State affordable housing policy, a step in the right direction

The timing has been right. The Karnataka government has cleared the affordable housing policy (KAHP). The Cabinet has passed the earlier housing policy of October 2013 by incorporating sensible modifications and additions in its efforts to provide “affordable homes” to the needy.
The urgency of a concrete policy by the government was more pronounced to immediately align with Prime Minister Narendra Modi’s pet policy of Pradhan Mantri Awas Yojana (PMAY) under the credit-linked subsidy scheme (CLSS) which has the mission of providing two crore and four crore houses in the urban and rural areas, respectively, by 2022.
The KAHP in its new avatar lays stress on the state participation through Public Development Agencies (PDAs) – Rajeev Gandhi Rural Housing Corporation Limited (RGRHCL), Karnataka Housing Board, BDA, BBMP, Karnataka Slum Development Board. The RGRHCL is doing significant work in the affordable housing space.
The KAHP is applicable only to urban areas. The beneficiaries would be below poverty line (BPL), economically weaker sections (EWS) and low income group (LIG) households living as residents in urban areas for a period of not less than one year, fulfilling certain income criteria. The final selection of the beneficiaries under affordable housing schemes is by the state- level nodal agency (SLNA).
The KAHP has designed seven models of affordable housing to cater to different sections of the target group. The purpose of the beneficiary-led house construction and enhancement is to upgrade kutcha houses (walls with grass, mud, unburnt bricks) to pucca houses (brick, concrete, with mortar and metal). The beneficiaries will get a grant of Rs 1.5 lakh under the PMAY scheme.
For the beneficiary led new construction – specially designed for construction of a new pucca houses with direct financial assistance – will get additional financial support through the various ongoing schemes of the state government under the Basava Housing, Indira Awas Yojana, Vajpayee urban housing scheme along with the popular Credit Linked Subsidy Scheme (CLSS) of the Central government.
Two other models are dedicated for upgrading and redevelopment of slums by providing basic infrastructure such as water, drainage system, roads and lighting. Three more models – plotted development of sites with houses, group housing and township projects and affordable group housing – in partnership with private developers are thoughtfully and scientifically designed to boost the housing stock to cater to the urban poor. The paradigm shift and game changer of KAHP is the active involvement and participation of private developers under the PPP model by granting benefits and incentives to the builders.
The State government seems to have understood the dynamics of housing activity. Providing housing to the needy can no longer be the sole monopoly of the state. The builders, by partnering in these “non-remunerative ventures,” get adequately compensated by the government by way of additional Floor Area Ratio (FAR) equivalent to the built-up area of the AHUs and additional transferable development rights (TDRs), by which builders can build extra floors and sell at commercial rates.
The KAHP proposes reduction in stamp duty from 7 to 5.5%, single window appro-vals with clear turnaround time for sanction of building plans, land conversions, issuance of commencement, completion and occupancy certificates. Housing activity through linkages with 200 ancillary industrial units will have multiplier effect on the economic development of Karnataka with positive impact on employment, income and savings.
There are certain critical inconsistencies, anomalies and show stoppers in the KAHP. The eligibility definition of an affordable housing unit is between 161 sft and 646 sft carpet area on a plot dimension 269 sft-1076 sft. The Central government under the CLSS has removed this requirement as cost of construction varies from place to place.
There is an anomaly in the income criteria too. Annual income of household up to Rs 1.5 lakh and Rs 3 lakh is the criteria considered for EWS and LIG by KAHP whereas it is double at Rs 3 lakh for EWS and Rs 6 lakh for LIG under CLSS. This is serious as it affects the very cherry-picking of the beneficiaries.
A large portion of households in the income band width of Rs 3-6 lakh per annum gets excluded from the scope of the KAHP. This will impact the beneficiaries who are eligible for an upfront subsidy of Rs 2.2 lakh by way of direct transfer under the CLSS if the AHU is in one of the 231 towns specified in the 30 taluka of Karnataka.
Woman as title holder
The KAHP should also incorporate woman of the household as one of the title holders of the property to be a beneficiary under the CLSS which has a rider that the applicant should not own any other residential property in the country.
Though the policy attracts private developers with additional TDRs and FARs, the condition that the FAR has to be “consumed” on the same site on which the AHUs are built for their commercial use will neither be attractive nor practical. Coexistence of residents of different economic and social strata would be difficult and can lead to social strife.
The affordable housing projects should be taken up within the city on government land. Under the PPP, the government should offer land at reasonable rates within the radius of 10 km to private developers to build quality affordable houses. Otherwise, the fate will be similar to certain projects wherein the houses are lying vacant and in dilapidated condition for want of occupancy.
The government should eliminate corruption which is rampant in the beneficiary selection stage. Also to be eliminated are middlemen and multiple funding of the same asset. Quality construction needs to be adhered to through fair practices code. Otherwise, the noble intentions of the new housing policy will be defeated.
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