AMITY GLOBAL BUSINESS SCHOOL-MUMBAISummer Internship Under

Topic OnHousing Affordability..A 21st Century

Problem

Submitted by :Abhishek Shrivastav

Enrollment Nos: A30206410012BBA + GDBA( 2010 -2013)

UNDER THE GUIDANCE OFPROF Ms.Bhavna Mehta

1st Page: Same as cover page2nd Page : Declaration- (Signed by Faculty guide )3rd Page : Certificate from company ((Signed byCompany

Mentor/ Guide)4th Page : Acknowledgements5th Page : Contents6th Page : Abstract (Executive summary)Chapter 1- IntroductionChapter 2 Literature ReviewChapter 3- Methodology (primary & secondary)

a. Sample details (size, demographic details)Chapter 4- Data analysisChapter 5- Results, Discussion & SuggestionsChapter 6- Conclusionc) Bibliographyd) Appendix( Font Type Times New roman)(Font Size 12, 1.5 spacing)

ACKNOWLEDGEMENT

This project is the outcome of sincere efforts, hard work and constant guidance of not only mebut a number of individuals. First and foremost, I would like to thank AMITY MUMBAI forgiving me the platform to work with such a company. I am thankful to my faculty guide Ms.BHAVNA MEHTA, AGBS MUMBAI for providing me help and support throughout theinternship period.I owe a debt of gratitude to my company guide Mr.MANISH KIRPEKAR, Asst.GeneralManager Technical,Mr.Ramrathinnam General Manager(Credit), Deewan Housing FinanceLTd,Bhavesh Prajapati,Rohit Maurya who not only gave me valuable inputs about theindustry but was a continuous source of inspiration during these two months, without whom thisProject was never such a great success.I would also take the opportunity to thank the entire staff of Deewan Housing FinanceLtd(DHFL), Pinky Malhotra,Rachna Chemburkar,Shonak Masurkar,Deepali Mam,AmeyaSir who helped and shared their knowledge about the industry for which I am highly grateful.Last but not the least I would like to thank all my Faculty members, friends and familymembers who have helped me directly or indirectly in the completion of the project.

Abhishek ShrivastavBBA + GDBA (2010 2013)AMITY MUMBAI

TABLE OF CONTENTSS. No. Particulars Page No.1. Introduction to the organization 3-82. Introduction to the project 93. Objective 94. Literature Review 9-105. Methodology 10-146. Results and data analysis 14-327. Conclusion and recommendations 32-348. Limitations 349. Appendix 1 35-3710. Appendix 2 3811. Appendix 3 39

INTRODUCTIONGeneral introduction.

Housing is one of the basic human necessities. It is fundamental for the physical, psychological, socialand economic well being of people. Shelter isone of the most basic needs of the people. Allover the world the having thehouse is major problem and continuous efforts have beenmade to meetthee ve r i n c re a s i n g needs o f e a ch gene ra t i on , wh i l e t he p rob l em of p r ov i d i n g housing is highly critical in the developing countries. Most of the advancedcountries alsoface this problem in varying degrees anddimensions.A l m o s t a l l g o v e r n m e n t s , i t m a y b e d e v e l o p e d , d e v e l o p in g o r underdeveloped country their object is every citizen of their country shouldhavea one decent house in a suitable living environment. Housing as a formof reproducible wealth and is aasset of the people and their country.Con s t r u c t i on o f house i n I n d i a ha s been one o ft he mos t impo r t an t problem, as a result of high growth of population. It has very difficult to fillthegap between supply and demand of houses. Housing is a important factor for de ve l opmen t i nbo th e conom i c and we l f a re t e rms . I t i s no t on l y a good consumption but alsoa productive investment.So for that, they need financial supports for construction of their ownhouse.

Specific Introduction

Solving the housing problems in India, the Government and Private financial institutions arestarted their business to give financial assistancesto people. "The National Housing Bank" has started its business to giveassistance andprovide financial support to their people.T h e "DEWAN HOUS ING F INANCE CORPORAT ION LTD", popularly known has DHFL has commenced its business to provide financialassistant and support totheir customers. The DHFL is providing loan for all the people. This companys main products are Homeloan, Home Extension loan,Home Improvement loan, leased Rental finance, Mortgage loan etc.,TheDHFL's Shimoga branch is providing loan for all salaried persons,self employed persons, businesspeople, agriculturists, fishermen's and all typesof people who want loan to build their own house in allover Shimoga.DHFL also has the special schemes facility known as, "SwarnaJayanthiR u r a l H o u s i n g F i n a n c e S c h e m e " t o m a r k t h e g o l d e n j u b i l e e o f I n

d i a ' s independence. The scheme seeks to provide improved to access housing loansto borrowers ofconstraints/ acquisitions/ up gradation of housing rural areas of the country.

COMPANY PROFILE

IntroductionD H F L i s a h o u s i n g f i n a n c e c o m p a n y t h a t h a s t a k e n t h e r o a d l e s s traveled. The journey began on the 11th of April 1984. On this day,RajeshKumarWadhawanbegan his mission to correct what had troubled him for years, the sad truth that most Indianscouldn't get a housing loan on fair terms.The Founder Chairman saw the owning of a home as a criticalelement tothe bu i l d i n g o f i den t i t y and con f i den ce o f e ve r y Ind i a n . DHF L wa s on l y the se cond hous i n g f i nan ce company s e t up i n I n d i a . And i t s s t a t e d bu s i ne s s objectivewas unusual to say the least, to provide access to housing financetol owe r and m idd l e i n come Ind i an s . Mos t e xpe r t s l auded Mr . Wadhawan ' s a l t ru i sm but shook the i r heads a t h i s appa ren t l a c k o f bus i ne s s a cumen . Especiallyas in the beginning DHFL disbursed funds from its own equitycontribution and had areturn on equity of less than 8% at a time when the interest rates were about 18%. But thatis the difference between those who seethings as they are and the visionaries who see things as theycan be. Over twodecades later, DHFL is still profitably doing what its founder intended it to do.DHFLhas disbursed loans amounting to over 53 billion, its non performingassets are the lowest inthe industry. The Founder Chairman had a unique andtimeless insight into the character of themajority of Indians who are generallydismissed as high credit risk. They respond unequivocally to trust.They have avery emotional relationship with the idea of an own home. To them it isntani n ve s tmen t . I t i s a s an c t ua r y . A s ymbo l o f who the y a r e . They w i l l n o tdoanything to jeopardize this symbol of security. This insight was the primemover behindDHFL.

Today, DHFL has an asset base of over Rs. 3,580 crores with a strong presence across Indiathrough its 72 branches and 116 service locations. DHFLcaters to a large section of Indians working inthe Middle East through its over seas branch in Dubai.Vision

T r a n s f o r m l i v e s o f I n d i a n h o u s e h o l d s b y e n a b l i n g a c c e s s t o h o m e .

Mission

Be easily accessible to every Indian who desires to own a home.

Understand our customers inner needs and speak their language.

Go to any length to make sure our customers dont feel intimidated.

Con t i nuou s l y con f i gu re ou r c r ed i t po l i c y t o make su re t he max imumnumber ofpeople can be eligible for loans.

Find ways to help our customers tide over difficult times

Spread our network to every corner of India

Respond promptly and courteously to all enquiries.

Values

Treat all our customers with dignity and respect.

Be totally transparent in all our dealings.

Strive to be a learning organization.

Dedicated to team excellence and employee happiness

Be single mindedly committed to the betterment of our societyPRODUCT PROFILE

Dewan Housing Finance Corporation Limited, this is a companywhichof f e r s the f inanc i a l s e rv i c e s t o the peop le . The company of f e r s in t a n

g i b l e packages in the form of financial services, which are not the physical goods astheproduct of the company.The main business and aim of the Dewan Housing FinanceCorporationLtd , i s p rov i d i ng long te rm loans t o ind i v i dua l s , co -

ope ra t i ve soc i e t i e s ,Corporate bodies and associations of persons for the purposeof acquisitionconstruction and improvement of the residential houses.DHFL offers differenttypes of Housing loans schemes i.e. Home loan,Home Extension loan and Home Improvement

loan etc.,PRODUCTS

DHFL Home Loans

DHFL Home Loans are offered to Individuals, Co-operative Societies,Corporate bodies andAssociations of Persons.The home loan se eke r c an a va i l l oans up t o Rs .

100 , 00 , 000 / - bu tno t e x c e e d i n g 8 5% o f t h e c o s t o f t h e p r o p e r t y . T h e a c t u a l l o a n a m

o u n t i s determined after taking into account factors likerepayment capacity, age,e duca t i ona l qua l i f i c a t i ons , s t ab i l i t y and con t i nu i t y

o f i ncome , numbe r o f dependents, co-applicant's income, assets, liabilities,saving habits etc. Thetenure of the loan ranges from 1 to 20 years. The term however does

not extend

4. Literature Review

The rising population in the cities has been identified as a contributing factor in rising housingcosts, to the extent that housing affordability has been declining in Australia. Sydneyspopulation continues to grow and the NSW Governments Metropolitan Strategy (2005),hereafter referred to as the Metro Strategy, expects on average, Sydney to grow by about40,000 people per year, or 780 people per week. About two thirds will be from naturalincrease and the remainder of the growth is expected to come from interstate and overseasmigration.

