Boost for Affordable Housing in India: New Policy on the Horizon
In a bid to rejuvenate the sluggish real estate sector, the Union Ministry of Housing and Urban Poverty Alleviation (Mhupa) is set to finalize a brand new affordable housing policy within the next two months. This move follows the government's earlier decision to allow external commercial borrowing for low-cost housing in the annual Budget, aiming to make such projects more viable for developers.
### Challenges in Affordable Housing Development
Despite the Budget allowance, real estate companies have shown limited enthusiasm for affordable housing due to the low profit margins. Consequently, the upcoming policy is designed to make this segment more attractive for developers.
### Key Provisions of the New Policy
- **Enhanced Floor Space Index**: To compensate developers for the high cost of land, the policy plans to increase the floor space index.
- **Ease on Density Norms**: Relaxed density norms to facilitate more housing units per project.
- **Capital and Interest Subsidy**: Provision of subsidies to support developers in managing project costs.
- **Government Land Utilization**: Auctioning of government land based on the capacity to build the maximum number of low-cost houses.
- **Streamlined Approvals**: Reduction in approval time from the current 2-3 years to just six-eight weeks, minimizing project delays.
### Overcoming Existing Hurdles
A recent case in point is the stalled plan by the Maharashtra Chamber of Housing Industry and the Confederation of Real Estate Developers’ Associations of India to construct 500,000 affordable homes in Maharashtra, highlighting the need for efficient single window clearance systems.
### Stringent ECB Borrowing Norms
To prevent fund diversion, the government is set to implement strict regulations on ECB borrowing, including:
- **Specific Project and Developer Approval**: Only approved projects and developers will have access to ECB funds.
- **Designated Borrowing Channels**: Restricting borrowing to specific channels like the National Housing Bank to ensure fund usage integrity.