R N Bhaskar
6 April 2015
Had the government really been serious about providing affordable housing for the economically weaker sections (EWS) of society, all it had to do was to look at what Iran has done. If it thought that unlike Iran — which had a lower density of population than India’s — this country has less land on which to build houses, it could have just allowed existing lands to have a higher FSI. That way space shortage could have been addressed.
But two other issues worsen the situation. They, unfortunately reinforce the image of the government as a predator, even as a parasite.
First, the way the government allowed rules for rental of housing to get modified stinks. They made the entire business of rentals a lot riskier for landlords than ever before. Quite expectedly, this dried up rental opportunities. Over the last five decades, the number of houses available “on rent” has declined from 54% of the housing stock to less than 28% (2011 figures). In Mumbai alone, more than 50,000 flats are said to have been kept locked up, because the owners do not want to give them away on rent.
Of the few houses that are still given on rent, most (understandably) belong to one of four categories: (a) relatively affluent (and pugnacious) people who readily haul a tenant to court if he overstays his contract period; (b) the tenant is well-known to the landlord and comes with excellent personal references; (c) the landlord is protected by a broker who knows how to use extra-legal methods to drive troublesome tenants out; or (d) the prospective tenant is a respectable corporate entity. Usually, most common folk therefore do not invest in houses from which they can earn rentals.
In one fell swoop, the government has corrupted the rental market. It has stalled small investments meant for the housing sector. This pushed up rental costs (opportunities became scarce). Brokerage charges soared, as the market now demanded brokers who could also act as ‘bouncers’ to ensure that a house can be got, or given out, on rent.
The government thus tipped the market in favour of ownership, which benefits realtors, and land-sharks, but not low-income households who could only afford rentals. India’s legislators have instead encouraged the proliferation of slums where rental survives. You get a hovel, even though living conditions there are deplorable and degrading.
The government also introduced myriad rules regarding clearances and approvals for real estate development. This has extended the construction period by 29-43 months, longer than the usual time. As a KPMG report states, “Estimates reveal that real estate developers are required to pass the approvals through 150 tables in about 40 departments of central and state governments and municipal corporations. Delays in project approvals could add 25-30 % to the project cost.” At each table, where an approval is sought, some money has often to be paid in cash, without any receipts. This eventually hurts the average citizen who must now fork out an additional 30% towards the cost of the premises. Sadly, even the courts have not taken up cudgels such corrupt, unfair and restrictive practices.
Eventually, all these factors contribute towards increasing the vulnerability of the common man.
At times, even the courts have added to this sense of vulnerability, by declaring illegal tracts of land on which some developer built (and sold) houses, after getting some clearances from the authorities concerned. Much later, after years of having purchased and occupied the premises, the residents are informed that the land is forest land, or has some other restriction. To date, at least to the knowledge of this correspondent, no bureaucrat (or legislator) has been sent to prison for wrongly allowing illegal buildings to come up on land that was not meant for residential use.
Compounding all this is the penchant that legislators and bureaucrats (and at times even the courts) have for protecting slums. The justifications always appear humane: “Where else can the poor stay?” “Real estate costs have become unaffordable.” “Some solution should be found for the hapless millions!” But the root problem lies elsewhere.
All this could have been resolved by doing just three things: increasing FSI as suggested last week, strengthening rental laws, and reducing delays (to not more than two months) in granting clearances. And yes, one more thing — ensure that the country can build at least 2-5 million affordable homes each year. Only large numbers can dispense the sense of shortages. It is time to stop further brutalisation of the human spirit. Quite possibly, the first push may have to come from the courts. The rest could come from the results of forthcoming elections.
The author is consulting editor with DNA.