Beginning with the National Housing Strategy definition of affordability to convey a notion ofreasonable costs in relation to income, Gabriel et al (p8, 2005) define housing affordability asa term usually denoting the maximum amount of income which households should beexpected to pay for their housing. Similarly, PCA (2007) and Whitehead (1991) point out thathousing affordability is expressed by the relationship between housing expenditure (rent ormortgage) and household income.In way or another, housing affordability is measured and expressed as a ratio betweenexpenditure on housing and income.

As a general rule property analysts (PCA, HIA, UDIA) use 30 percent as the benchmark forhousing affordability. Yates and Gabriel (2006) defined as havinghousing stress, those in the nations lowest two income quintiles (40 percent) that need morethan 30 percent of their disposable income for housing and refer to it as the 30/40 rule. Usingthis definition, in a study for the Australian Housing and Urban Research Institute (AHURI),they have identified that there are 862,000 households in Australia experiencing housingstress.

A survey of 159 major markets in Australia, Canada, Ireland, New Zealand, the UnitedKingdom in 2006 by Cox and Pavlevich (2007) showed that Australia has the most pervasivehousing affordability crisis. The measure used to rate housing affordability was the MedianHouse Price to Median Household Income Multiple, and thereby deriving the MedianMultiple ratio. The survey also identified that the housing cost escalation is principally theresult of supply factors.

Day (2006) points out, that in Australia, it is not the house itself that has risen inprice, rather it is the land the house sits on, which over the previous ten years (1995-2005) has nearly trebled across Australia and by comparison the cost of building a new houseon that land has hardly moved. Where land once represented 25 percent of the cost of a newhouse and land package, it is now 60 percent .

UDIAs (2007) submission to the NSW Department of Planning regarding the City CentrePlans in four city centres (Penrith, Liverpool, Parramatta and Gosford) concluded that it is notfeasible to undertake new medium and high rise dwelling development in these areas as thecost of supplying the new dwelling is less thanthe expected price realisation. UDIA contends that regulatory and market conditions arepresently unsympathetic to apartment construction and contend that there need to be areduction taxes and charges, in particular, developer contributions (Sect 94 levies). In aprevious report, UDIA (2002) calculated that for every $10,000 increase in the cost ofdeveloping land, 240,000 Australian households are no longer able to afford a basic houseand land package.

As noted from above, there are varying views as to cause of affordability as the REIA (2007)points out, the affordability problem has been caused by a broad range of complex factorsincluding policy inaction by various levels of government. In a case study of residentialdevelopments, Karantonis (2007) found that the government receives 60 percent of totalincome, whilst the developer with the risk, receives 40 percent. In a study for the PropertyCouncil of Australia, UrbisJHD (2006) found that government levies and compliances nowmake up for 35 percent of the total cost of homes in Sydneys northwest and 28 percent of thecost of new units. HIA (2003)also noted that state and local government approaches to the supply and funding ofinfrastructure associated with residential development have impacted negatively on housingaffordability.

Internationally, in a review of housing supply in the UK (UK Treasury, 2004), known as theBarker Report, identified that the long-term upward trend in real house prices has been2.4 per cent per annum over the last 30 years compared to the EUaverage of 1.1 percent. To bring the UK real price trend in line with the EU, an extra120,000 houses each year would be required. In their submission to the review, theHome Builders Federation (HBF) stressed that land supply is the key to sustainablehousing (Anonymous, 2007).

Finally, UDIA (2003) noted that providing affordable housing is determined by threeinteracting factors; namely, demand side factors, supply side factors and government.The latter included its intervention in planning regulatory mechanism, provision ofinfrastructure, which are predominantly on the supply side

GROWTH OF HOUSING REQUIREMENTS AND HOUSING FINANCE IN INDIA

ABSTRACT

In a developing country like India, many institutions operate with varied objectives, in varioussectors of its economy. Some of these institutions provide it with a strong industrial base whilesome others conduct their operations to provide financial base to sustain the pace ofeconomic growth. The latter category included financial institutions, which are required tomanage finance for other institutions. Finance is the life blood of almost all the activities,involved in operating an economy. The housing finance institutions, as a whole, may be said thatprecursor of the new era of finance. The existing housing finance institutions though havedone pioneering job in the nation building but in recent years it has been felt that they havenot been able to shoulder that social responsibility, to a desirable extent. Indeed, this was thevery crux of establishing the housing finance institutions in the country so as to improve thestandard of life the major chunk of the rank and file.

Man is a social creature, which brings some amenities like food, clothing, and shelter mandatoryfor his existence. Generally after food and clothing, shelter is an important benchmark for theexistence of the human being. The rate of inflation has played its part in changing themindset of people, now not a palatial accommodation but a small house is perhaps the dream ofmillions of people. The standard of living can be judged by the adequacy of housing but millionsof people are still vagrant in our country as well as in the world, so there is a very wild housingproblem in our nation and world also. It is well known that the housing problem in India isalarming problem in both rural and the urban areas. To overcome this problem some financialinstitution are coming forward to provide money to public. In present, housing finance

companies provides loans to individual person, association of person, firm, company,corporations, union or state government and municipal or any local or public authority forpurchase of house or land, construction, maintenance, reconstruction, improvement anddevelopment of house property, building, flat, office, shop, factory and warehouse etc. Thereare some housing finance companies such as Housing and Urban Development

Corporation Limited (HUDCO), Housing Development CorporationLimited (HDFC), Life Insurance Corporation of India (LIC) Housing Finance Limited, Bank of BoradaHousing Finance Limited, Deewan Housing Finance Corporation Limited, State Bank of India(SBI) Housing Finance, Canara Bank -

INTRODUCTIONIts the serendipity that we are born in the breed that is known to be the most adroit among allliving being. We are known for acumen but are it sufficient. Man is a social creature, whichbrings some amenities like food, clothing, and shelter mandatory for his existence. Generallyafter food and clothing, shelter is an important benchmark for the existence of the humanbeing. Shelter is a basic human need next only to food and clothing. The rate of inflation hasplayed its part in changing the mindset of people. Now not a palatial accommodation but asmall house is perhaps the dream of millions of people. The standard of living can bejudged by the adequacy of housing but millions of people are still vagrant in our country aswell as in the world. So there is a very wild housing problem in our nation and world also. It iswell known that the housing problem in India is alarming problem in both rural and urban areas.To overcome this problem some financial institution are coming forward to provide moneyto public.The need to have a roof over our heads dates back to the time when our ancestors first left theshelter of the trees for life on the open areas. They either built a simple shelter or found anunoccupied caves in which people lived. But unfortunately, life today, is more complicatedthan that. In our industrialized urban areas, when it comes to finding somewhere to live,our choices are limited to renting a dwelling or buying one, more often than not with the helpof a housing loan. After this they lived in huts. For making dwelling units people took loans. Forthis purpose in previous century, there was housing finance provided by mahajans, sahukarsand moneylenders. But unfortunately, today taking loans is more complicated than it wasduring our past time. In recent years we have banks and corporate HFCs for this purpose.Against the milieu of rapid urbanization and a changing socio-economic scenario, the demandfor housing has grown explosively. The importance of the housing sector in the economy can beillustrated by a few key statistics. Housing property forms an important share of the totalwealth of households in India and an estimate made put it to be as high as28% of the household property.A study made by the United Nations reveals that developing countries like India should go infor the annual construction rate of least 8 to 10 dwelling units per thousand populations

in the ensuing 2-3 decades to prevent further deterioration of housing situation. Theobservation deserves greater attention in the context that at present only 2 or 3 dwelling unitsis being constructed for a population of 1,000 per year. It has been estimated that as againstthe requirement of 5 dwelling units per one thousand populations per year due to growth ofpopulation along, the net addition to the housing stock was only 2-3 dwelling units perthousand per year up to 1971. Between 1971- 1981 this rate increased to 4 dwelling perthousand per year. The need for improvement in the existing standards and replacement of oldstock further adds to the housing shortage.

IDENTIFICATION OF THE PROBLEMWe dream of living in an affluent society, to take the first step towards achieving it, properaccommodation is mandatory. Which in turn is a behemoth problem in Indian scenario? Theproblem of housing is not unique for India alone but it is pandemic. This problem has led tolarge scale housing shortage both in the rural and urban areas especially among the poor andmiserable communities. The housing problem has been further accentuated with the increase inpopulation in the country. The shortage of housing in India persists since independence. Againstthe milieu of rapid urbanization and a changing socio economic scenario the demand forhousing has grownup explosively. According to the National Building Organization the totaldemand for housing is estimated at 2 million units per year and total housing shortfall isestimated to be 19.4 million units in both the rural and urban areas.

OBJECTIVES OF THE STUDY1. To study the net resources invested by housing finance company in India since theirincorporation.2. To find the area where efficiency can be improved.3. To locate the area where cost reduction is possible.4. To make possible the efficient and effective utilization of resources.

RESEARCH METHODOLOGYThe proposed study, "Growth of Housing Requirements and Housing Finance in India" will bebased both on primary and secondary data. The primary data will be collected throughquestionnaire and personal interviews with the official of the housing finance companies

concerned. The secondary data will be collected through published financial. The datathus collected will be tabulated, classified and grouped for the purpose of interpretation,analysis, finding and conclusions.

