Adani Institute of Infrastructure Management

Post Graduate Program in Infrastructure Management

Independent Project Report on
Affordable Housing Development
Submitted To:
Dr. D R Mahapatra
Project Guide:
Dr. Ganesh Devkar
Submitted By:
iddhartha Modi
!oll "o. #$
In partial fulfilment of the requirement for the degree of PGPIM
AIIM %
th
&atch
20/06/2014
A'(")*+,DG,M,"-
This project is the result of six months or! herein innumerable people ha"e been
instrumental in completing it successfully# It is a pleasant aspect that I ha"e no the
opportunity to express my than!s for all of them#
I ould li!e to express my heartfelt gratitude to my guide$ Prof# Ganesh %e"!ar$ for
the indi"idual help and guidance he has pro"ided during the ma!ing of the thesis# &e
has alays been helpful and ga"e "aluable guidance and comments hich led to
successful completion of this project#
My sincere than!s to the project head$ Prof# %iptiranjan Mahapatra$ the discussion
ith hom ha"e alays helped me to !eep my spirits high and hose suggestions
ha"e alays come at the right time to guide me toards the right direction#
My than!s to Mr# 'igar Talati ()rchitect$ 'igar Interior %esigner*$ Mr# Sanjay Gupta
(M%$ +ashi ,onsultancy*$ Mr# M#) Shah (,hief -ngineer$ -.S &ousing$ )/%)* 0
Mrs# 1eeru Pandey (,hief Ton Planner$ )/%)* for the information shared ith me
and their guidance throughout the project or!#
) special than!s to all the pri"ate de"elopers of )hmedabad$ especially Mr# )n!it
Shah (Tirupati %e"elopers* for gi"ing their "aluable time and suggestions hich
helped me a lot in my thesis#
I ould also than! the entire faculty members of )IIM$ my friends and colleagues for
una"ering support and understanding during the many hours I dedicated to
achie"ing this milestone in my life 0 career#
I ould li!e to express my deepest gratitude to my parents$ ithout hose blessings$
any of this ould not ha"e been possible#
)nd finally to almighty God for e"erything hich he has gi"en me#
Siddhartha Modi
(2oll 1o# 3 45*
-A&+, ). ')"-,"-
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In India there is a shortfall of 65#44 million housing units from hich about 789
shortage is for :o Income group 0 economically ea!er section housing# Public
Sector and agencies are pro"iding mass housing to the urban poor hich are not
sufficient to fulfil the bac!log# To minimi;e the shortfall$ pri"ate sector can also
contribute to the housing problem through some unique housing model ith
go"ernment (li!e PPP*# Increasing slum population 0 ,ontinuous migration from
rural to urban areas add to the problem of housing supply in "arious de"eloping
cities of India#
PPP concept has arisen due to the huge need of housing in our country# The
pre"ailing socio<economic structure is such that a "iable permanent housing project
hoe"er cost effecti"e$ is beyond the reach of a "ast majority of the MIG 0 :IG# To
bring don the land cost 0 construction cost for )ffordable housing go"ernment of
India also launched a scheme of )ffordable housing in partnership hich focuses
upon pri"ate inter"ention in -.S=:IG housing projects in return pri"ate sector gets
some incenti"es#
Today "arious states li!e .est Bengal$ &aryana$ 2ajasthan$ Gujarat$ >arnata!a$
Maharashtra$ and Punjab ha"e adopted pri"ate inter"ention in housing deli"ery for
-.S=:IG categories#
Ministry of &ousing and Po"erty )lle"iation$ ith an aim of reali;ing the goal of
)ffordable housing for all$ is de"eloping guidelines for ?Public Pri"ate Partnership in
housing@ to meet this shortage#
'hapter # I"-!)D0'-I)"
#.# "eed of the tud3
India faces a challenge in managing the rapid process of urbani;ation and the
groth of its cities# It ran!s second in population in orld$ ith a population of 4#6A
billion$ out of hich B55#4 million li"e in cities and tons# India@s urban population
