Features: Magazine | Literary Review | Life | Metro Plus | Open Page | Education Plus | Book Review | Business | SciTech | NXg | Friday Review | Cinema Plus | Young World | Property Plus | Quest | Folio |

Meeting the challenge: The demand for affordable housing will increase phenomenally.

The concept, mooted by Kumar Gera, chairman of Confederation of Real Estate Developers’ Associations of India, envisages the creation of special tax-free zones where only mass housing of a certain kind will be permitted.

“A Special Residential Zone (SRZ) is a notified geographical region that is free of domestic taxes, levies and duties (both for the creation, operation and maintenance of the SRZ) with special development rules to promote large-scale, greenfield, affordable housing projects for the country’s masses. The SRZ would have a prescribed minimum number of dwelling units with a maximum prescribed size, and each SRZ would require adequate social infrastructure, including schools, medical facilities, etc.,” is how he describes it in a recent concept paper.

The National Housing and Habitat Policy, 2007 has referred to the need to develop new integrated townships as half of India’s population will be living in urban areas by 2041. The concept of the SRZs will have to be promoted to help the country meet the massive upsurge in housing demand, he says.

But with the takeover of land for the Special Economic Zones becoming a contentious issue in some parts of the country, will the creation of any kind of a zone involving land acquisition prove viable?

Mr. Gera is very clear that the creation of residential zones should not involve land acquisition by the government. “This proposal does not suggest any acquisition effort by the government — all the land should be purchased by the developer at fair market values, without any government intervention in the acquisition process,” he told The Hindu-PropertyPlus.

“It should just be a transaction between a willing buyer and a willing seller without any compulsion, force, or threat of an acquisition law supported by a State or local authority. Under no circumstances should there be any compulsion for an unwilling seller to be forced to surrender his land,” he further explained in response to a question as to how his SRZ proposal could be possibly implemented in a densely populated State such as Kerala.

Taxes that are prohibitive act as a “significant barrier” to the development of large-scale housing projects for the cost-conscious urban mass market, he argues.

As on December-end 2007, the pan-India average rate (per sq.ft) for a residential apartment was around Rs. 2,700, of which Rs. 700 per sq.ft ( little over 25 per cent) could be directly attributed to various local, State and Central duties and levies and direct and indirect taxes in the form of value-added tax, service tax, tax deduction at source, stamp duty on sale, stamp duty on land, income tax on profit of development, materials, services, municipal premiums and development charges, excise on materials, Octroi and other levies.

So, there is a need to create an economic vehicle that will help the country meet the demand for good quality affordable housing arising from rapid urbanisation and the SRZ concept will be the answer to it.

But will the SRZ proposition be profitable enough to attract builders on the required scale? When this question was put to him, Mr. Gera said, “It is my firm belief that if [exemptions in] duties, levies, and all other charges (as is done for the SEZs) is given for small homes in SRZs, then, without a doubt, developers will enter this field as the largest demand volumes are in this segment in India. They will enter it for a profit which will be less than normal, but as volumes will be much higher it will become an attractive value proposition.”

The construction in such economic zones can be subject to the kind of administrative controls applicable to the Special Economic Zones. For instance, it can be stipulated that they contain low-sized units (typically in the range of 300 sq.ft to a maximum 750 sq.ft, limited to a maximum permissible average of 500 sq.ft); have a minimum threshold on the number of units to be developed (typically medium-scale urban agglomerations have populations of around 50,000 — nearly 10,000 residential units) and be managed and monitored by resident development commissioners, after the approvals are recommended by the respective States and cleared by the Board of Approvals at the Centre. The funds of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) can be used for connecting the SRZs with the nearest urban agglomeration. The notification process for the SRZs can be on the same pattern as the current notification process for the SEZs. They can have buildings with an FSI relevant to the stipulated infrastructure standards and will have planned support infrastructure (community halls, gardens, play parks, heath centres, education, shopping, etc.).

Effective measures and rules can be formulated to prevent malpractices or misuse of SRZ benefits. For instance, a person may be permitted to buy only one flat and tax-free materials brought for consumption specifically in the SRZs should not be diverted to other locations for use.

There are specific benefits that such SEZs can bring to the housing scene in the country.

It will open up quality low-cost housing to the mass market supported by appropriate infrastructure, such as schools and medical facilities. The SRZs will bring housing activities under one umbrella leading to better organisation and implementation of national specifications and policies, lead to massive employment generation, promote the economic growth of a region and help in controlling the proliferation of slums in the cities by offering affordable housing options.

Systematically planned housing activity will lead to “better redistribution of resources and upliftment of living standards,” help bring down delays in the sanction of projects and lead to the quicker release of locked funds and enable the government to earn revenue from the growth in economic activity as a result of the SEZ.

Mr. Gera’s paper has been submitted to the Union Ministry of Urban Development in the form of a “thought paper.” Whether it will help in the creation of policies that will promote the SRZ concept or not, it is certainly worth a thought or two.

Printer friendly page  
Send this article to Friends by E-Mail