HYPOTHESISIn the course of study the following hypotheses will be tested:-a. The positive growth is registered by housing finance industry in India. b. There is nosignificant difference between the growth and requirementof housing finance companies in India.c. The efficient working of the housing finance companies will have common men tohave confidence in the housing finance industry.d. The trend has moved in favor of the private sector with regards to the total resourcesinvestment by the housing finance companies.

LIMITATION OF THE STUDYThe proposed study is bound to have a few limitations. Firstly, the analysis and measurement ofgrowth of housing requirements would be based on primary and secondary data so thelimitations or shortcoming of primary and secondary data affects the conclusion and results ofthe study. Secondly the study is subjected to general human limitations.

HOUSING POLICIESWith a view to solve this problem of housing there was a need of a well-organized NationalHousing Policy. It is encouraging to note that efforts have been made to establish housingenterprises and institutions at the national and state levels such as the Central BuildingResearch Institution and the National Building Organization and State Housing Boards. Themajor financial institutions in the area of housing, operating either directly or through agenciesdealing with the housing sector, can be broadly classified into two groups, depending uponwhether housing finance is their primary field of operation or a secondary or incidentalfunction.The formal sources of housing finance in gist comprise (1) budgetary allocations by theCentral and State Government, including market borrowings, (2) general financial institutionsnamely the Life Insurance Corporation, the General Insurance Corporation and its foursubsidiaries, the Provident Fund, National and State Municipal Finance Corporations, and theCommercial Banks & Credit Institutions. The involvement of these in housing finance is ratherincidental or secondary and hence they keep aside a specified portion of their funds at thedisposal of the housing sector, (3) specialized housing finance institutions as the namesuggests include mainly the NHB, the HUDCO, Apex and Cooperative Finance Institutions,in the public sector HDFC and few other housing finance companies set up in the privatesector.Although housing is primarily a State subject, the Central Government has been formulatingNational Housing Policies to provide guidance to the State Government to meet the growinghousing shortage. The GOI has had schemes and projects for the housing problem in every fiveyears plan but there was no such housing policy for the country as a whole before 1988. Thisprocess started in 1986. As a follow-up of the Global Shelter Strategy, NHP was announced in1988. The long term goal of the NHP was to eradicate house-lessens, improve the housingconditions of the inadequately housed and provide a minimum level of basic services andamenities to all. The role of government was conceived, as a provider for the poorest andvulnerable sections and as a facilitator for other income groups and private sector by theremoval of constraints and the increased supply of land and services.In 1991, India adopted a more growth oriented view of economic development by emphasizingthat it must integrate with the global economy. In pursuance of this, it reduced custom dutiesand welcomed FDI in several sectors of the economy. The NHP

1994 was a product of this economic point of view. The 1994 Policy sought to increase

supply of land serviced by basic minimum services with a view to promoting a healthyenvironment.The National Housing & Habitat Policy, 1998 laid greater emphasis on the aspect of Habitat as asupplementary focus to housing. The emphasis on providing housing continued in thispolicy with emphasis on both quality and cost-effectiveness especially to vulnerable sections ofsociety. The policy envisages a shift in the governments role from a builder to an enabler, withthe government committed to remove barriers like access to land, finance and technology andforging strong public-private partnerships to accelerate the pace of house construction mainlyfor the disadvantaged sections.NRIs/PIOs are permitted to invest up to 100% in the following housing and real estatedevelopment projects: Development of serviced plots and construction of built up residentialpremises. Real estate covering construction of residential and commercial premisesincluding business enterprise centers and offices. Development of townships. City and regional level urban infrastructure facilities, including both roads and bridges. Manufacture of building materials. Preparatory ventures in these above and Investment in housing finance institutions.It means, 100% FDIs permitted to development of integrated townships (Including housing,commercial premises, hotels, resorts etc) requires prior government approval.The National Urban Housing & Habitat Policy 2007, has been formulated keeping in view

the changing socio-economic parameters of the urban areas and growingrequirement of shelter and related infrastructure. The policy seeks to promote various typesof public-private partnerships for realizing the goal of Affordable Housing for all with specialemphasis on the urban poor. The National Urban Housing & Habitat Policy, 2007 seeks toenhance the spotlight on habitat with a regional planning approach as well as furtherdeepens the role of government as a facilitator and regulator. Moreover, the new policylays emphasis on earmarking of land for the EWS/LIG groups in new housing projects. The policylays emphasis on Government, retaining its role in social housing, so that affordable housing ismade available to EWS and LIG of the population.

The Policy envisages specific roles for the Central Government, State Governments, localbodies, banks & HFCs, public agencies. The housing problem has been viewed as a seriousissue. It is also a fact that housing cannot be considered in an isolated sector and therefore,there is an urgent need to co-ordinate action by different ministries viz. Works and HousingIndustrial Development. Finance and Labour and other related departments to solve theproblem of housing in an integrated way.

In India there was no such problem as housing till 1941. It was only after in 1951 when thedeficit trend was started and which is continuing with an escalating magnitude. As per theestimate of National Building Organization there has been a deficit of 2.11 crore houses in ourcountry during the year 1981 and the deficit increased to 2.47 crore (1.88 crore in rural areaand 0.59 crore in urban area) by the end of March 31, 1985. The deficit is increased to3.13 crore in urban area) the end of 1991 and likely to increase4.16 crore units by 2000 AD (1.61 crore in urban areas and 2.55 crore in the ruralareas).The Policies of Urban Development and Housing in India have come a long way since1950s. The pressure of urban population and lack of housing and basic services werevery much evident in the early 1950s. The positive aspects of cities as engines ofeconomic growth in the context of national economic policies were not muchappreciated and, therefore, the problems of urban areas were treated more as welfareproblems and sectors of residual investment rather than as issues of national economicimportance.

ROLE AND OBJECTIVES OF NATIONAL HOUSING POLICYThe basic role, objectives of the NHP are: To assist all people and in particular the houseless and inadequately house andvulnerable sections, to secure for themselves affordable shelter through access to developedland, building materials, finance and technology. To create an enabling environment for housing activity by eliminatingconstraints and the developing an efficient system for delivery of housing inputs. To expand infrastructure facilities in rural and urban areas in order to improve theenvironment of human settlement, increase the access of poorer households to basic servicesand to increase the supply of developed land for housing. To undertake, within the overall context of policies for poverty alleviation andemployment, steps for improving the housing situation of the poorest sections and vulnerablegroups by direct initiative and financial support of the state. To help mobiles resources and facilitate expansion of investment in housing in orderto meet the needs of housing construction, up-gradation and augmentation of infrastructure,and

To promote a more equal distribution of land and houses in urban and rural areasand to curb speculation in land and housing in consonance with the macro-economicpolicies for efficient and equitable growth.Though the draft NHP is yet to take a final shape, the shelter sector has beenrecognized as an important vehicle for economic activity and provides the most direct andindirect employment in the semi urban and urban areas. For achieving the basic objectives ofNHP, the government should take initiative for directing the activities of public agenciestowards increasing the supply of serviced land for various groups and

essential purposes with the preponderant proportion for the poor sections. The major weaknessof the national housing policy, however, lies in the fact that the policy does not set any timebound targets owing to resource constraints. But without commitment, the policies remain onlyon paper. Various tax incentives proposed in the draft policy for private sector and NRIinvestment in the housing sector that cannot solve the problem to any significant extent.

Table: Plan Outlay in Housing and Urban Development Sector(Rs. in crore)

Five Years Plan Total OutlayHousing & Urban

DevelopmentPercentage share in

the totalFirst Plan 2,068.80 48.80 2.36

Second Plan 4,800.00 120.00 2.50Third Plan 7,500.00 127.60 1.70

Annual Plan 1966-69 6,625.40 73.30 1.11Fourth Plan 15,900.00 2700.20 1.70Fifth Plan 37,250.00 1150.00 3.09

Annual Plan 1977-80 12,176.50 368.80 3.03Sixth Plan 97,500.00 2488.40 2.55

Seventh Plan 180,000.00 4229.50 2.35Annual Plan 1990-92 133,835.00 3000.10 2.24

Eighth Plan 434,100.00 10500.00 2.42Ninth Plan 859,200.00 15880.00 1.85Tenth Plan 1,525,639.00 40500.00 2.65