has gron at a ,)G2 of 6#C percent o"er 6884<6844$ and economic reform has
gi"en considerable momentum to the process of urbanisation resulting in an increase
in the urbani;ation rate from 65#C percent to B4#6 percent# This means that existing
cities ill continue to gro larger and many cities and tons ill be added#
#.#.# Present housing scenario in India
Groing concentration of people in urban areas has resulted in an increase in the
number of people li"ing in slums and squatter settlements# S!yroc!eting prices of
land and real estate in urban areas ha"e induced the poor and the economically
ea!er sections of the society to occupy the marginal lands typified by poor housing
stoc!$ congestion and obsolescence# It is apparent that substantial housing shortage
looms in /rban India and a ide gap exists beteen the demand and supply of
housing$ both in terms of quantity and quality#
#.4 )b5ectives of the tud3
The main objecti"e of the project is to study the housing scenario pre"ailing in India$
)ffordable housing supply models$ identifying !ey issues and analysing factors
affecting affordable housing de"elopment$ come up ith mechanism of reducing
affordable housing shortage$ study initiati"es ta!en and challenges faced by
Sta!eholder@s$ analyse ho PPP models can reduce the shortage of affordable
housing$ and finally de"eloping a mechanism to reduce demand and supply gap in
the affordable housing sector#
The objecti"e of the study is also to find out pri"ate sector perception toards
participating into affordable housing projects through a Private Developer6s urve3
in )hmedabad city# The sur"ey and the data collection of existing model can be used
as base for ma!ing housing policy for Gujarat State and to recommend certain
macro le"el changes in the existing housing model of Gujarat#
#.7 cope of the tud3
Dor the objecti"es of the study$ the data collection is explained in details as belo:
#.7.# +iterature tud3
The literature study is as belo:
4* Study of &ousing scenario 0 2eal -state mar!et in India#
6* Study of Go"ernment@s Policy$ Guidelines 0 schemes for )ffordable &ousing#
B* Study of ,urrent &ousing Shortage#
A* Study of /rban Population 0 &ousing demand#
E* Study of initiati"es ta!en and challenges faced by Sta!eholder@s
F* Study of ho PPP models can be beneficial in reducing the affordable
housing shortage#
#.7.4 Data 'ollection
Primar3 Data 'ollection
It includes study of Pre"ailing affordable housing models in )hmedabad (Gujarat*#
4* Process of reser"ing land for social infrastructure= :IG housing
6* Process of construction of units on reser"ed land
B* Total amount of units constructed and allotted
A* 1o# of units proposed as per %e"elopment plan
E* Gther initiati"es by de"elopment authority= state go"ernment for affordable
housing
,ase Study of )ffordable housing Projects in )hmedabad
Pri"ate de"eloper@s sur"ey (Huestionnaire*
econdar3 Data 'ollection
It includes methods and mechanism of urban land de"elopers$ ton planning
schemes 0 land acquisition method for reser"ing land for Social Infrastructure#
#.7.7 Data Anal3sis
It is based on the primary data collected of the state model and policy# It shos
ad"antages and disad"antages of the state model ith respect to housing supply
and land de"elopment mechanism#
#.7.8 Proposed Polic3 9 !ecommendation for Gu5arat tate
) proposed housing policy for Gujarat is formulated on the basis of data gathered
and analysed from de"elopment authorities as ell as pri"ate sector sur"ey in
)hmedabad city# ,ertain recommendations and amendments are also proposed to
impro"e -.S housing deli"ery in Gujarat#
#.8 !esearch Methodolog3
2esearch
Methodology
:iterature Study %ata ,ollection
&ousing Scenario
%emographics 0
&ousing %emand
Go"ernment Policy
,ase Study
Pri"ate %e"eloper
Sur"ey
)nalysis 0 >ey
