Lessons We Can Learn From China To Achieve Housing-For-All Target
By 2022, Housing For All Mission would have achieved its target of two crore houses in urban India. But, if this is the pace that the project progresses at, India will be unable to achieve even the 20-lakh mark. This was one of the points of discussion among the participants of a recently organised National Summit by The Associated Chambers of Commerce of India (ASSOCHAM). The need of the hour is to understand what the stakeholders should do to expedite the pace. To achieve the target, nearly 10,000 homes should be built in a day and three to four lakh homes in a month, but, we are far away from the target. Agreeing to this, P K Aggarwal, chairman, Affordable Housing Committee, ASSOCHAM and chairman, Signature Global Group says, “We are just a few years away from the target year but haven't completed even 10 per cent of what we set out to do.”
Can we take a cue from the China model?
In China, world's most populous country, the construction norms and deadlines are more achievable when compared to India. The licenses and clearances in China are completed within 30 days, which makes the entire construction process smooth, ensures better-calculated finances and better-controlled plans and delivery schedules available with the developers. Hitender Mehta, partner, Vaish Associates, Advocates says, “The China model is good. Following the same, the projects will not face a delay due to regulatory issues.”
Why aren't developers willing to be a part of the Mission?
Shubranshu Pani, Managing Director, Strategic Consulting, Jones Lang LaSalle says, “Indian developers do not plan projects in advance, and do not keep the project lifecycle, time and cost overruns into account. Second, the margin in the affordable segment is thin and there is no provision for a quick entry and exit when they undertake such projects. Such issues render it a not so attractive option.” He further suggests, because most developers find it tough to come up with an initial investment, there is a need for government intervention. First, technological know-how should be cultivated so that there are cost reduction and more efficiency; second, contractors need to help developers and be aware of opportunities that will help them maximise their productivity. Small developers could form a conglomerate to deliver a large project that is affordable.
Sudhir Agarwal, managing director at Victory One Group, however, disagrees. He says, “New methodologies and technologies are not required because the real issue is not about construction methodologies, but when developers divert their funds. Financial institutions should help cash-strapped developers by giving them loans against their unsold inventory just like how a homebuyer gets a loan against his assets. Fast-track support by financial institutions could be helpful.” If contractors were to actively help developers, they should help the latter understand construction and strategies better so that with better guidance developers do not end up losing their profits by giving it away to the contractors. Such money saved would mean lower unit costs for homebuyers as well.
“If we deliver projects on time, there should be tax holidays, too. If there are heavy penalties that we bear if we default, why can't there be incentives?” he adds.
Why can't banks give loans against unsold stock?
While Agarwal raised a pertinent issue, Manish Baid, DGM, HDFC Ltd says, “Banks earn through the interest and if financial institutions were to give loans against unsold inventory, the proceeds can come only if the assets are liquidated and that is not viable for lenders.”
Two crore houses, five years and an investment of $4 trillion is what Housing For All will take to become a reality. Hopefully, we are there by 2022.