Housing Finance in India: Affordability Analysis (Case Study of Jaipur) Housing Finance in India: Affordability Analysis

A thesis submitted for the Degree of Doctor of Philosophy (Economics) Submitted to : Department of Economics, University of Rajasthan, Jaipur Researcher Ms. Neerja Khanna Under (UGC Direct Fellowship, NET) Under the Guidance of Dr. Mrs. Kanta Ahuja & Dr. Mrs. Alpana Kateja

Introduction I About the Topic 1. Since time immemorial housing has been regarded as a private activity and except for undertaking construction of some buildings like palaces, courtyards and guest houses, State has rarely played an active role in provision of houses for individual citizens and their families. 2. Since independence Government has accepted that State has to play an important role in housing provision. In Fifth Plan provision was made for urban housing. The sixth pan clearly spelled out that the provision of shelter was a basic need which calls for careful planning and faithful execution. 3. It is the housing requirements of lower middle income and lower income groups that are neglected, and there exists a huge dearth in supply of affordable houses demanded by this income group. 4. Ownership passes on to non target group as they sell away the house provided to them Introduction

Objectives To study the magnitude of investment required for meeting the housing backlog in the country. To review the institutional arrangements for financing the housing sector - public, private and cooperative sector. To assess the terms of financing on which housing finance is made available by various institutional and non-institutional sources and their relationship with housing affordability. To highlight the link between income eligibility criteria of target groups as laid down by institutions and unaffordability of houses/plots when finally it reaches the stage of its delivery to target group.

Chapterization In chapter I, existing literature, studies, researches have been extensively scanned and Surveyed. The fitting methodology with some measure of wide coverage adopted in the study has been outlined with directional and approach clarity. Chapter - II focuses on existing housing situation. It delineates the growth and and evolution of housing policy which passes through various stages. Chapter - III delves into diverse framework of Housing Finance and it’s affordability by the people. In chapter IV , results of survey covering various aspects of Financial affordability for housing for individuals in Jaipur have been covered

Methodology Population Universe of the Study The universe selected for the study is Jaipur City where urban agglomeration has witnessed high growth rate in respect of population as well as households. The target population for this study is houses provided to non-affluent target population by public agencies, cooperative societies or private builders in Jaipur. The sample colonies were taken out of four sub-systems i.e. Rajasthan Housing Board, Jaipur Development Authority Squatter Settlements and Housing Cooperative Society.

Housing Finance- Institutional Formal Housing Finance Formal Housing Finance HUDCO, HDFC, NHB,LIC, GIC,Banks catered to 10% of total housing Finance. Fund generation through inter-institutional transfers like HUDCO finances RHB schemes Cost of loan is about 35% of total monthly savings or take home pay. Indirect financing of house through Coop. Societies, State Housing Boards, etc. Cater mainly to relatively better off segments of population. Little portion of institutional finance to poor only because of Govt’s directives to allocate proportion of their funds for low income housing activities.

HOUSING FINANCE -AFFORDABILITY Involves 4 factors- 1. Income Factor : Based on income ranges for EWS, LIG MIG, HIG, the percentage of houses allotted by agencies and occupied have been studied. 30% EWS, 34% LIG,20%MIG and 7.5% HIG were found occupying houses allotted to lower income category. That means the target group had sold their houses to higher income groups. 2. Capital Cost of houses offered to target groups : Cost Of House /Affordable Rs.2940/- / By EWS-10% OF INCOME Rs.6600/- /By LIG-13% Housing-Income relationship Rs.13750/- / By MIG- 16% of income Rs.26,900/- /By HIG- 20% of income Also parameters guiding cost of housing as land acquisition & development cost, Construction cost, Administrative overheads, Cost overrun due to delay, revision of cost, due to delay, price escalations etc. 40% of cost constitutes Administrative charges. Construction Cost doubles if house is constructed by public agency.

Distribution of Sample HH in different Housing Scheme The primary Field survey was conducted in 8122 households covering different Housing Scheme in Vaishali Nagar, Jhalana Doongri Phase IV, Surya Nagar and Jawahar Nagar colony. JDA 38% of total sample Cooperative Housing Society 12% of total sample Rajasthan Housing Board 50% of total sample

Housing Finance-Affordability The affordability of housing scheme invariably involving four factors: the income of household, the capital cost offered, the propensity to consume housing & the terms of financing the housing for the target group, it was found that- Even the cheapest house built by public agencies is unaffordable for the poorest.