Dindings
Proposed Policy 0
2ecommendations
,onclusion
'hapter 4 +I-,!A-0!, -0D2
Go"ernment of India pro"ides "arious guidelines 0 criteria to state go"ernments ho
ant to participate in )ffordable housing projects through pri"ate sector in"ol"ement#
)nd thus different States are planning to de"elop ne policy on affordable housing
hich increases pri"ate de"eloper@s in"ol"ement#
/:B=State go"ernment adopting such policy ill be getting subsidy amount#
2ajasthan is the state to initiate pri"ate in"ol"ement through "arious mechanisms to
build -.S=:IG=MIG 3 ) units#
-"ol"ing$ inno"ati"e$ transparent and hassle< free PPP models are a must to bring
about synergy beteen the public and pri"ate sectors in tac!ling the housing
requirement of urban India#
Pri"ate de"elopers ha"e proposed some land in 'aipur for construction of )ffordable
housing schemes under PPP# This ill decrease the burden of housing supply from
Public sector 0 planning bodies#
2ajasthan State gi"es se"eral ;oning incenti"es to selected de"elopers li!e
additional D)2 0 Iero :and con"ersion charges# There is a Tri<Party )greement
done beteen pri"ate de"elopers$ concerned local authority 0 a nodal agency#
Gujarat State -.S &ousing Supply Model 3 Planning authorities has adopted ton
planning scheme mechanism for land de"elopment# This mechanism is "ery
successful in reser"ing land for affordable housing in urban areas# The reser"ed land
parcel in each T#P scheme is than de"eloped through public procurement or
tendering process# Through this -.S &ousing model "arious cities in Gujarat are
trying to minimi;e the shortfall of housing but due to increment in slum population the
bac!log remains the same#
Sur"ey of Pri"ate de"elopers< Sur"ey to be carried out to !no hether the pri"ate
sector is ready to contribute to affordable housing 0 hich model do they expect
from go"ernment$ hich ill include questions on illingness to contribute to
-.S=:IG projects$ Partnership ith go"ernment$ preferred mechanism of
de"elopment 0 preferred incenti"es against its contribution#
Policy Dormulation for Gujarat 3 Policy strategy is interlin!ed ith T#P mechanism#
&ere pri"ate de"eloper can construct housing on their on land 0 also on reser"ed
land in T#P# Scheme# The de"eloper participating in the projects ill get the land
deduction subsidy on his on plot anyhere ithin %e"elopment authority limits#
The ,entre is also loo!ing toards de"eloping suitable financial instruments for
promotion of housing for the -.S and :IG groups ser"iced by basic amenities and
promote action plans for creation of adequate infrastructure facilities relating to
ater$ drainage$ sanitation$ seerage$ poer supply and transport connecti"ity.
4.# Housing cenario in India
)ccording to a report submitted by a technical committee to the Ministry of &ousing
and /rban Po"erty )lle"iation (M&/P)*$ India@s urban housing shortage is estimated
at nearly 4C#5C million households in 6846# Besides those li"ing in obsolescent
houses$ C8 percent of these households are li"ing in congested houses and are in
requirement of ne houses# The report also highlights that nearly one million
households are li"ing in non<ser"iceable !atcha houses$ hile o"er half a million
households are in homeless conditions#
Figure: 1
Gf the total urban housing shortage$ nearly F6 percent houses are self<oned$ hile
BC percent families li"e in rented homes#
The State<ise data shos a mixed picture here both de"eloped as ell as less
de"eloped states ha"e families li"ing in poor housing conditions# /ttar Pradesh has a
housing shortage of o"er three million homes folloed by Maharashtra (4#75 mn*$
.est Bengal (4#BB mn*$ )ndhra Pradesh (4#65 mn* and Tamil 1adu (4#6E mn*# The
top 48 states$ in terms of urban housing shortage$ contribute to 4A#B million or 5F
percent of housing shortage.
