This week, the cabinet approved one of the NDA’s flagship programmes — the Housing for All scheme, which aims to build two crore houses in urban India and four crore in rural parts of the country. The programme, which will subsume some of the existing schemes launched by the previous UPA government, has been tweaked, with a much more realistic realignment of the income cap to cover more households in urban areas and an increase in the unit size, coupled with a grant of Rs 1 lakh from the Central government.
Conceptually, this is a good and much-needed project, given the rapid rate at which the country is urbanising. In urban India, it is the economically weaker sections and the low income groups, which earn between Rs 3 to 6 lakh annually, that account for 96 per cent of the housing shortage. That gap could well widen with the growing trend of migration from the hinterland to bigger cities and towns. That’s why, of the 4,041 statutory towns that the programme aims to cover, the immediate focus appears to be on building affordable homes in the country’s top 100 cities. The scale of this housing mission also means that the government will have to work closely with the private sector.
But there are several challenges. Similar schemes have floundered in many states in the past, including UP, because of execution incapacities, lack of availability of land and resources. The government has provided Rs 14,000 crore in this year’s budget but questions remain about the funding of the project, which according to one estimate, works out to Rs 6 lakh crore. Of greater concern is the ability of the states to push this scheme or better empower local civic bodies to deliver on housing.
Yet, housing can be a great trigger for growth. It was during NDA I that the seeds for the first housing boom of the last decade were sown with a package of tax incentives, coupled with deep interest rate cuts and competitive lending by institutions and banks. Thankfully, Indian households today aren’t as leveraged as corporates, which should make it easier for the government to act more as a facilitator, leaving the choice to individuals or co-operatives on specific projects. For Indian banks, their retail portfolios, which include a good chunk of housing loans, are far healthier, underlining the need for them to boost lending to this segment. Earlier this year, in the run-up to the polls, the Conservative government in the UK announced a financial top-up for first-time home buyers. Spending on housing is not just good economics, but good politics, too. But for this government to reap the benefits, it has to switch to mission mode right now. Execution will be key.