Governments New Policy for Private Investments in Affordable Housing

By Admin October 04, 2017 news
Governments New Policy for Private Investments in Affordable Housing

To achieve “Housing for All by 2022” goal, the central government has declared a new public-private partnership (PPP) policy for affordable housing that allows extending central support of up to Rs.2.50 lakh per each house to be constructed by private developers even on private lands.

Under this strategy declared by Minister of Housing & Urban Affairs Hardeep Singh Puri, eight PPP (Public Private Partnership) models have been provided for the private sector to deal with affordable housing section. This scheme has also opened the opportunity for private investments in affordable housing segments on government lands in metropolitan areas.

While attending NAREDCO’s Summing (Real Estate Body), Hardeep Singh Puri clarified that this strategy tries to assign risks between the administration, builders, and banks, to those who can supervise them the best besides leveraging under-utilized and un-utilized private and public lands towards achieving the target of Housing for All.

“We are not being prescriptive or limiting with these strategies. The land is a state subject, the government can come about with more strategies that would assist in approaching affordable housing efforts further,” he added.

The two PPP (Public Private Partnership) models for private investments in affordable housing on private lands include extending central assistance of about Rs 2.50 lakh per each house as interest subsidy on bank loans as upfront payment under the Credit-Linked Subsidy Component (CLSS) component of Pradhan Mantri Awas Yojana (Urban). Under the second option, the central assistance of Rs 1.50 lakh per each house to be built on private lands would be provided, in case the beneficiaries do not intend to take bank loans.

public private partnership

Puri stated that eight PPP options, including six for promoting affordable housing with private investments using government lands, have been evolved after extensive consultations with States, promoter bodies, and other stakeholders.

The 6 models using government lands are:

1. DBT Model: Under this option, private builders can design, build and transfer houses built on government lands to public authorities. Government land is to be allocated based on the least cost of construction. Payments to builders will be made by the public authority based on the progress of the project as per agreed upon milestones and buyers will pay to the Government.

2. Mixed- Development Cross –subsidized Housing: Government land to be allotted based on a number of affordable houses to be built on the plot offered to private builders, cross-subsidizing this segment from revenues from high-end house building or commercial development.

3. Annuity-Based Subsidized Housing: Builders will invest against deferred annuity payments by the Government. Land allocation to builders is based on the unit cost of construction.

4. Annuity-cum-Capital Grant Based Affordable Housing: Besides annuity payments, builders could be paid a share of the project cost as an upfront payment.

5. Direct Relationship Ownership Housing: As against government mediated payments to builders and transfer of houses to beneficiaries in the above four models, under this option, promoters will directly deal with buyers and recover costs. Allocation of public land is based on the unit cost of construction.

6. Direct Relationship Rental Housing: Recovery of the costs by builders is through rental income from the houses built on government lands.

Under these six government-land-based PPP models, expectation from Indian real estate have risen and recipients can gain the central support of Rs.1.00 to Rs.2.50 lakh per house as provisioned under different components of PMAY(Urban). Recipients will be recognized as per the norms of PMAY(Urban).

Puri expressed apprehension over the private sector until now not showing interest in affordable projects in spite of huge scope for the same under Pradhan Mantri Awas Yojana(Urban) and a facilitating eco-system put in place through numerous concessions and incentives offered counting the funding of infrastructure status for this division.

The minister also announced that last week he has declared a time-bound analysis of FSI/FAR norms in 53 cities with a population of million and above each and State capitals to allow enhanced utilization of limited urban land banks.

moderl tenancy

He cleared that a view would soon be taken on permitting urban residential development in peripheral rural areas and talks are going on this view with the Ministry of Rural Development. An online method for time-bound sanctions for building plans and construction permits has already been launched in Mumbai and Delhi and the same would launch soon in further 53 cities with the population of above one million each, he said. He also added that the government is set to Model Tenancy Act and National Rental Housing Policy and this would be declared soon.

While influencing private builder to grab the investment opportunities in affordable housing in the current enabling environment, Puri said, ’need of the hour is to stop discussion and swing into action”.

 

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Baldev Singh writes the content on real-estate from several years and he is one of the few writers who provide the thought-provoking content on best properties deals.
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