Eleventh Plan 3,644,718.00 36870.00 1.01Sources-mhupa.gov.in (modified)Table shows there is a fluctuation in the sanctioned amount of plans. In the First Five Year Plan(1951-56), the emphasis was given on institution building and on construction ofhouses for Government employees and weaker sections. The Ministry of Works & Housing wasconstituted and National Building Organization and Town & Country Planning Organizationwere set up. A sizeable part of the plan outlay was

spent for rehabilitation of the refugees from Pakistan and on building the new city ofChandigarh. An Industrial Housing Scheme was also initiated. The GOI had introducedthe Centre Subsidy Scheme to the extent of 50% towards the cost of land and construction.The scope of housing program for the poor was expanded in the Second Plan (1956-61). TheIndustrial Housing Scheme was widened to cover all workers. Three new schemes wereintroduced, namely, Rural Housing, Slum Clearance and Sweepers Housing. Town & CountryPlanning Legislations were enacted in many states and necessary enterprises were also set up forpreparation of master plans for important towns. Government had earmarked in the second fiveyears plan, substantial portion of its funds towards expansion of infrastructure, which hadresulted in development of housing sector.The general directions for housing programs in the Third Plan (1961-66) were co- ordination ofefforts of all agencies and orienting the programs to the needs of the LIGs A Scheme wasintroduced in 1959 to give loans to State Governments, for a period of 10 years foracquisition and development of land in order to make available building sites in sufficientnumbers. Master Plans for major cities were prepared and the State capitals of GandhiNagar and Bhubaneswar were developed. During the period from 1966 to 1969 owing tounstable Government, there had occurred a plan holiday, which had affected the growth ofhousing sector.The balanced urban growth was accorded high priority in the Fourth Plan (1969-74). The Planstressed the need to prevent further growth of population in large cities and need fordecongestion or dispersal of population. This was envisaged to be achieved by creation ofsmaller towns and by planning the spatial location of economic activity. HUDCO was establishedto fund the remunerative housing and urban development programs, promising a quickturnover. A Scheme for Environmental Improvement or Urban Slums was undertaken in thecentral sector from 1972-73 with a view to provide a minimum level of services, like, watersupply, sewerage, drainage, street pavements in 11 cities with a population of 8 lakh and above.The scheme was later extended to 9 more cities.The Fifth Plan (1974-79) reiterated the policies of the preceding plans to promote smallertowns in new urban centers, in order to ease the increasing pressure on urbanization. This wasto be supplemented by efforts to augment civic services in urban areas with particularemphasis on a comprehensive and regional approach to problems in metropolitan cities. A taskforce was set up for development of small and medium towns. The Urban Land (Ceiling &Regulation) Act was enacted to prevent concentration of land holding in urban areas and tomake available urban land for construction of houses for the MIG and LIGs.The thrust of the planning in the Sixth Plan (1980-85) was on integrated provision of servicesalong with shelter, particularly for the poor. The Integrated Development of Small and MediumTowns was launched in towns with population below one lakh for provision of roads,pavements, minor civic works, bus stands, markets, shopping complex etc. Positiveinducements were proposed for setting up new industries,

commercial and professional establishments in small, medium and intermediate towns. Thesixth five years plan clearly states that the provision of shelter is a basic need. The objectives inrespect of housing in the plan were; (1) Provision of house sites and assistance for theconstruction of dwelling for rural landless laborers. (2) In view of the severe constraints of publicresources, public sector social housing schemes have been designed to benefit the maximumnumber of people. (3) Specific efforts must be made to secure reduction in cost in publichousing schemes by using cheap and alternative building materials.The Seventh Plan (1985-90) stressed on the need to entrust major responsibility ofhousing construction on the private sector. A three-fold role was assigned to the public sector,namely, mobilization for resources for housing, provision for subsidized housing for thepoor and acquisition and development of land. The NHB was set up to expand the base ofhousing finance. NBO was reconstituted and a new enterprise called Building MaterialTechnology Promotion Council was set up for promoting commercial production of innovativebuilding materials. A network of building centers was also set up during this plan period. TheSeventh Plan explicitly recognized the problems of the urban poor and for the first time anUrban Poverty Alleviation Scheme known as Urban Basic Services for the Poor was launched.During the year 1990-91 there was a plan disturb because of shortage of funds.In the backdrop of this report the Eighth Plan (1992-97) for the first time explicitly recognizedthe role and importance of urban sector for the national economy. While growth rate ofemployment in the urban areas averaged around 3.8% per annum, it dropped to about 1.6% inthe rural areas. The Plan identified the key issues in the emerging urban scenario: The widening gap between demand and supply of infrastructural services badlyhitting the poor, whose access to the basic services like drinking water, sanitation, educationand basic health services is shrinking. Unabated growth of urban population aggravated the accumulated backlog of housingshortages, resulting in proliferation of slums and squatter settlement and decay of cityenvironment, and High incidence of marginal employment and urban poverty as reflected in NSS43rd round that 4.18 crore urban people lived below the poverty line.The Planning Commission suggested modification of the Housing policy to incorporateaffordable housing program for the BPL category. Considerable efforts were made during Ninthand Tenth Five Year Plans to enlarge the resource base and initiate innovative institutionalmechanisms to augment housing delivery in urban areas. Focused efforts were also initiated tocover the poor and vulnerable groups of society to enable them to access basic shelter relatedservices. Fiscal concessions coupled with legislative measures were also initiated to encourageincreased investments in housing by individuals and corporate.The National Common Minimum Program has stated that housing for weaker sections in ruralareas extended on a large scale. The Tenth Plan, therefore, had suggested

provision of free housing only to the landless SC/ST families and shift to a credit-cum subsidyscheme for the other BPL families. The repeal of the Urban Land (Ceiling and Regulation) Act,1976 has been a significant step towards reform in the urban land market. Following the repealof the central legislation, a number of state governments had also repealed the state-level law.Having identified housing as a priority in the Ninth Five year plan (1997-2002), the NHP hasenvisaged an investment target of Rs. 15880.00 crore for this sector. In order to achieve thisinvestment target, the Government needs to make low cost funds easily available and enforcelegal and regulatory reforms.In order to improve the quality of life in urban areas, the Eleventh Five Year Plan (2007-2012) has stressed the need for improved housing stock through urban renewal, in cityslum improvement and development of new housing stock in existing cities as well asnew townships. Furthermore, the Bharat Nirman Program has also recognized andaccorded due priority to the need to end shelter. The Program has set a target toconstruct 60 lakh houses from 2005 to 2009. The housing component under theProgram is being implemented in parallel with Indira Awas Yojana scheme. For theEleventh Plan, the focus is on targeting the poorest of the poor.Till June 1982, the following social housing schemes had been taken up in the country (I)Integrated Subsidized Housing Scheme for Industrial Workers and EWS of Community 1952, (ii)Low Income Group Housing Scheme 1954, (iii) Subsidized Housing Scheme for PlantationWorkers 1956, (iv) Middle Income Group Housing Schemes for State Government Employees1956, (v) Slum Clearance/Improvement Scheme 1956, (vi) Village Housing Projects Scheme 1957,(vii) Land Acquisition and Development Scheme 1959 and (viii) Provision of House Sites toLandless Workers in Rural Areas 1971. From July 1982, the existing Social Housing Schemes,except the subsidized housing scheme for plantation workers, which continue to be in thecentral sector and the scheme for provision of houses sites to landless workers have beenreclassified in 4 categories on the basis of income criteria as: (I) Housing Scheme forEconomically Weaker Sections, (ii) Low Income Group Housing Scheme, (iii) Middle IncomeGroup Housing Scheme and (iv) Rental Housing Scheme for State Government Employees.In the last four decades, the urban population in India has grown from about 7.00 crore to 60.00crore. There has been a distinct decline in housing investment in proportion to the totalinvestment. Around 20% of the population is either houseless or is seriously under-housed. Thatis a grim picture indeed, notwithstanding the fact that presently the total number of dwellingunits in the country number about 12.50 crore (as per housing finance an unpublished documentof HDFC). To bridge the current gap of housing alone we need about Rs. 80,000 crore at aconservative estimate at todays prices. The estimate is only likely to increase with over theperiod.

In India, because of the lack of fund mobilization, the system of housing finance has remainedlargely undeveloped. In a workshop held under the aegis of the Housing and Public WorkCommittee of the FICCI and NHB, it was pointed out that an investment of about Rs. 190,000crore was required for housing by the end of 2001. A study

conducted by FICCI revealed that an investment of Rs. 51,576 crore at December, 1989 priceswould be needed during the Eight Plan. Financial experts have estimated that the public andprivate sectors have to invest an average of Rs. 15,000 crore during 1990-95 to meet the growing demand. Our endeavor here is to assess the financial measures beingundertaken by the government towards the housing problems. Are these enough to mobilizethe required level of investment, in the housing sector? If not, what new measures could beundertaken for enhancing the level of investment? With the growing recognition ofhousing finance in a developing economy like India, where housing finance industry hasassumed all the more significance and presently over 400 entities, including HFCs andnationalized banks, foreign as well as co-operative have entered the scene. In the marketsituation, there is room for many numbers of players to remain active. But it is importantfor a player to fulfill its obligations to its clients both in terms of disbursement made at acomparatively lower cost and also the quality of service. The HFCs, which are approved by NHBand are taking NHB refinance, can improve their position of funds through the securitizationroute. Besides, though the service quality has improved overall there is need and scope forfurther improvement in this field.The HFC in the country is suffering mainly from the big cost of funds and even after reduction inrates of interest in the recent year, the rate of interest for the long terms loans is 5-6% morethan rates in USA. The legal system of the country requires strengthening and also streamliningbecause this is necessary from the documentation point of view as well as for remedialactions for foreclosure of the loans in case of default The Apartment Ownership Act, StampDuty Act, Land Acquisition. Act, Transfer of Property Act, Regional Planning & DevelopmentControl Regulation Act, Rent Control Act, Housing Board Act, Urban Land Ceiling Act, Co-operative Act 2006, Negotiable Instrument Act 1881, The Indian Contract Act 1872, TheCompanies Act1956, Code of Civil Procedure 1908, Criminal Procedure Code 1973, BankingCompanies Act 1949, Banker Book Evidence Act and Indian Banking (Regulation) Act1949 (Revised in September 1956) and Reserve Bank of India Act 1934 etc., whichdirectly or indirectly have a bearing on the housing sector, needs to be modified andsome sort of uniformity may be introduced.

