company credited with setting up the housing finance market in India from the scratch, feels that in its present form, affordable housing is a `misnomer’.
In his letter to HDFC shareholders, Parekh said that although developers are now reintroducing one-bedroom apartments and, in the current falling interest rate scenario, buyers are making a comeback, the real issues are not being addressed.
“Affordable housing is not about box-sized, budget homes in far-flung places where there is no connectivity to work places and little surrounding infrastructure,” Parekh wrote. “Affordable housing has to be able to cut across all income segments and has to make economic sense in terms of proximity to work place. The agenda for affordable housing requires a combined public-private collaboration and a strong political will to enforce change,” Parekh wrote.
There is serious shortages of urban land at affordable prices in India, where encroachments, irrational land use and absence of urban spatial plans are the norm. The total urban land stock in India is 2.3% of its geographical area and it houses 30% of the country’s population, Parekh wrote. So, for the regular expansion of urban land area, “the process of land acquisition and conversion of agricultural land for urban use need to be simplified”. Secondly, the floor space index (FSI) should be increased–even if it means imposing an impact fee on those benefiting from higher FSI. And above all, with higher FSI, urban infrastructure also needs to be upgraded.
Parekh also called for the revival of state housing boards. He pointed out that the recent success of mass housing projects by MMRDA in Mumbai and DDA in Delhi proved that there is huge demand for good housing, provided the price is realistic and within the common man’s reach. “One is hopeful that state housing boards will reassess their role and performance. In the recent period, many housing boards have shifted their focus to merely selling land for profit and sitting on cash surpluses. Such profits should be mandatorily ring fenced and deployed only for affordable housing,” Parekh wrote.
Acknowledging that the housing agenda is a daunting task for the new government, Parekh said the challenges of rural housing are very different from urban housing and hence solutions are also different. “For instance, key reforms such as permitting mortgage of agricultural land for residential purposes and introducing title insurance could give rural housing the much-needed thrust,” he wrote. “One is hopeful that this government will be more sensitive to both the rural and urban housing needs of the aam aadmi (the common man).”
The HDFC chief also looks forward to a real estate regulator. “There is such a compelling need for state level real estate regulators whose role would be to oversee and monitor the affordable housing agenda, promote real estate reforms, ensure transparency, especially by mandating that flats be sold only based on carpet area, and, most importantly, act as a platform to protect buyers from real estate fraud,” Parekh wrote to his shareholders.
Parekh also brought to notice a growing trend of developers asking homebuyers for full upfront payment on start up housing projects “under the guise of offering a substantial discount”. Calling them “hawa mahal (castles in the air)”, Parekh said, “There are instances where homebuyers have made the entire payment despite the developer not having commenced construction at all.” He warned that this seemingly attractive proposition could come with high risk.
Although real estate prices have come down, Parekh feels it could fall further. “Some correction in prices has happened but real estate prices are still high,” the HDFC chairman wrote.