If there is political intent, then ‘that’ dream home for ‘those’ millions is actually not that far . . .
India, for all the hype of being the second fastest growing economy of the world, with one of the largest foreign exchange reserves, still remains among the bracketed nations where having a decent home remains an elusive dream for millions. In most of the metropolitan cities like Delhi, Mumbai, Bengalooru, Chennai, Hyderabad, Pune and even Kolkata, the price of having a decent dwelling today is beyond the reach of the common man. At times, rationale fails to justify the reasons for such an exponential price rise. The prices of apartments and stand-alone houses have shot up by 60% and 50% in Delhi and Mumbai in the last couple of years. In places like Dwarka, on the outskirts of Delhi, the price of a 900 square feet apartment in 2002-03 was around Rs 10-14 lakh. Today, the same apartment costs nothing less than Rs 60-70 lakh. By any standards, these prices are no way affordable for the teeming millions who constitute India’s middle class.
As such, there is a huge shortage of houses in India (a whopping 20 million homes) which in itself makes owning a shelter an almost impossible phenomenon. On top of it, when such a huge scarcity is confronted with an unprecedented demand, prices skyrocket, making it a happy hunting ground for speculators. Speculators, who have been investing heavily, add to the scarcity, making it even more difficult for the end user to own a house in this overheated market. The apex bank then continuously hardens the interest rates in order to arrest this overheating. But the hardening of interest rates further burdens the EMIs or tenures making housing affordability almost impossible for the end user. Consider this: interest rates on home loans which were around 7% in 2002-03 has now shot up to around 10%-10.5% and inching even further. The irony is that for those who were fortunate to get home loans at softer, but variable, rates are feeling the heat too. And now the tenure of repayments have nearly doubled, plunging people into a sort of perennial debt trap.
The most pertinent question is, why is the housing market so distorted? Why is it that, when the prices of every other FMCG and consumer durable goods are coming down today, and becoming affordable to even the poor, the price of the ‘home sweet home’ remains unrelenting? Though the reasons are manifold, one of the prime reasons for the scarcity is sheer lack of spread of development, which is restricted to only pockets of a metropolis and its adjoining areas resulting in mass migration and putting pressure on the already crumbling city infrastructure. Another reason for this intriguing mystery is government control on land use. Archaic laws like the Urban Land Ceiling Act (which has lost its efficacy a long time ago) make it a point that even when land is available for building dwellings, it cannot be used for the same. There are huge tracts of land (running into thousands of hectares) lying vacant in cities like Delhi and Mumbai. They are mostly owned by government agencies and departments and have been lying vacant for decades. Yet, never an effort was made to build skyscrapers (and in them thousands of apartments) which could have eased the problem a little bit, and supply side efforts would have made sure that prices come down. Yet, the governments, be it the Central or the State, would not let things like that to happen. They don’t mind if, on those government tracts, slums are put up and millions of migrants forced to live in wretched conditions even if much below their dignity. No wonder that more than 60% of Mumbai’s population live in slums and not all of them are poor. In places like Delhi, restrictions on constructions of high-rise buildings make it a point that the city is sculptured with posh bungalows which are a treat to eyes but mass housing remains a nightmare.
It is not that there are no solutions. Solutions are available but the intent is missing. If efforts are made to have development and economic activities in the rural hinterland, as well as many suburban regions coupled with world class transport infrastructure, it would ease the influx of people in big cities and at the same time many can come, work and go back to their hometown by night. Even for the existing cities, some time ago the Confederation of Real Estate Developers has come out with a solution of building low cost houses at Rs 50,000 for a 250 square feet house. If the government takes initiatives to replicate this model across India, then most of the current crisis can be arrested. To be precise, if there is political intent, then ‘that’ dream home for ‘those’ millions is actually not that far.
As such, there is a huge shortage of houses in India (a whopping 20 million homes) which in itself makes owning a shelter an almost impossible phenomenon. On top of it, when such a huge scarcity is confronted with an unprecedented demand, prices skyrocket, making it a happy hunting ground for speculators. Speculators, who have been investing heavily, add to the scarcity, making it even more difficult for the end user to own a house in this overheated market. The apex bank then continuously hardens the interest rates in order to arrest this overheating. But the hardening of interest rates further burdens the EMIs or tenures making housing affordability almost impossible for the end user. Consider this: interest rates on home loans which were around 7% in 2002-03 has now shot up to around 10%-10.5% and inching even further. The irony is that for those who were fortunate to get home loans at softer, but variable, rates are feeling the heat too. And now the tenure of repayments have nearly doubled, plunging people into a sort of perennial debt trap.
The most pertinent question is, why is the housing market so distorted? Why is it that, when the prices of every other FMCG and consumer durable goods are coming down today, and becoming affordable to even the poor, the price of the ‘home sweet home’ remains unrelenting? Though the reasons are manifold, one of the prime reasons for the scarcity is sheer lack of spread of development, which is restricted to only pockets of a metropolis and its adjoining areas resulting in mass migration and putting pressure on the already crumbling city infrastructure. Another reason for this intriguing mystery is government control on land use. Archaic laws like the Urban Land Ceiling Act (which has lost its efficacy a long time ago) make it a point that even when land is available for building dwellings, it cannot be used for the same. There are huge tracts of land (running into thousands of hectares) lying vacant in cities like Delhi and Mumbai. They are mostly owned by government agencies and departments and have been lying vacant for decades. Yet, never an effort was made to build skyscrapers (and in them thousands of apartments) which could have eased the problem a little bit, and supply side efforts would have made sure that prices come down. Yet, the governments, be it the Central or the State, would not let things like that to happen. They don’t mind if, on those government tracts, slums are put up and millions of migrants forced to live in wretched conditions even if much below their dignity. No wonder that more than 60% of Mumbai’s population live in slums and not all of them are poor. In places like Delhi, restrictions on constructions of high-rise buildings make it a point that the city is sculptured with posh bungalows which are a treat to eyes but mass housing remains a nightmare.
It is not that there are no solutions. Solutions are available but the intent is missing. If efforts are made to have development and economic activities in the rural hinterland, as well as many suburban regions coupled with world class transport infrastructure, it would ease the influx of people in big cities and at the same time many can come, work and go back to their hometown by night. Even for the existing cities, some time ago the Confederation of Real Estate Developers has come out with a solution of building low cost houses at Rs 50,000 for a 250 square feet house. If the government takes initiatives to replicate this model across India, then most of the current crisis can be arrested. To be precise, if there is political intent, then ‘that’ dream home for ‘those’ millions is actually not that far.
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