Apna Ghar Yojana Affordable Housing for slum dwellers GOI scheme(1999-2006) Self-help housing /Sites & Services Scheme under NSDP 1. Scheme – Rehabilitating urban slum inhabitants from slum areas to Developed Colonies with all infrastructure. 2. Land measuring 28 sq.ft. to 50 sq. ft. provided to each individual household having survey nos. 3. Financing- Bank Loan of Rs. 25,000/- , Subsidy of Rs.10,000/- , Own contribution in form of cash, kind , old building material, own labour . 4. Unit Cost of Housing @ Rs. 40,000/-

Survey of site where construction is to be undertaken for developing colony for rehabilitation of slum dwellers Site selection Planning & designing Survey Selecting Bank /HFIs for funding Distributing Pattas Infrastructure Development Providing Cheques Self Help Construction Construction Management

Community Mobilization /Public Participation/ Motivation Willingness to shift elsewhere Willingness to contribute Adaptability Changing living styles Willingness to link income with housing Willingness to save for housing out of their income

Area 342,000 sq. km Largest state in India Population 68.62 million (2011) Capital Jaipur Districts 33 Urban Population 24.89% 17.08 million Cities & Towns 297 (census towns) 190 (municipal towns) Population Density 201 persons per sq. km (2011 census)

Category wise Housing Shortage 2011 HOUSING SCENARIO Category wise Housing Shortage 2011 All India 18.78 million 100% EWS 10.55 million 56.18% LIG 7.41 million 39.44% MIG/HIG 0.82 million 4.38% More than 95% shortage is for EWS/LIG housing Rajasthan State Level Shortage – 1.15 million dwelling units Projected increase to 1.706 million by 2021 86% shortage in EWS & LIG Housing shortage- 1981-0.3 million; 1991-0.9 million Dus Hsg. Shortage Jaipur-52000 Dus (1981), 32,000 Dus(1971)

Affordable Housing Policy BENEFITS TO ALLOTTEES Land Cost Nil EWS Flats Ceiling Cost Rs. 2.40 lacs (revised Rs. 2.75 lacs) LIG Flats Ceiling Cost Rs. 3.75 lacs (revised Rs. 4.25 lacs) SBUA of EWS Flats 325 sq. ft. (2 rooms, kitchen, WC, bath) SBUA of LIG Flats 500 sq. ft. (3 rooms, kitchen, WC, bath) SBUA of MIG-A Flats 700 sq. ft. (2 BHK Flat) Stamp Duty for EWS Flats Rs. 10.00 per flat (8% earlier) Stamp Duty for LIG Flats Rs. 25.00 per flat Additional Benefits •Bank loan for beneficiaries •Subsidy of Rs. 12,500.00/flat for beneficiaries, approved by GOI for Jaipur city projects under “Affordable Housing in Partnership” of GOI

SUGGESTIONS 1. Decentralized Planning- Planning for housing should be at District Level instead of Centre. Strategies in Housing Finance should be worked out at centre in commensurate with the requirement at ground level. 2. Commercialization of Housing Planning- State responsibility to provide affordable shelter for people was shifted to cooperative, private developers and informal sector from 198 3. Tenancy of hoarding in residential houses- Because of fear of tenants no one wants to provide house on rental basis . 4. HUDCO and other agencies should enter into financing for setting up satellite towns instead of financing Housing Boards. 5. Tenement Housing- Instead of ownership, tenement or rental housing for EWS. 6. Equitable Mortgage- Equitable mortgage i.e. deposit of lease deed to Banks or Housing Finance Institutions should be allowed and encouraged which is done mostly to money lenders. 7. Simplifying procedures- To encourage sites and services scheme and simplify procedure for obtaining loan and proving their income eligibility and producing a no. of documents

Cost of Residential house

Suggestions 8. To revise pattern of financing to suit needs of families in affordability range. 9. Credit assistance for desirable minimum dwelling units should be easily availed. Desirable unit means a possible affordable unit having minimum facilities of toilet , two rooms, cooking space, toilet. 10. Cross Subsidies between different income groups .