Real Estate Regulation Bill : reserve housing for the urban poor- a far off reality?!

The Real Estate Regulation Bill, which aims to establish a regulatory authority for the realty sector, is likely to be tabled in the upcoming Winter session of Parliament, Union Housing and Urban Poverty Alleviation Minister Ajay Maken said. The draft legislation, pending since 2009, aims to establish a regulatory authority for the realty sector, ensure sale of immovable properties in an efficient and transparent manner and protect consumer interest.

The most important proposal in the draft Bill includes setting up a regulatory authority in every state. Maken said private builders will have to reserve 35 per cent of houses or 15 per cent floor area ratio (FAR), whichever is higher for the economically weaker sections (EWS), under the Rajiv Awas Yojana. He also asked the private sector to pass on the benefits to the EWS instead of only “maximising” their profit. Under the ambitious Rajiv Awas Yojana, the government has proposed an expenditure of Rs 40,000 crore, Maken said, adding that bank loans will be available for EWS without any collateral. Maken said a credit risk guarantee fund has been created for low-income housing and all states would have to implement these norms in all cities. “The need for housing is growing rapidly as there has been a rapid urbanisation,” he added. “The urban population has risen to 31 per cent from 27 per cent in the past six-seven years while the total number of towns also surged to 7,800 from 5,100 during the same period,” he said.

While real estate industry analysts have expressed largely unanimous approval for new minister for housing and urban poverty alleviation Ajay Maken’s edict that private developers will have to reserve 35% of houses or 15% floor area ratio (FAR), whichever is higher, for economically weaker sections (EWS) under the Rajiv Awas Yojana, builders say the move will inevitably lead to further escalation in property prices.

The builder’s apex body Confederation of Real Estate Developers’ Associations of India (CREDAI) has submitted a memorandum to the housing ministry urging that Maken rethink his proposal. “Such a directive, without any incentives to the developer community, would only burden the open-market buyers, mainly from the middle-income group (MIG), who will be forced to cross-subsidise the lower-income group (LIG) or EWS,” it said.

“If we construct 100 homes, we won’t be able to sell 35 of them. We will have to hand them over to the government so they are passed on to the EWS. This means we are losing a large chunk of our profit. So, naturally we’ll have to sell the remaining flats at a steep rate,” said a builder on condition of anonymity.

Meanwhile, CREDAI chairman Lalit Kumar Jain says the government needs to look at the larger picture. “The government should come up with proposals where the EWS and LIG can be accommodated in flats that are in smaller buildings. Because, taller buildings mean lifts, and other maintenance costs. Who will pay these?” asked Jain. Jain termed Maken’s plan populist and said such proposals garner attention, even if they aren’t passed in the end. The CREDAI memo suggested that there’s a need for special housing zones with tax exemptions, and these zones should have tenements smaller than 80 sq m.

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One thought on “Real Estate Regulation Bill : reserve housing for the urban poor- a far off reality?!

  1. terraurban November 19, 2012 at 7:45 am Reply

    Rajarshi Rakesh Sahai Actually, the bill is acceptable to most ‘fair’ developers. The bigger issue is that affordable housing and fair-play in the real estate market will never give them the artificial growth and cache for black money that many have successfully exploited the real estate market for…..

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