Urban Housing

♤ The most important issue is high cost of lands, which in result affects availability of affordable housing.

♤ According to Niti Aayog, 4 supply side factors have contributed to the artificially high urban property values in India.

o Large pieces of land are tied up in litigation

o Many sick PSEs own large pieces of unused land in prime urban areas

o Central & state government own substantial urban land that remains unused or encroached.

o Land Acquisition Act, 2013 fixes compensation at higher rate. It makes housing projects unaffordable.

♤ Niti Aayog offers following solutions to these issues:

o Expedite resolution process of tied lands.

o Close these PSEs (Already under process)

o Monetize these urban lands to finance infrastructure & other critical expenditures.

o Amend the act

♤ In addition to this, there is issue of stringent land laws/rules. Vast tracts of lands are lying unused on the periphery of the urban space. But to use these lands, it needs to be converted from agricultural to non-agricultural land. But state revenue departments are reluctant to do so.

♤ The scarcity of horizontal space should be countered by vertical expansion. Unfortunately, Floor Space Index (FSI) permitted is very low – ranging from 1 to 1.5. Thus tall buildings are absent in India. There is need to relax permitted FSI.

Low Rent Housing

♤ Ultra high land prices lead to low rental yields which in return act as a barrier to the emergence of institutional investors in low rent housing. Also according to Census 2011, about 11.09 million urban properties remained vacant across India.

♤ In most states, rent control laws disproportionally protect the tenet. Rent is kept at low level and eviction is difficult. This leads to paradoxical situation of unsatisfied demand for rental housing while many units lie vacant.

♤ There is need for replacing current rent control laws by modern tenancy law, which would give full freedom to tenant and owner to negotiate the rent and length of the law. In 2015, Ministry of Housing and Urban Poverty alleviation drafted Model Tenancy Law.

♤ Without correction of land prices, rental yields will remain low. Reform of land markets to better align the rental yields to the interest rate remains critical to low-rent commercial housing.

♤ Ownership Titles: In a longer run, there is also need for legislation providing for conclusive ownership titles giving protection to the owners. Rajasthan is the only state that passed legislation in this regard.

♤ Dormitory Housing: It will address the housing woes of migrant workers who come to cities without families. It will also discourage the growth of slums.

♤ Rental Voucher Scheme: The government is considering a rental voucher scheme for the urban poor in 100 smart cities. In view of the fact that urban poor receive very limited government, this scheme is an important positive step.