1 OVERVIEW

This report provides an overview of the major findings that have emerged out of the thirdAHURI-funded National Research Venture (NRV3), Housing Affordability for Lower IncomeAustralians. It identifies the major risks and challenges in relation to Australias housingproblem in the 21st century, as well as drawing out policy implications.

Themajor conclusions of the three-year NRV3 research program are as follows:

Housing affordability is a large and widespread problem.

Housing affordability is a structural problem.

Causes of affordability problems are complex and diverse. Major driving factors can befound both within the housing system and beyond it.

Housing affordability problems are predicted to increase in the first half of the 21st century asa result of anticipated demographic and housing market changes.

Affordability problems have specific spatial and cyclical dimensions.

Households most at risk of facing the multiple problems that arise from a lack of affordablehousing are lower-income households in the private rental market.

Housing markets have failed to provide an adequate supply of affordable housing for lower-income households.

Individual households experience and address housing affordability problems in differentways.

While housing provides shelter, it also influences a raft of non-shelter outcomes forindividual households, such as workforce participation, access to jobs and services, familystability and educational attainment.

Declining affordability has implications for economic performance and labour marketefficiency, social cohesion and polarisation of cities, environmental considerations andthe creation and distribution of wealth through home ownership.

Together these conclusions explain the title given to this report: housing affordability is a 21stcentury problem.

Figure 2.5: Determinants of housing affordabilitySupply ofhousing

Dwellingprices/rents

Affordability InterestratesDemand forhousing

Householdincome

Demographicfactors

2.3.2 Risk factors that can affect affordability outcomes

In addition to the underlying structural issues affecting housing affordability, which have beenthe focus of this chapter, a number of relatively recent changes have taken place that increase thesystemic risk that affordability problems may be even greater in the future than they havebeen in the past, particularly for lower-income households. These relate to the greaterflexibility that has been the hallmark of the new economy and to the economic, social andstructural changes that have been associated with it.

Labour markets are less regulated than they were in the past. There is greater reliance onfixed-term contracts, part-time work and a casualised workforce, all of which put incomes of theworking poor at risk. The steady growth experienced over the past decade has provided a strongelement of protection against the risks that such changes impose on individual workers but there isno guarantee that the economic boom will continue or that it will continue to benefit all workers,including the low-skilled. A downturn will affect purchasers who depend on overtime oradditional part-time work to pay their mortgage and aspirant purchasers who rely on this to helpsave a deposit.

Structural change has contributed to a reduction in the high rates of inflation and an associatednominal wage growth that dominated the economic environment in the 1970s and 1980s. Inturn, this means that marginal home purchasers undertaking mortgages at the limit of whatthey can afford no longer can rely on inflation to reduce their repayment burden.

Household relationships are more flexible than they have been in the past and single-personhouseholds are becoming increasingly dominant. Any transition from a household withmore than one income earner to one with one or no earners increases the risk that contractualhousing costs will become unaffordable. Transactions costs can make it difficult forhouseholds to adjust to changed circumstances.

Part of the rise in single person households is associated with the ageing of the population.Demographic change creates the additional risk that the existing dwelling stock does

not reflect the needs of smaller and older households in relation to both form and location.Mismatches between what is appropriate and what is available can contribute to affordabilitypressures if households are unable to choose the type of housing that best suits their currentneeds. The ageing of the population brings with it a further risk associated with the pressures thatarise if the current generation of workers are not outright owners by the time they reach retirementage.

The move from collective to individualised provision for retirement incomes via contributorysuperannuation schemes where payouts depend on fund earnings means households bear therisk of their retirement incomes being inadequate to meet both their housing and non-housingneeds. Households constrained from gaining access to owner-occupation face the risk of higherhousing costs in their retirement years than those faced by previous generations of retirees forwhom home ownership has provided considerable protection from housing stress.

Tax incentives designed to encourage personal superannuation benefit high- income and high-wealth households and run the risk of creating an economy in which income and wealth areeven more unevenly distributed than at present. Such inequalities may impose greater pressureson the housing market than have been felt in the past and create additional affordability problemsfor those whose incomes and wealth have not kept pace with the national average.

Incentives designed to encourage investment in superannuation may also have the unintendedconsequence of reducing individual investment in the private rental market. Any reduction in suchinvestment either will add to pressures on rents or will result in a reduction in the supply ofrental dwellings at a time when an increasing proportion of the population are being discouragedfrom entering home ownership for either lifestyle or affordability reasons.

More generally, moves from collective to individual responsibility for health, education andretirement provision, to name just a few of the services that were centrally provided in thepast, have meant that households face increased demands on budgets already squeezed byrising housing costs.

Lower-income households seeking to avoid the burdens imposed by high housing cost ratios areforced to relocate to regions where housing costs are lower and where, in many cases, there is ageneral lack of services and where they may lose the support provided by family and communitynetworks.

IndiaAccording to the last census conducted in India in 1991, the country had a population of 846.3million out of which 217.6 million lived in cities and towns. The total number of householdswas estimated at 153.2 million for the same year. As against this figure, the housing stock in thecountry was of the order of 148 million 39.3 million units in urban areas (26.6%) and 108.7million in rural areas (73.4%). During the period 1971-1991, while the number of householdsincreased by 58%, the number of housing units went up by about 59%. Although India has beenfacing the problem of housing shortage for a long time, the increase in housing stock in recentdecades has been more than that in the number of households. Table 1 portrays some salientdata regarding the housing situation in India at the 1991 Census.

Approximately 40% of households in 1991 were in single room tenaments; about 30% lived in two-room units. Only about 15% of households had four or more rooms. Table 2 shows thepercentage break-up of households by the number of rooms occupied.

Table 1

Housing Situation in India: 1971, 1981 & 19911971 1981 1991

Population & Households:Total Population (Million) 548.20 683.30 846.30Rural Population (Million) 439.10 523.80 628.70Urban Population (Million) 109.10 159.50 217.60Slum Population (Million) - 27.91 46.73Total Households (Million) 97.10 123.40 153.20Rural Households (Million) 78.00 94.10 112.50Urban Households (Million) 19.10 29.30 40.70Household Size: Total 5.65 5.54 5.52Household Size: Rural 5.63 5.57 5.59Household Size: Urban 5.71 5.44 5.35Households per Dwelling 1.04 1.06 1.03Persons per Dwelling 5.89 5.86 5.72Housing Units (Million):Housing Stock: Total 93.00 116.70 148.00Housing Stock: Rural 74.50 88.70 108.70Housing Stock Urban 18.50 28.00 39.30Housing Shortage: Total 14.60 23.30 23.90Housing Shortage: Rural 11.60 16.30 14.67Housing Shortage: Urban 3.00 7.00 8.23Source: Government of India National Buildings Organisation, Ministry of UrbanAffairs & Employment: Prominent Facts on Housing 1997.

Table 2Distribution of Households by Number of Rooms Occupied

(Percent)1971 1981 1991

One Room:RuralUrban

47.350.0

44.345.8

40.839.6

Two Rooms:RuralUrban

28.527.0

28.927.8

30.630.4

Three Rooms:RuralUrban

12.111.4

12.312.2

13.514.8

Four or More Rooms:RuralUrban

12.011.4

12.112.1

14.014.7

No Exclusive Room andUnspecified Rooms

RuralUrban

0.10.2

2.42.1

1.10.5

Source: Government of India National Buildings Organisation, Ministry of UrbanAffairs & Employment: Prominent Facts on Housing 1997.At the 1991 Census, more than 95% of the households living in rural areas hadbuildings of their own whereas the figure for urban areas was much lower at 63.1%.However, over the period 1971-91 though the percentage of households owningbuildings rose in both rural and urban areas, the rise in case of the latter wasimpressive the figure going up from 47.1% in 1971 to 63.1% in 1991. In addition toimprovement in ownership status, there has also been a steady upward trend in thequality of housing units in the country. During the decade 1981-91, the number ofpucca (permanent) housing units increased by 64.64%, which is much higher than thegrowth of 53.39% occurring during the decade 1971-81. Over the period 1981-91, thenumber of semi-pucca houses declined by about 8% (from 6.80 million in 1981 to6.23 million in 1991), while the number of kutcha (thatched, huts, etc.) housesshowed only a marginal increase of about 6% (from 3.1 million in 1981 to 3.2 millionin 1991). Table 3 provides some important information regarding the housingconditions in the country.Insofar as the provision of civic amenities is concerned, there have been considerableimprovements in the access of people to such amenities over the years althoughshortages in housing and infrastructure do continue. Table 4 shows the percentage ofhouseholds in the country as a whole having access to safe drinking water, toiletfacilities and supply of electricity during the decade 1981-1991.

