Housing for the poor can revive a stagnant realty market
If one went by the sponsored ganpati mandaps or the double-layered jackets of daily newspapers in Mumbai, one wouldn’t imagine that the building industry is in any crisis. Yet, it is for a variety of reasons.
It is no secret that the industry has unsold stock on its hands, which has led to an arrest in prices, if not a fall. Only recently, the industry implored its members to sell their apartments by carpet rather than built-up area, which is a sure sign of its stagnation.
According to real-estate dealers, the number of under-construction buildings is 70,000, while those which have been completed but are unoccupied — in other words, have been bought for speculation — is only 2,500, which seems a big underestimate. Housing activists believe that the total of both is 1.3 lakh units.
Builders have to snake their way through the Kafkaesque labyrinths of the BMC, state and central government agencies. This led to one taking his life in Thane only the other day. A second is the toll of taxes, totalling some 40 per cent, which are levied on the industry.
However, for many reasons, the industry has itself to blame for this current state of affairs. According to suggestions for the revised draft Development Plan, activist PK Das shows that the industry is at best catering to only 13-15 per cent of the city’s population.
If one takes 60 per cent living in slums and on pavements, some 25 per cent living in old and dilapidated (including cessed) buildings and 5-7 per cent floating population (in company accommodation), the proportion is even lower.
At a recent meeting in the city organised by the citizens’ initiative of Action Aid, Amite Bhide from the Tata Institute of Social Sciences traced the history of the real estate market in the country and commercial capital. Till the 1980s, the state was meant to intervene in the market to accommodate the poor, but only provided at best a tenth of the demand for such housing.
On the contrary, the state raised several hurdles for the industry, which led to it being relegated to the singular city from where a builder operated. To meet this crisis, the poor had no alternative but to provide their own informal housing, wherever they were able to squat in the most abysmal surroundings.
With market forces gaining ground, things started changing; by 2000, a real estate economy was firmly established throughout the country. Since then, it has been growing at more than 20 per cent per annum. Between 2005 and 12, the volume of construction went up 10 times — from 5 million cubic ft to 52 million.
As much as 4 per cent of all foreign direct investment (FDI) has gone into real estate. A quarter comes from private equity, both of which indicate its profitability. For urban households, it is the most preferred form of investment.
By 2020, India will have the third largest real estate market in the world, with an investment of $180 billion. Its share of GDP has gone up from 14 per cent in 2014 to 19 per cent. It is also the second biggest employer, after agriculture (displacing textiles, after the decline in that industry).
With the arrival of foreign investors, there has been a demand for clear land titles, registrations of properties at the national rather than a city or state level and other regular procedures. Now, local firms like DHL and Indiabulls operate throughout the country; a couple of Indian firms have also gone global.
Bhide notes the anomaly that housing is treated as a right, even though equally pressing needs, like jobs, water and education aren’t given the same pride of place. Some 2.5 million houses are required to be built in the country in the next five years, but in the current context, for every affordable house built, there are far more which are unaffordable to the majority, occupying 800 sq ft and more.
A pointer is that the building mania in China has abated, with several ghost towns. In Mumbai, the few moderate rental or ownership schemes like the high-rises for former mill workers also stand at the peripheries of Mumbai but are disconnected with jobs.
Linking informal with formal housing, a la the Slum Rehabilitation Authority in Mumbai, is counterproductive. Slum dwellers, being the majority of the population, ought to be given protection of tenure and, wherever possible, the right to their land. They must have access to affordable finance and other facilities.
The single biggest hurdle for housing the poor in Mumbai is the cost of land. In Brazil, there are special planning zones for the urban poor, which genuflect to the market, but also protects the interests of the poor. Shirish Patel, the urban planner, suggests the formation of a Community Land Reserve, whereby the ownership of land on which squatters reside is transferred by way of a gift or subsidy in its purchase price.
Ownership of the constructed tenement vests with the homeowner, but the ownership of land remains with the Reserve. On resale — a vexed question in slum redevelopment schemes — gains on account of appreciation accrue to the Reserve, while the appreciated value of construction alone is due to the homeowner. The house can be sold or rented to a new incumbent at a price that excludes the value of underlying land.
In the US, these are named Community Land Trusts, the nomenclature of which acquires a different meaning in this country. Patel likens the arrangement to a Forest Reserve, which implies reservation of land exclusively for a specific purpose. It addresses housing the poor by its governance and the adoption of a resale formula, which leaves land appreciation in the hands of the Reserve, not the original owner.
In his DP document, Das notes that slums only occupy 8 per cent of Greater Mumbai’s area. He warns that the plan proposes to make a fifth of all housing affordable, but is reiterating the cross-subsidy formula, which has failed abysmally. Instead, he also proposes reserving all land occupied by slums for such housing, which will generate 1 million affordable homes along with amenities and infrastructure.
The colonies under the Maharashtra Housing & Area Development Agency (MHADA) occupy 2,000 hectares and can generate another half a million homes. Why builders continue to provide only for the minority when there is a huge potential waiting to be tapped is something which only they can answer.
The author is chairperson, Forum of Environmental Journalists of India (FEJI)