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Obstacle in urban housing


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This presentation is about issues in housing sector in india

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Obstacle in urban housing

  1. 1. Obstacles in Housing Ravi Sharma
  2. 2. Effects of Urbanization • Pressure on land resource, particularly agricultural land for conversion • Land Sustainability • Adequate Funding Resource • Urban Governance and Management • HOUSING PROBLEMS • Poor Infrastructure • Poverty
  3. 3. What They Say … • India’s urban population registered a decadal growth of 32 percent rising from 285 million to 377 million between 2001 and 2011 - Census of India 2011 • By 2050, 900 million people will be added to Indian cities - Urban Infrastructure in India, FICCI • The shortage, prominent within the EWS and LIG, was estimated at 18.78 million households in 2012 - Ministry of Housing and Urban Poverty Alleviation • India needs to build 30K units daily for 8 years to meet housing needs - KPMG Report 2014
  4. 4. Urban Population • India’s urban population has grown at a CAGR of 2.8 percent over 2001-2011, resulting in an increase in the urbanization rate from 27.8 percent to 31.2 percent (census 2011) • Over 2014-2050, the pace of urbanization is likely to increase at a CAGR of 2.1 percent – double than that of China (Report of the Technical Urban Group)
  5. 5. Agencies Involved Housing Industry Institutional Framework Acts & Regulation Policy Framework Central State Central State Central State - MoUD - MHUPA - Government Housing Finance Bodies (HUDCO) - JDA - RHB - PWD Etc. - Ownership of Land for Development - Nature of Development - Operations of Developers - Earnings and Profits of Developers - Rent Control Acts - Urban Development Acts - Rajasthan Urban Improvement Act, 1959 - NUHHP - JnNURM - IHSDP - FDI - Rajasthan Affordable Housing Policy
  6. 6. Roti, Kapda aur Makaan • The real estate sector is a critical sector of our economy. It has a huge multiplier effect on the economy and therefore, is a big driver of economic growth. • It is the second-largest employment-generating sector after agriculture. • Growing at a rate of about 20% per annum and this sector has been contributing about 5-6% to India’s GDP. • Not only does it generate a high level of direct employment, but it also stimulates the demand in over 250 ancillary industries such as cement, steel, paint, brick, building materials, consumer durables and so on.
  7. 7. Roti, Kapda aur Makaan • If the total population of about 1200 million population is divided by 5, the average number of members in a family, the country requires housing for 240 million families. • Of this, 2.4 million around 30% are either house-less or live in thatched collage or houses made of tree and plant live in and bamboo and mud houses.
  8. 8. Causes The requirement of house building is a massive program and the Indian Government is aware of it but cannot do much about it because of the following reasons: • Lack of investment and funds. • Lack of building materials like red bricks, timber, steel sections, flats, angles, rods etc. as well as glass, tiles, sanitary-wares and cement and sand, as well as lime and plaster. • Lack of a definite housing program. • Non-availability of low cost housing ideas to be built for village and rural areas. • Vacant Plots • Poor Planning • Soaring Rents
  9. 9. Obstacles • Land acquisition ▫ The inclusion of real estate industries like tourism and housing (for unspecified income groups) as public purpose makes a mockery of the concept. It also so happens that every single one of these other “infrastructure” activities is now being undertaken for profit by private companies through the PPP model. Often they are allowed to undertake real estate development on excess land abutting the infrastructure. ▫ The LAA amendment would thus give clear legal sanction to taking land from farmers and giving it to private players for real estate profiteering. To take another example, many SEZs (which are largely real estate projects) are being built through joint ventures between state industrial development corporations and private companies.
  10. 10. Land Acquisition as obstacle in Housing
  11. 11. Obstacles • Land acquisition • Lack of Transparency • Constraint on Bank Credit • No specific agency to monitor and control rent • Inadequate provision of both government and private sector house • High land cost • Private housing getting inaccessible to LIG and MIG • Lack of private sector involvement and participation • Lack of stable, sustainable and viable long and medium term home financing
  12. 12. Obstacles • Lack of Transparency ▫ The industry should work towards increased transparency, clear land titles, improved delivery and project execution while on the other hand the Government must provide fiscal incentives to developers to build low cost and affordable housing for the masses and also review the existing FDI guidelines for investment and development in Indian real estate in order to increase the flow of foreign capital into the sector. • Stamp Duty ▫ Consumers should also be given reduction in stamp duty for opting for green development. ▫ Some of other initiatives which could benefit the developers as well the end consumers would be lowering & standardization of stamp duty across the country as well as reducing transaction burden. The introduction of unified taxation system across all states will also help to incentivize more consumers for home ownership.
  13. 13. Obstacles • Constraint on Bank Credit ▫ Another important constraint that has been existent all along for the housing sector is finance for the developers as well as finance for the households, particularly for the low cost/affordable housing category. ▫ The current financing mechanism prevalent in the country mostly targets middle and high income sections of the society while the households falling under low income and economically weaker sections category find it difficult to secure formal housing finance. Commercial banks and traditional means of housing finance typically do not serve low-income groups, whose income may vary with crop seasons or is below the ‘viable’ threshold to ensure repayment or those who cannot provide collateral for loans.
  14. 14. Obstacles • No specific agency to monitor and control rent ▫ The proposed reform was introduced in the form of the Model Rent Control Legislation in 1992, yet only five states have implemented the same. The only upside is that about ten states have proposed bills as of 2010 ▫ Rent control comes under the states legislative competence, therefore it has to be reformed by the states themselves. • High land cost ▫ At present, there is a shortage of 187.80 lakh dwelling units in urban areas, but this is not attracting developers to take up low- cost units as the sector is facing many challenges on the land acquisition front, soaring land and material cost and liquidity issues, say experts.
  15. 15. Obstacles • Private housing getting inaccessible to LIG and MIG ▫ low-cost project or mid or high-income, the cost incurred in buying land and construction is same, but the returns are very low. This condition does not attract private developers and thus they see HIG housing project as a profitable deal. • Lack of private sector involvement and participation ▫ flow of funds to the affordable housing segment of the real estate sector is dismal and there is need to incentivize and encourage private sector participation in affordable housing for the urban poor. • Lack of stable, sustainable and viable long and medium term home financing ▫ Banks lend at around 18 per cent while PEs (private equity) expect returns of up to 23 per cent. Thus in a project which is costlier than its returns, financing them becomes a major challenge
  16. 16. Obstacles Impact of Budget 2013 • Capital Gain Tax Exemption • Boost to Infrastructure and Construction • Service Tax Increase Credit Crisis Home Owner Mortgage broker Mortgage lender Mortgage Investment Banker Housing prices rises practically Buys the mortgage from lender at a nice profit • Home owner lend money from lenders and get a house • Investment banker borrows money and buys lots of mortgages • Banks started receiving a lot of money from home owners (installments) Down Payment
  17. 17. Thank U