Figure: 2
/rban housing shortage is prominent across the economically ea!er sections
(-.S* and lo income groups (:IG* hich together constitute o"er 7E percent of the
total housing shortage# The shortage amongst the middle income groups (MIG* and
abo"e is estimated at A#BC percent# Section<ise shortage is displayed belo#
Figure: 3
4.4 Definition of Affordable Housing
J)ffordabilityK as a concept is "ery generic and could ha"e different meanings for
different people based on differences in income le"els# Affordable houin! refer to
an" houin! that meet ome form of affordabilit" criterion#
%ifferent countries ha"e defined affordable housing to present the economic
potential of an indi"idual buying a house# %efining affordable housing in India is a
difficult tas! gi"en that at e"ery square !ilometre of the country$ the dynamics of the
mar!et are different# Therefore broadly affordable housing in India for Tier I$ II and III
cities is defined based on three !ey parameters:
'ategor3 #: Income +evel 4: i;e of D.0 7: Affordabilit3
-.S LI12 4#E :acs=annum /pto B88 sq# ft
-MI to Monthly
Income (B8 < A89*
:IG
I12 4#E < B
:acs=annum B88 < F88 sq# ft
&ouse Price to
)nnual Income 2atio
( L E#4 *
MIG
I12 B < 48
:acs=annum F88 < 4688 sq# ft
Table: 1
4.7 .actors affecting Affordable Housing Development
The demand dri"ers for affordable housing are as belo:
/rbani;ation: /rbani;ation is an Jindex of transformation from traditional rural
economies to modern industrial one#K India@s urban population is increasing at a
faster rate than its total population# )t 6C percent$ the pace of urbani;ation in India
has been sloer than the a"erage pace of urbani;ation in )sia# &oe"er$ the
absolute number of people in urban cities and tons has gone up substantially# In
India$ urbani;ation can be described as a product of demographic explosion and
po"erty induced rural<urban migration# This situation has resulted in pressure on
urban infrastructure and in an increase in the number of homeless people li"ing on
the streets# )s per the 6884 census the total urban homeless population as 5$
5C$E77 people$ hich ould be much more currently gi"en the inadequate a"ailability
of affordable = lo<cost housing#
2ising income le"els leading to a si;eable middle class segment: The past fe years
ha"e seen tremendous economic groth in the country and one of the
implementation of one of the most successful anti<po"erty programmes in the
country@s history# .hile 7B percent of the total population in 47CE as under
depri"ed category$ this declined to EA percent of total population in 688E and is
expected to further decline to 669 by 686E #The economic groth is also expected
to dramatically change India@s income pyramid by creating a si;eable layer of middle
class #This middle class segment is expected to be the primary dri"er for affordable
housing#
The !ey supply constraints for affordable housing are as follos:
)"ailability of :and: Gne of the biggest questions that India needs to anser going
forard is ith respect to adequate supply of land for housing purposes# The
Go"ernment@s "ision of J)ffordable &ousing for )llK ill require acquisition = supply of
large land parcels on a regular basis# )s per 6884 census$ the country@s urban land
mass (6#A percent of total land mass* houses approximately 6C percent of the
country@s population$ excluding people ho li"e on the streets# )ccording to
calculations made by the Ton and ,ountry Planning Grgani;ation (T,PG*$ to cater
to the demand of -.S and :IG category alone ould require CA$ 56A to 468$CC6
hectares of additional land # :and cost is another crucial factor affecting supply of
land# Gi"en limited a"ailability of land in urban areas$ it becomes un"iable for
de"elopers to pro"ide affordable housing ithout Go"ernment support# Gn the other
hand$ the Go"ernment holds substantial amount of urban land under onership of
port trusts$ the 2ailays$ the Ministry of %efence$ land acquired under the /rban
:and (,eiling and 2egulation* )ct$ the )irports )uthority of India and other
go"ernment departments# It is also because of folloing points:
-xcessi"e ,ontrol on %e"elopment of :and ,reates )rtificial Shortage
:ac! of Mar!etable :and Parcels
Titling Issues and :ac! of Information
2ising Threshold ,osts of ,onstruction: .hilst price of premium residential projects
are largely guided by land costs$ construction costs ha"e a significant share in the
