Andhra Pradesh Priorities: Social Housing - Kundu

1. Social Housing
Analysis of PMAY (Urban) Verticals in Large Cities of Andhra
Pradesh
Amitabh Kundu & Arjun Kumar
Institute for Human Development (IHD)
Andhra Pradesh Priorities Eminent Panel Presentation, Vijayawada June 17-21, 2018

2. Pradhan Mantri Awas Yojana - Urban
Housing for All by 2022
Soon after assuming power in May 2014, the National Democratic Alliance (NDA)
government announced a goal of giving a boost to the housing sector in urban areas, with
focus on urban poor.
The goal of providing houses to all in a time-bound manner was announced in the address of
the President of India to the joint session of Parliament on 9th June 2014. He announced
that his government (i.e., the newly elected NDA government) would provide every family ‘a
pucca house with water connection, toilet facilities, 24x7 electricity supply and access.’
To meet this objective, the Union Government launched Housing for All (HFA) by 2022 -
‘Pradhan Mantri Awas Yojana Urban’ (PMAY U) as a comprehensive mission for the purpose.
The mission seeks to provide houses to all eligible families/beneficiaries (consisting of
husband, wife, unmarried sons and/or unmarried daughters) that do not own a pucca house
in the name of any member of the family.

3. The Mission will be implemented during 2015-2022 and will provide central assistance through
States/UTs for:
1. In-situ Rehabilitation of existing slum dwellers using land as a resource through private
participation (ISSR) - undertaken by a public agency jointly with private developers using land as a
resource, engagement of the slum community is encouraged, The central government subsidy is Rs
100,000, extra FSI/FAR.
2. Affordable Housing in Partnership (AHP) - PPP arrangement, 35 percent of the houses to be
reserved for the poor, the central government subsidy for housing for the poor is Rs 150,000.
3. Subsidy for Beneficiary-led individual house construction/enhancement (BLC) - poor households
having legal title to land, can construct/ extend house as per sanctioned plan, claim a subsidy of Rs
150,000.
4. Credit Linked Subsidy Scheme (CLSS)
CLSS component will be implemented as a Central Sector Scheme while other three components will be implemented as
Centrally Sponsored Scheme (CSS). For this study we are considering only CSS verticals ie. ISSR, AHP and BLC.

4. Progress under the Mission
•4302 cities included in the mission with 469 Class-I cities. Houses sanctioned under PMAY U in
2015-16, 2016-17 and 2017 (until Dec) were 0.60, 1.02 and 1.97 million respectively. Recent
acceleration in sanctions , under BLC and AHP. In March 27, of 4.2 m sanctioned, only 8 per
cent are completed and another 36 percent units are in different stages of completion. 56 per
cent units are yet to be grounded. Total units sanctioned now is 4.8 m. Sanctioning not backed
by budgetary support.
•Houses sanctioned under BLC, AHP, ISSR and CLSS were 56, 38, 2 and 4 percent respectively.
Mission acknowledges need for focus on slums but progress under ISSR is very low.
•Andhra Pradesh (111 towns) has reported very high proportion of houses (about 20 percent of
national, 0.7 million houses) sanctioned under PMAY U. The vertical wise composition was 0.2
and 0.48 million houses for BLC and AHP respectively, and none under ISSR. Unfortunately,
ISSR is yet to take off the ground with no unit being sanctioned under it till date. The average
cost of per house sanctioned came out to be Rs. 4.5 and 6.6 lakh for BLC and AHP respectively.

5. Operationalisation of the Mission
•Housing shortage, estimated by the Ministry is 12 million (recently according to
Demand Survey) against 18.7 m of the TG-12. Slum improvement to account for 90 per
cent (target of 2 crores as envisaged in PMAY U guidelines). Importance of four
verticals of PMAY U has changed in the process of implementation. The progress
under ISSR has been low, compared to all other verticals.
•The total benefit accruing under PMAY U depends not merely on the total number of
units but the verticals through which they are constructed achieved.
•Vijayawada city has been selected for the state of Andhra Pradesh, comparable to the
average large cities of India and to Jaipur, capital city in the state of Rajasthan, which is
taken as the second case study. Although Vijayawada is not the state capital, it falls in
the Capital Region and would perform many of the functions of the capital until its new
capital city viz Amaravati is fully developed. It is a Metropolis having more than 1 million
population like Jaipur. Comparable information on housing prices for both the cities is
available from several sources.

6. Scope of the Study: Public private sector efficiency debate
•Engagement of private sector directly or in partnership with public agencies as in
AHP & BLC is expected to have relative advantage in flexibility, cost efficiency,
timeliness in delivery etc.
•Public agencies through community participation, as in ISSR, however, can bring
down costs and increase social benefits by reducing leakages/ displacement of
slum dwellers.
•The study examines these alternate perspectives based on evaluation of three
centrally sponsored verticals.
• The authors determine Benefit-Cost Ratios for the three verticals (at three
alternate rates of discount) to help central and state govt. prioritize interventions
and re-allocate funds across verticals to maximise social impact

7. Distinctive Features in Benefit Cost Analysis
•Costs and benefits are calculated per house basis, under each vertical for large cities of
India. Size of the dwelling unit is taken to be 300 sq. ft. Time of house construction is 1.5
years. This would be realistic if the concerned agencies implement the projects with a
sense of urgency, backed up of by political will, resulting in some reduction in the time.
Aided by modern technology, it is possible to do in six months which will be unrealistic in
Indian conditions.
•The unit costs have been taken from projects that built average number of units and not
by considering the cost of building a stand-alone unit. Estimation of benefits have been
computed taking time horizon of 10 years after house possession.
•The net present value (NPV) of the stream of benefits and costs have been worked out
after discounting by different rates of interest viz. 3, 5 and 8 %. Actual NSS health
expenditure used rather than standards.
•State compared with the national level estimates