Table 3

Housing Conditions in India: 1971, 1981 & 19911971 1981 1991

Tenure Status of Households (%)Owned:

RuralUrban

93.847.1

93.053.5

94.563.1

Rented:RuralUrban

6.252.9

7.046.5

5.536.9

Type of Structure (%)Pucca:

RuralUrban

19.063.8

21.164.6

33.075.8

Semi Pucca:RuralUrban

37.023.5

37.624.3

34.215.8

Kutcha: (Serviceable):RuralUrban

32.012.7

29.011.1

22.88.4

Kutcha: (Unserviceable):RuralUrban

12.0-

12.3-

10.0-

Source: Government of India National Buildings Organisation, Ministry of UrbanAffairs & Employment: Prominent Facts on Housing 1997.

Table 4Access of Households to Basic Amenities: 1981-1991

1981 1991Households having SafeDrinking Water

74.14% 81.59%Households having ToiletFacility

57.4% 63.58%Households with Electricity 61.6% 75.93%Source: Government of India National Buildings Organisation, Ministry of UrbanAffairs & Employment: Prominent Facts on Housing 1997Housing ShortageHousing shortage is estimated in terms of excess households over houses includinghouseless households, congestion (number of married couples requiring separateroom/house), replacement/upgradation of kutcha/unserviceable kutcha houses andobsolescence/replacement of old houses. Table 5 shows the components of housingshortage in the country at the beginning of 1991. Table 6 shows the estimates ofhousing shortage in urban areas based on the Report of the Ninth Plan Working Groupof the Government of India, Ministry of Urban Affairs & Employment

Table 5Components of Housing Shortage: 1991

Million Units

Total Rural UrbanExcess of Households overHouses including HouselessHouseholds

5.16 3.76 1.40

Congestion (No. of Marriedcouples requiring separateRoom/House)

1.91 - 1.91

Replacement/Upgradationof Kutcha/UnserviceableKutcha Houses

14.20 10.91 3.29

Obsolescence/Replacementof Old Houses

1.63 - 1.63Total 22.90 14.67 8.63Source: Government of India National Buildings Organisation, Ministry of UrbanAffairs & Employment: Prominent Facts on Housing 1997

Table 6Projected Housing Shortage in Indias Urban Areas, 1997-2001

Million UnitsItem 1997 1998 1999 2000 2001Pucca 40.08 42.13 44.29 46.56 48.94Semi-pucca 6.65 6.73 6.81 6.88 6.97Kutcha 3.35 3.38 3.40 3.43 3.45Households (No.) 50.09 51.85 53.68 55.56 57.52Housing Shortage 7.57 7.36 7.18 6.93 6.64Note: The housing shortage estimates also account for congestion and obsolescence ofexisting unitsSource: Ministry of Urban Affairs & Employment 1996. Report of the WorkingGroup on Urban Housing for the Ninth Five-year Plan. Government of India, Delhi.Indias National Report for Habitat II Conference in Istanbul estimates that by 2021,the country would face a housing shortage of 44.9 million units and that theinvestment required for tackling this shortage over a period of 25 years at 1991 priceswould be of the order of Rs.6580 billion. The Ninth Plan Working Group of theGovernment of India, Ministry of Urban Affairs & Employment estimated the newhousing/old housing upgradation requirement at 16.76 million units for the 9th planperiod (1997-2002). About 70% of the units are estimated to be required for theurban poor/economically weaker sections of society while about 20% is for low-income groups. About 10% of the urban requirement is for addressing the middle andhigher income group segments. It is estimated that for urban housing alone, the totalrequirement of investment would be of the order of Rs.1213.7 billion for 1997-2002to address the housing shortage of 7.57 million, upgradation of 0.32 million semi-pucca Economically Weaker Sections (EWS) units and the additional construction of8.67 million units. The total requirement of funds for urban and rural housing put

together for 1997-2002 was estimated to be of the order of Rs.1500 billion (see Table7). Against this amount, about Rs.520 billion is likely to be available if the pasttrends of housing finance are assumed to continue.

Table 7Investment Requirement for Housing: Ninth Five Year Plan

(1997-2002)Segment No of Units to be

Constructed(Million)

Fund Requirement(Rs. Billion)

Likely Availability

Rural 162.5 290 180Urban 176.6 1,214 340Total 330.1 1,504 520Source: Government of India, Ministry of Urban Affairs & Employment: Ninth PlanWorking Group on Housing (1996)Shortage in Civic ServicesIn addition to shortage in housing, India is faced with the problem of inadequate civicservices. The coverage in terms of organised sewerage systems ranges from 35% insmall towns to 75% in large cities. According to estimates prepared by the Ministry ofUrban Affairs and Employment, Government of India, only about 50% of the urbanpopulation had access to sanitation facilities in 1997-98. Approximately one third of theurban centres are not covered by proper drainage systems; storm-water drainagefacilities are estimated to cover no more than 66% of the urban population. The NationalSample Survey Organisation (NSSO) 44th round Survey (1988-89) reveals that 31.08%of the urban population does not posses any latrine/toilet facility.Only 66% of theurbanites have access to toilet facilities within their premises. Out of those urbanresidents having toilets, only 39.06% have a flush system, 37.49% a septic tank systemand the rest service latrines. As estimated under the Low Cost Sanitation Programme ofthe Government of India, there are about 3.3 million dry latrines yet to be converted intowater-borne toilets in the towns with a population of less than 500,000.It is estimated that 28% of the urban population do not have access to refusecollection and disposal services. A study in 1989 shows that the solid wastescollection efficiency (solid wastes collected as percentage of solid wastes generated)ranged from 82.8% in 6 metropolitan cities to 63.5% in 19 cities with populationranging from 0.1 to 1 million, 55.5% in 6 towns with population between 50,000 and100,000 and 50.0% in 5 towns with population between 20,000 and 50,000.Approach to Housing DevelopmentAfter independence, housing was accorded a relatively low priority in the nationaldevelopment programme in India, presumably with the objective of keeping itbasically a private sector activity. The low budgetary support given to the housingsector is evident from the fact that the First Five Year Plan of India allocated 7.4% ofthe total plan resources for housing; the share of housing in the subsequent planresources ranged between 1.2% and 4.9%. The governmental agencies, however,played a strong supporting role for the provision of housing for the poorer sections ofsociety, including allocation of land. Over the years there has been a gradual shift in

the role of the Government from a provider to a facilitator, ensuring access todeveloped land, basic services, building materials, technology, construction skills andfinance so that housing can be undertaken as a people's programme. The facilitatingapproach aims at fostering strong public-private partnerships with the provision ofappropriate incentives to the private sector, promotion of housing finance institutions,propagation of alternate building materials and technologies and extension of support toNGOs, CBOs, co-operatives and the private sector.The Government of India and State Governments have adopted a two-prongedapproach to housing development for the poor in the past, i. e., sites and services and

permanent housing. Under sites and services, basic infrastructure facilities likedrinking water, internal roads, approach roads, drainage, community toilet, etc., wereprovided to develop layouts. The beneficiaries were also given constructionassistance for erecting a small shelter. The permanent housing programme, which hasreplaced sites and services, was initially confined to those beneficiaries who could availloan facility. Later, several modifications have come up in the programme to addressthe housing needs of different target groups. The broad elements of theapproach of the Government of India to tackle the problem of housing the poor are:special programmes/targeted subsidy to the poor and vulnerable groups, loanassistance to governmental agencies/beneficiaries at below-market interest rate forhousing and at normal rate for infrastructure through the Housing and UrbanDevelopment Corporation (HUDCO), creation of housing assets as part ofemployment and income generation programmes, promotion of cost-effective and eco-friendly building materials and technologies and creation of an enablingenvironment for private sector initiative. Indira Awas Yojana (IAY) is an example ofhousing for targeted groups in rural areas through employment creation.Indira Awaas Yojana (IAY)Indira Awas Yojana (IAY) intends to assist certain vulnerable target groups inhousing activities. The programme applies to categories such as Scheduled Caste(SC)/Scheduled Tribe (ST) households who are victims of social atrocities, SC/SThouseholds headed by widows and unmarried women, SC/ST households affected byflood, fire accident, earthquake, cyclone and similar natural calamities, freed bondedlabourers, families/widows of personnel from defence services/para-military forces killedin action, ex-servicemen and retired members of para-military forces, persons displacedon account of developmental projects, nomadic, semi-nomadic and de- notified tribalsand families with disabled members, subject to the conditions that these householdsbelong to below poverty line category. As per the Government of India guidelines, IAYhouses are being allotted in the name of the female member of family or alternatively inthe joint name of both wife and husband. The programme is fully subsidised by theGovernment of India.Housing Programmes: Unit CostsThe contents and unit costs adopted for various types of housing programmes differbetween States and have been revised from time to time. Table 8 depicts the latest unitcosts adopted by the State of Andhra Pradesh for the programmes implemented by it.