price of affordable housing# This is due to the fact that hilst land prices fall
exponentially from city centre to peripheral locations of the city$ construction costs
generally follo a gradual trend from premium luxury$ mid<income to lo<income
housing# If land is acquired at a reasonable cost of I12 4E836E8 per sq ft$ an
affordable housing project ith basic amenities (construction cost of I12 C8834$888
per sq ft* ould result in a minimum selling price of I12 4$A8834$588 per sq ft
(Digure 48*# Thus$ construction costs form nearly E83F89 of the total selling price for
affordable housing# Gn the other hand$ luxury housing projects in South Mumbai
ha"e construction costs of nearly I12 A$8883E$888 per sq ft$ hich is nearly 4C3689
of the selling price of I12 68$88836E$888 per sq ft# )ffordable housing projects get
more affected by rising costs of construction than premium projects# &ence$ it
becomes important that costs are minimised for construction of lo<income housing
hilst balancing the amenities pro"ided as ell as ensuring the safety and
ser"iceability of the built structure during its lifecycle# %uring the past decade$
construction costs ha"e significantly increased by nearly C834889 due to the
appreciation in prices of construction materials such as steel$ cement and sand#
Shortage of labour has also resulted in a rapid increase in ages#
Dinancial 0 2egulatory support: Dinancial and regulatory constraints ha"e plagued
the housing sector in India# ,urrent financing mechanism pre"alent in the country
mostly targets MIG and &IG sections of the society hile the households falling
under :IG and -.S category find it difficult to secure formal housing finance#
,ommercial ban!s and traditional means of housing finance typically do not ser"e
lo<income groups$ hose income may be "ary ith crop seasons$ or is belo the
?"iable@ threshold to ensure repayment$ or ho cannot pro"ide collateral for loans#
Microfinance institutions are considered to be the next best alternati"e to for
financing the -.S and :IG category# &oe"er$ there are challenges faced by
microfinance institutions hich pre"ent them from extending housing loans#
,hallenges faced are primarily due to the longer period of housing loans (typically
beteen fi"e to se"en years minimum$ if not more* and due to the larger amount of
loan compared to typical loans extended by MDs# Typically$ a house$ particularly in
the urban areas$ ill be about I12 4 la!h$ hereas hen microfinance institutions
gi"e for li"elihood financing$ they gi"e I12 48$888 to maximum I12 BE$888# If they
ha"e to lend to a significant numbers of people$ the amount to be loaned goes into
crores of rupees hich can be a problem for microfinance institutions# )nother
problem ith microfinance institutions is of refinance# .hile 1ational &ousing Ban!
(1&B* pro"ides refinancing facility$ interest rates are not fixed but re"ieed
periodically# :ac! of de"eloped debt mar!et places considerable challenges for
microfinance companies depri"ing them of long<term affordable money and hat
they currently ha"e is a maximum of three to four year money a"ailable at a cost of
4E<45 percent$ ma!ing it difficult to lend for mortgages# -"en if they are illing$ the
rate ill be some 4C<47 percent$ hich$ hile it may be ay cheaper than hat a
moneylender ould as! for$ doesn@t really help the cause#
There are se"ere regulatory constraints to real estate de"elopment in Indian cities$
hich range from lengthy appro"al processes to lac! of clarity in urban planning$
described belo:
:engthy )ppro"al and :and /se ,on"ersion Process
:ac! of ,larity in Building Bylas 0 Guidelines < rules for DSI$ ;oning 0
de"elopment plans by /:B@s 0 /%%@s lac! clarity 0 ha"e o"erlapping
guidelines for de"elopment
,ontinuation of )rchaic :as 3 such as 2ent ,ontrol )ct$ this hampers
rede"elopment of areas#
Figure: 4
4.8 Gu5arat tate < An )vervie=
Total &ousing Shortage 3 44#E la!h %elling unit
,urrent /rban Population 3 6 crore
Damilies in Slum 3 5#7 la!h
Projected /rban Population (6864* 3 B#B crore
Projected shortage in 6864 3 4C la!h %elling units
-.S &ousing Shortage 3 C#B la!h delling units
:IG &ousing Shortage 36#E la!h delling units
-.S<:IG Supply required e"ery year (Gujarat State* 3 4#E la!h units=year
-.S<:IG Supply required e"ery day 3 A48 units=day
4.8.# Housing shortage in Ahmedabad 'it3
