Source : The Hindu Date : 13.06.2009
Wanted: nano houses
| There is a great shortage of dwelling units for the lower middle class, and the government must act |
The new government faces a number of challenges, the foremost being the early revival of the economy amidst the global recession. As rightly observed by the Union Finance Minister, Pranab Mukherjee, our economy is resilient and we shall have to build up and come back to the growth track as early as possible. Leading economists have been suggesting several ways to tackle the situation and the areas which need to be focussed on.
One vital sector — housing — has been ignored by the economists. It may be due to the developments in the U.S. The root cause of global recession is attributed to the sub-prime lending to housing in the U.S. The greed of investors across the world to invest in mortgage-backed securities created a huge housing stock, more than the demand. Later on, due to huge defaults from sub-prime lending portfolio and rush for realising the debts by lenders, property prices came down sharply. Lenders lost billions of dollars, leading to global financial meltdown.
The ground realities are totally different in our country. Since the turn of the century, banks and Home Finance Companies (HFCs) gave undue focus to HNIs (High Net-worth Individuals) acquiring high-end property. In metros and other large urban places, builders and developers developed high-value projects en masse. As a result, the supply levels breached the demand levels in 2007.
Coupled with global recession, property prices in the recent past have sharply nose-dived. The high-end sector, which constitutes only 3-5 per cent of the overall housing market, cannot be a yardstick to conclude that there is oversupply of property. Thinking that real estate development is no more viable is certainly imprudent.
Not of much help
Although home loan disbursals have grown from Rs. 11,000 crore in 1999-2000 to Rs. 135,000 crore in 2008-09, and the percentage of mortgages to GDP has grown from one to eight, it has not really helped the social cause of increasing housing stock, as the lenders went on providing large-ticket loans to HNIs. As per the National Hosing Bank’s estimates in the past five years, the growth of housing sector in physical terms is only three per cent whereas in financial terms, the growth is 30 per cent.
As per the estimate released by the Planning Commission, the shortage of housing units during the 11th Five Year Plan (2007-2012) is estimated to be 26.53 million. More than 70 per cent of the shortage is estimated to be for small, affordable houses for the lower middle class and economically weaker sections. Hence there is vast scope for promoting small houses.
Considering an average cost of Rs. 1 lakh for each unit, the investment required to construct 20 million units would be Rs. 20 lakh crore, more than one-third of our GDP. By encouraging the housing sector, the government would be able to meet both social and economical objectives. The construction activity would provide the largest employment opportunities, next only to agriculture. Since the construction sector has forward and backward linkages with more than 250 ancillary industries, the government would be able to revive the economy.
It is reported that Tatas have received overwhelming response for their nano housing projects and it is likely that both the Government agencies like HUDCO and various Housing Boards and builders and developers across the country will take the cue from Tatas and will come forward with affordable housing schemes. It may be difficult to fix one yardstick to define an affordable home. The affordability varies from one person to another and depends on many related factors such as socio-economic background, needs, savings, loan eligibility, in which place the house is situated like metro/city/semi-urban/rural place, prevailing land cost etc. Considering the majority of factors and averaging all other parameters, the affordable loan can be assumed as indicated in the table.
Although the Union Housing and Urban Development Ministry has plans to provide interest subsidy for lower income sections to acquire dwelling units, much needs to be done to promote affordable housing
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