Table 8Unit Cost Particulars of Housing Schemes: Andhra Pradesh

(In Rupees)

Scheme Year UnitCostBenefi-ciaryContri-bution

LoanGovernment Subsidy

State Central Total(1) (2) (3) (4) (5) (6) (7) (8)

Sites & Services 1981 1000 - - 1000 - 1000Semi PermanentRural Housing 1998-99 7500 500 - 7000 - 7000Rural PermanentHousing 1998-99 17500 500 10000 7000 - 7000

Urban PermanentHousing 1986-87 12,000 300 10700 1000 - 1000Weavers Housing:(i) House-cum Workshed (Rural) 1998-99 35000 4000 8000 5000 18000 23000(ii)House-cum Workshed (Urban) 1998-99 45000 6000 14000 5000 20000 25000(iii) ExclusiveWorksheds 1996-97 6000 500 - 1500 4000 5500Workshed (Rural) 1998-99 9000 - - 2000 7000 9000Workshed (Urban) 1998-99 14000 2000 - 2000 10000 12000Rural LandlessEmploymentGuarantee(RLEGP) Housing 1987-88 10200 - - 2040 8160 10200Beedi WorkersHousing 1998-99 18000 1000 6500 1500 9000 9000FishermenHousing 1998-99 20000 1250 7000 - - 11750Indira AwasYojana Housing:In Plain Areas 1996-97 16500 - - 3300 13200 16500In Black CottonSoils 1998-99 20000 - - 4000 16000 20000Special Housing 1998-99 20000 500 12500 7000 7000Cyclone Housing(i) By APSHCL 1996-97 16500 - 10000 6500 - 6500(ii) By NGOsa) 0-5 Kms. FromSea Coast 1996-97 30000 15000 - 15000 - 15000b) In Other Areas 1996-97 20000 10000 - 10000 - 10000EconomicallyWeaker Sections(EWS) Housing 1998-99 25000 2000 20000 3000 - 3000Scheme for 1991-92 4000 - 3000 400 600 1000

CGGWorking Papers4/2003

Housing & ShelterUpgradation

to1996-97

EWS (SpecialCyclone) 1996-97 30000 4500 25500 - - -EWS (Special) 1998-99 30000 2000 25000 3000 - 3000Township Housing 1998-99 50000 2000 43000 5000 - 5000Source: Andhra Pradesh State HousingCorporation Ltd.Housing and Urban DevelopmentCorporationThe Housing and Urban Development Corporation (HUDCO) was established as afully- owned enterprise of the Government of India in 1970 with an equitybase of Rs.20 million to function as a national techno-financial institution topromote housing and urban development. The objectives of HUDCO include thefollowing:

To finance and undertake housing and urban development programmes inurban and rural areas;

To finance and undertake either wholly or partly, the setting up of new towns orsatellite towns covering infrastructure needs in urban and ruralareas;

To finance and undertake the setting up of building material industries; To provide consultancy services for projects of housing and urban development

within the country andabroad.

At present HUDCO has an authorised capital base of Rs.12.50 billion ($297million), paid-up equity of Rs.8.98 billion ($213 million), reserve of Rs.5.75billion ($136 million) and net worth of Rs.14.83 billion ($349 million).

The total borrowings byHUDCO stand at Rs.121.68 billion ($2897 million). Thus the debt-equityratio of HUDCO works out to 7.77.The key activities of HUDCOinclude:

Lending for housing programmes through various schemes such asurban housing, rural housing, staff rental housing, cooperativehousing, working women's housing, housing schemes through NGOsand CBOs and housing through private builders;

Lending for urban infrastructure, including land acquisition for projects,integrated land acquisition and development, city level infrastructure -water supply (rehabilitation, augmentation, new sourcedevelopment/transmission projects), sanitation (rehabilitation,augmentation, new sewerage and drainage projects, conversion of drylatrines, construction of individual and community toilets), solid wastemanagement (collection, conveyance, treatment and disposal, energyrecovery), transportation (roads, bridges, rail and road transport terminals,airports, ports), etc., social infrastructure (health, education, parks,playgrounds), commercial infrastructure (shopping centres, commercialcomplexes, office complexes), and integrated area development/newtownship projects, etc.;

Consultancy services in the field of housing, township development and

infrastructuredevelopment;

Promotion of Building Centres for technology transfer and support to buildingmaterialindustries; and

Training in human settlements and technical assistance to borrowing agencies.

The borrowers of HUDCO are: State Urban Infrastructure Finance and DevelopmentCorporations, Water Supply and Sewerage Boards, Urban Development Authorities,State Housing Boards, National Capital Region Planning Board (NCRPB), New TownDevelopment Agencies like City and Industrial Development Corporation (CIDCO),Mumbai, Municipal Corporations/Municipalities, Improvement Trusts, and privatecompanies and agencies.Since its inception, HUDCO has so far sanctioned 14821 projects with a project cost ofRs.48.51 billion ($11.54 billion). The amount of loan sanctioned is Rs.31.66 billion($7.53 billion) against which Rs.17.82 billion ($4.24 billion) is already released.Housing loans approved amount to Rs.19.42 billion ($4.6 billion) against whichRs.12.30 billion ($2.9 billion) has been disbursed. HUDCO has so far contributed to thedevelopment of 10.14 million dwelling units and 4.7 million low-cost sanitation units.HUDCOs infrastructure financing portfolio is growing at a phenomenal rate. Duringthe last 10 years HUDCO has sanctioned Rs.12.24 billion ($2.9 billion) for infrastructureprojects covering water supply, sewerage, drainage, solid waste management, low costsanitation, etc. HUDCOs operations extend over 1,760 towns and thousands of villagesin the country.Cost-effective & Eco-friendly TechnologiesBuilding materials account for about 60% of basic inputs in any housing programmeand their costs can go as much as 75% of the cost of a house for low-income groups.There is a growing concern that persisting shortage of cost-effective buildingmaterials for the vast majority of population is a serious impediment to improving thehousing conditions of the people. While popular traditional materials are short insupply, high demand for them has resulted in their high prices and taking them out ofthe reach of the poor. Most of the new alternate materials developed in recent past arecost-effective and environment-friendly. But they are yet to be translated intomarketable products for mass application. Excepting cement and steel, all othermaterials required for housing are likely to have constraints of supply.Keeping the above aspects in view, the Government of India and State Governmentshave been promoting research in the fields housing and construction activities. Thishas led to a number of new alternative building materials and techniques aimed atreducing the cost of house construction and improving the performance ofconventional building materials and techniques. Energy-efficient manufacturingprocesses and use of renewable raw material resources of wastes and byproducts ofindustry, agriculture and forestry, etc., have resulted in Cost-Effective and Eco-Friendly (CEEF) products. As it was seen that the use of CEEF building materialsand techniques was hampered by the general lack of understanding on part ofbeneficiaries due to ignorance and illiteracy, the Government has initiated a massiveprogramme of demonstration, education and counseling for the poor. Rural masonsare considered as the rural housing engineers by the beneficiaries and therefore,care is being taken to train and motivate masons in addition to beneficiaries.Building Centres MovementRecognising that the propagation and extension of new cost-effective, energy-efficient and eco-friendly building technologies to the grassroots level require a

focused approach, a Centrally-sponsored scheme for setting up a national network ofBuilding Centres (Nirmithi Kendras) was initiated in different States. Over 350 such

centres have already become fully operational. These Building Centres are promotinguse of cost-effective building materials based on locally available raw materials andwastes. They provide a variety of services such as practical demonstration andpropagation of new technologies, training of artisans, entrepreneurs and smallcontractors, counseling of householders and production of low-cost materials andcomponents to meet the local housing construction needs. A large number of centresare also undertaking construction of housing projects and other public buildings.HUDCO provides funding support to Building Centres for setting up production unitsof new building materials and components. To encourage Building Centres intechnology extension activities, the Government of India has exempted the levy ofexcise duty on materials and components produced by these Centres. The training toentrepreneurs in several States has led to setting up of their production units for low-cost building materials and components to cater to the local needs.National Housing and Habitat Policy 1998In 1994, India adopted the National Housing Policy (NHP), which recognises the keyrole of the Government as facilitator rather than provider of housing services. TheNational Housing & Habitat Policy-1988 (NH&HP) is a continuation of the NHP. Itcalls for a housing revolution in the country and focuses on the changed roles ofvarious stakeholders in the housing development process in the new economicenvironment of liberalisation and globalisation. The policy emphasises the need topersuade the private and cooperative sectors to take greater initiatives in thepromotion and development of housing through fiscal concessions and otherincentives. Though the move towards disassociation of governmental agencies fromdirect construction is being witnessed since the early 70s, the NH&HP calls for acontinued positive role by the Government in housing of the poor. Rapid growth ofpopulation and increased urbanisation on one hand and escalating land prices on theother are responsible for widening the gap between demand for and supply of housingunits. These factors squeeze the poor off land and marginalise them in urban housingmarkets. Recognising this, the NH&HP suggests a number of areas of interventionfor governmental agencies to promote affordable housing for the poor, includingavailability of sites, housing loans at below-market rates, low-cost building materialsand civic services.The broad aims of the National Habitat and Housing Policy-1998 (NH&HP) are:

Creation of surpluses in housing stock either on rental or ownership basis; Providing quality and cost-effective housing and shelter options to the citizens,

especially the vulnerable groups and the poor; Guiding urban and rural settlements to ensure planned and balanced growth and

a healthy environment; Making urban transport as an integral part of the urban Master Plan; Using the housing sector to generate more employment and to achieve skill

upgradation in housing and building activities; Promoting accessibility of dwelling units to basic facilities like sanitation and

drinking water; Removing legal, financial and administrative barriers for accessing land, finance

and technology for housing; Forging strong partnerships between private, public and co-operative sectors in

housing and habitat projects.