&ousing shortage in )hmedabad (6844* 3 4#5 la!h delling units
769 shortage in -.S< :IG section
-.S<:IG supply required per year in )hmdebad 3 46$E88 units=year
-.S &ouseholds in )hmedabad (688E* < 48E$EA6 1os#
'hapter 7 DA-A ')++,'-I)"
7.# &ackground of ,* Housing uppl3 b3 A0DA >Gu5arat Model:
)M, 0 )/%) is pro"iding housing to -.S category= slum dellers in )hmedabad
city since 4776# Till 688F total F888 delling units ere constructed and allotted to
the beneficiaries# )s per city de"elopment plan 688F$ totally E8$888 units of -.S
ere proposed under responsibility of )/%)# These units ere proposed to
complete by 684B
7.#.# tatus of ,* Housing uppl3 b3 A0DA
It completed 4$8? units by 6885$ and %@%? units by 688C# Till 6844 )/%) completed
a total of ##A78 units and allotted @A4B units to the beneficiaries$ and had a bac!log
of ?B## applications hich ere pending as on 6844#
7.#.4 !eCuirements from beneficiaries
Income limit for applicants of -.S category (Total Income of household= year*
(-.S* M /p to 2s# BB$888
The applicant has to gi"e brea! up of income 0 income of his ife and
children
If applicant holds a property on his= his ife= his children@s name$ details of
that property= plot has to be shon
%etails li!e 2ation card$ Income certificate from current employer$ cast
certificate has to be submitted to the concern authority#
7.4 Pro5ect Development Mechanism for ,* Housing in Gu5arat
)s -.S housing construction is done through a public procurement process the
planning 0 designs of units ha"e to be pre<decided by the Planning authority# They
also ha"e to prepare all the cost estimates# The tendering process is to be carried
out by the authority in 6<bid system# These all procedures are time consuming and
abo"e all the appro"al of land reser"ed in T#P scheme ta!e a huge amount of time#
7.7 Mechanism of allotment of ,* Housing units to the
beneficiaries
7.8 'ase stud3 of ,* Housing Pro5ect < (rishnadhamD
Prahladnagar
)&E,'-I1,
The objecti"e of this project report is 3
)nalyse the manner in hich PPP models can be used to resol"e the
shortage of )ffordable housing
)nalyse the existing PPP model in Indian ,ontext
Type of PPP model to be adopted 0 formulating the criteria based on hich a
particular PPP model can be selected in )ffordable &ousing Projects#
2ecommend policy changes for the state$ hich can impro"e the housing
supply for -.S 0 :IG
To formulate mechanism of de"elopment ith pri"ate sector (PPP model*
>ey issues pre"enting the pri"ate de"elopers from participating in )ffordable
housing projects#
>ey issues in PPP model for )ffordable &ousing Projects
)0-')M,
/nderstanding of existing PPP business models in )ffordable housing#
/nderstanding the need of %emand 0 Supply patterns of )ffordable &ousing
in India#
/nderstanding the issues related to Go"ernment policies
To get an understanding of ris! mitigation mechanisms for pri"ate de"elopers#
/nderstanding of the financial issues hich arise in affordable housing
projects
/nderstanding of the factors to be !ept in mind for bidding#
) criterion based on hich a pri"ate de"eloper could decide hether to
participate in an affordable housing project or not#
/nderstanding hich PPP model is better for affordable housing#
/nderstanding the procedure of selecting a particular PPP model for
affordable &ousing
/nderstand the affordability of the potential buyers
MA"AG,!IA+ IMP+I'A-I)"
The outcome of the study ill help in a better understanding of Policy 0 financial
issues hich pre"ent pri"ate de"elopers to enter into PPP model in )ffordable
housing sector# It ill also help in getting better understanding of factors of Success
0 failure of PPP in )ffordable housing projects#
)nother implication of the study is de"elopment of a criterion based on hich a
pri"ate de"eloper may decide to participate in PPP models for affordable housing
projects#
!,.,!,"',
4
JPositi"e for lo<cost housing projectsK : ,risil 2esearch 2eport
6
-asing of -,B normsK : ,risil 2esearch report
B
J2ecommendations Gn < G/I%-:I1-S DG2 PPP I1 &G/SI1GK : >night
Dran! < )d"isory Ser"ices
A
JGo"ernment policies pro"ide support to housing for urban and rural
populationK : ,risil 2esearch 2eport
E
JPPP in &ousing 0 /rban %e"elopmentK : The global /rban -conomic
%ialogue Series
F
J)ffordable &ousingK : >PMG
5
J2eport on PPP 3 Social SectorK : Go"ernment of India
C
J)ffordable &ousing in IndiaK : IB-D