8. Database
Officially available information have been used for computation of benefits and costs,
sourced from National Housing Bank (NHB) RESIDEX, Census of India 2011, National
Sample Survey 60th and 71st round, Labour Bureau, Ministry of Urban Development
(MoUD), MoUD Reports on Minimum Standards and Service Level Benchmarking, and
High-Powered Expert Committee’s (HPEC) Report on Indian Urban Infrastructure and
Services, Housing and Urban Development Corporation (HUDCO), National Buildings
Organisation (NBO), National Buildings Construction Corporation (NBCC), Construction
Industry Development Council (CIDC) among others.
A few of the parameters have been determined in consultation with the officials of
various public agencies, select subject experts, functionaries in concerned civil society
organizations and other stakeholders engaged in slums and affordable housing projects
at ground level.

9. Benefit Stream under Different Verticals
• The present market value of the house is the sum total of the value of the residential
services rendered over its lifetime. The present value is considered to be the same as after
one and a half year. The housing prices has been obtained from NHB RESIDEX database.
• Health and Employment benefits are additionalities under ISSR. These are unlikely to be
reflected in market prices as the demand of the slum dwellers on the formal housing
market is very small.
• The value of the building material, which slum dwellers can get by dismantling their
existing structure is taken to be Rs. 10,000. It has not been discounted as this benefit is
realized at the beginning of the construction process.
• Under AHP, there is a profit component (Rs. 1.1 lakh) accruing to the builder which is
additional benefit to the society. However, the builder is in a different income group than
the beneficiary, who are taken as poor. Benefit accruing to the builder vis-à-vis that of the
beneficiary is estimated as Rs. 0.85 Lakh by applying the logarithmic welfare function
underlying Theil’s inequality index

10. Benefit items Source of Data
1 Value of a planned ownership dwelling unit
at market price
Circle rates, NHB RESIDEX
(https://residex.nhbonline.org.in/), Census 2011
2 Household health NSS data 60th and 71st round and Authors calculation
3 Employment opportunities Authors calculation
4 Re-utilizable building material Authors calculation
5 Benefits to the builder Authors calculation of profit margin as Rs. 1.1 lakh, based
on the cost of construction and price of the house

11. Costs under Different Verticals
• Land cost in large cities is taken as 50% of the current value of the house, based on the
data from HUDCO. For BLC, the cost of 300 sq. ft. in inner city is estimated as 50% of the
market price of houses of that dimension, estimated using NHB RESIDEX database.
Assuming the FSI to be 3 under AHP, the land cost is taken to be 1/6th (1/3rd of 50%) of
the market price of the house. For ISSR, the land cost is taken as zero since the
government policy, embodied in the mission is to provide land title to slum dwellers.
• The cost of construction is assessed as Rs. 1,000 per sq. ft., for the large cities under ISSR
at All India level. This is as per the national standards for construction of houses with all
amenities, envisaged under PMAY U, based on the prescribed designs and norms of 300
sq. ft. units. For BLC, the amount is 10% below the average cost: Rs. 900 per sq. ft. since
the process of construction, purchase of materials etc. are supervised by beneficiaries.
For AHP, 50% additional costs have been considered since the units will be in multi-
storied structures, which brings the costs per sq. ft. to Rs. 1500.

12. Cost items Source of Data
1 Land Circle rates, NHB RESIDEX (https://residex.nhbonline.org.in/),
NBO, NBCC, and HUDCO
2 Construction NBCC, NBO, CIDC and HUDCO, Report on the Working of The
Minimum Wages Act, 1948 for the Year 2014, (Labour Bureau,
Ministry of Labour and Employment) gives data of wages in
construction activities at national and state levels
3 Internal infrastructure Authors calculation based on scattered information with HPEC
and MoUD
4 External infrastructure Authors calculation, HPEC, MoUD
5 Community mobilization, project
management and completion of
procedures
Authors calculation
6 Transit accommodation and
rehabilitation
Information with MoUD and grass root institutions engaged in
slum development

13. 1st analyzed solution
Beneficiary led Construction/Enhancement (BLC)

15. 2nd analyzed solution
Affordable Housing in Partnership (AHP)

17. 3rd analyzed solution
In-situ Slum Redevelopment using land as Resource (ISSR)

23. The funds allocated for PMAY U will have much greater social impact
and lead to increase in BCR, if more units are built under ISSR.
The AHP, too, has a higher BCR compared to BLC, at different rates of
discounting. The authorities at the central and state level must take
immediate steps to upscale ISSR, after removing the hurdles
encountered in the slum redevelopment.
Legislative hindrances and procedural delays for acquisition of slum
land must be addressed, in achieving the goal of Housing for All by
2022, which is linked to SDG 6.
Key Recommendation

24. Thank You!
Pradhan Mantri Awas Yojana: The arithmetics of housing for all
June 3, 2018, 10:37 PM IST Economic Times in ET Commentary | Economy, Edit Page, India | ET
https://blogs.economictimes.indiatimes.com/et-commentary/pradhan-mantri-awas-yojana-the-arithmetics-of-housing-for-all/