The NH&HP envisages a key role for the Government of India in promoting policyand legal reforms, facilitating flow of resources to housing and infrastructure throughmeasures such as fiscal concessions to investors and promoting the creation of asecondary mortgage market. The State Governments are expected to graduallywithdraw from direct construction of houses, liberalise legal and regulatory regime togive a boost to housing and support infrastructure, promote private sector and co-operatives, and facilitate access of the poor to land, finance, low-cost and locally-suited engineering solutions and participatory designs.Two Million Housing ProgrammeThe National Agenda for Governancethe election manifesto of the presentGovernment recognises Housing for All as a national priority. It has set a target forthe construction of 2 million additional houses every year 0.7 million in urban areasand 1.3 million in rural areas. A programme of this magnitude is expected to result inan investment of about Rs.80 billion in housing construction activity. This would alsofacilitate cement, steel and other building materials industries in addition to creatingsubstantial employment in this sector. Every million of rupees spent by theconstruction industry generates about 75 man-years of employment.Recent Budgetary InitiativesIn recent years, housing and construction have emerged as top priority sectors forpolicy-makers. Faced with recession and slow-down of economic activities, theGovernment of India has realised the key role that construction Industry can play injump-starting the economy and provide gainful employment to people. Housingconstruction has many forward and backward linkages and about 280 industries aredirectly or indirectly linked to housing activities. Moreover, construction is thesecond largest employment-generating sector in the country, next only to agriculture.Considering these, the Union Budgets of 1998-99 and 1999-2000 have laid a greatdeal of emphasis on creating an enabling environment for housing activities in thecountry through the private sector.The measures initiated by the Union Budgets to boost up housing activities include: Additional equity support to HUDCO to the tune of Rs.1.92 billion in the 1998-99

budget and Rs.2.71 billion in the 1999-2000 budget of the Ministry of UrbanAffairs and Employment and Rs.0.5 billion in the1998-99 budget of the Ministryof Rural Affairs and Employment. These measures augmented the equity base ofHUDCO by Rs.5.13 billion in a period of just two years as against the infusion ofRs.3.85 billion by the Government of India over a period of 27 years from thecreation of HUDCO. The addition of Rs.5.13 billion of equity would enableHUDCO to leverage about Rs.42 billion from the market for housing and urbaninfrastructure activities. HUDCO would be in a position to support the creation of1.5 million houses each year out of which 1 million will be towards achieving thetarget under the Two Million Housing Programme;

Extension of tax holidays for approved housing projects allowing a deduction of100% of the profits for the first five assessment years and 30% deduction foranother five years. This was made applicable to housing units upto 1500 sq. ft. inthe budget of 1999-2000. The facility will promote private sector participation inhousing activities;

Increase in deduction against income from house property for repairs andcollection charges from 1/5th to 1/4th and increase in the deduction for interest onborrowed capital in the case of self-occupied property from Rs.15,000 to

Rs.30,000 in 1998-99 budget. The latter figure was revised drastically toRs.75,000 in the budget of 1999-2000. This will promote better maintenance ofconstructed housing stock in addition to promoting larger individual investmentsin housing;

Enhancement in the percentage of incremental deposits into housing activitiesfrom the banking sector from 1.5% to 3% to enable inflow of Rs.3.8 billion forlow-cost housing;

Inclusion of micro-credit and tiny sector as part of priority sector lending of banksto give a fillip to weaker section/low-income housing;

Extension of depreciation benefits in corporate employees housing from 20% to40% to encourage corporate houses to take up housing for their employees;

Repeal of the Urban Land Ceiling and Regulation Act in 1998 to free the supplyof land for housing in urban areas, especially metropolitan cities.

Andhra Pradesh Model: Self-help & Mutual HelpThe State of Andhra Pradesh is a pioneer in India in implementing innovative housingprogrammes for the poor on a large scale. Though the A.P. State HousingCorporation Limited (APSHCL) was established in 1979 to formulate, promote andexecute housing schemes for the weaker sections of society, the Corporation hasconstructed about 3.62 million houses by 31.03.2000 out of which 2.4 million are inrural areas. It ranked first in the country in the implementation of housing for thepoor in rural areas from the year 199192 onwards. Households with an annualincome of Rs.13,000 or less are eligible for sanction of houses under various schemesfrom 199697 onwards. 50% of the houses are earmarked for Scheduled Castes andScheduled Tribes, 33% for Backward Castes, 7% for Minorities and the remaining10% for other Economically Weaker Sections. The funding of the housingprogramme includes subsidy from the Government and loan from various financialinstitutions for the repayment of which the Government stands guarantee irrespectiveof the ultimate recovery from beneficiaries. Loans are mobilised from HUDCO, LifeInsurance Corporation, General Insurance Corporation and Commercial Banks.The basic concepts and features based on which the entire Weaker Sections HousingProgramme is being implemented in the State of Andhra Pradesh are: Self-help and Mutual help by the beneficiaries and their full participation in

decision-making and implementation, consequently resulting in their capacitybuilding;

The concept of Core House which is easily expandable depending upon theimprovement in the economic position of the beneficiary and his need. Theadequacy of the accommodation is not relevant and it does not come in the way ofimplementation of the housing programme. The issue of adequacy of subsidy-cum-loan assistance is also irrelevant as the Government gives only a fixedfinancial assistance to the beneficiary;

Cost-Effective and Eco-Friendly (CEEF) building materials and constructiontechnologies;

Principal Bank Branch System (PBBS) in handling of finances. Amount due thebeneficiary is directly credited to individual bank accounts of beneficiaries. Onebank is designated as the nodal or principal bank for each scheme. The nodalbank promotes banking habit and thrift and credit among beneficiaries.

Some Directions for FutureAlthough the National Housing and Habitat Policy emphasises the facilitating role of the

Government in housing, the public sector agencies are not absolved of the responsibilityof providing housing to those segments of the people who cannot be served by themarket. However, a new approach is called for issues such as beneficiary consultationson the location, design and cost aspects of shelter, affordable shelter options for the verypoor, integration of income generation and housing, eligibility criteria for availinghousing finance and providing a collateral for the same, easier availability of plots andhouses from public and private providers, assistance for house construction, speedyapprovals for construction of infrastructural services, simplification of documentationand procedures, etc. Housing subsidies often benefit the salaried employees of theorganised sector including the Government and the recipients of tax concessions forhousing investment. Implicit subsidies to beneficiaries of social housing schemes arisefrom loan waivers, low cost recovery rate, concessional interest and inefficienciesabsorbed by the agencies. The schemes involving a combination of concessional loanand subsidy affect the extension of viable finance on non-subsidised terms, based onrigorously enforced cost recovery. These issues need to be re-examined.Part of the resources needed for the shelter of the urban poor could be diverted fromcurrent outlays by an objective review of all subsidies and mis-applied resources, and bychannelling institutional finance. Additional resource mobilisation could be by acombination of measures to activate beneficiary savings and channelling loans on viableterms by financial institutions. These measures could be catalysed and leveraged bybudget provisions for land and services, equity for housing agencies and support to openmarket lending on credit-rated terms. Steps are needed for avoiding the dispensation ofex-post and implicit subsidies, to provide for transparent and well-targeted subsidies, andto prevent the leakages of subsidies under government programmes and unwarrantedfiscal concessions to better-off sections. Subsidies may perhaps be administered in theform of subventions through credible NGOs for group shelter activity and savings effort.The State governments need to adopt a state-wide policy on the regularisation oftenure and conferment of leasehold or occupancy rights to slum-dwellers at least inareas not needed by public agencies. The National Housing and Habitat Policyemphasises the grant of occupancy rights to slum-dwellers and providing support forprogressive slum redevelopment and upgradation schemes. The slums and squattersettlements could be categorised as those needing urgent relocation, those that can beconsidered for conferment of occupancy rights/title and upgradation or redevelopment insitu, and those which can be provided with basic services without conferment of title.This categorisation process should be dovetailed with the process of Master Planrevision and formulation of flexible development planning norms. It would enable therelocation of slum-dwellers and change in land use plans to incorporate the regularisedslums into the plan-scape of the city. Also, physical and social planning should be oncity-wide basis so as to integrate the informal sector in the city's economy and social life.The State and city agencies need to be encouraged to formulate city plans for developingvaried shelter options for the urban poor, such as the provision of essential services,

shelter upgradation and extension including toilets, renewal of congested inner citychawls, serviced sites for the poor, in situ redevelopment of slums with assistance of theprivate sector and co-operative involvement, night-shelter and sanitation facilities for thenew migrant landless persons, relocation of families from sites urgently required forpublic purposes, and financial and technical assistance on a group or individual basis forincremental construction.In order to facilitate greater private and co-operative sector participation in housingactivity, as well as public-private partnership, there is the need to: first, undertake legalreforms; second, to undertake land policy reform to provide easier access to developedland; third, provide suitable fiscal measures and incentives to encourage investment of

household savings in home ownership and to induce the corporate sector to invest inemployee housing; fourth, carefully assign property rights and make them legallyenforceable; fifth, create enabling institutions for providing an enabling environment byrestructuring existing institutions and by creating new ones, if required; and sixth,widen the existing database for strategic planning to cover aspects relating to ownershipof land and property, housing starts and completions, etc.With the Union Budgets for 1998-1999 and 1999-2000 according a new thru