Daily News & Analysis - November, 2006

Kumar Gera provides an in-depth analysis of the Maharashtra state draft housing policy

The draft housing policy is definitely a step in the right direction. Land, its use and development is a state subject; so each state controls the development of urban and rural areas within the state. Maharashtra is amongst the first states to bring out its draft housing policy.

The policy specifies strategies to achieve the low – income group housing, middle income group housing through supply side economics by moving ‘from acute shortage of accommodation towards a surplus situation.’ This will be possible if competition is allowed and encouraged.

Creating an abundant supply is the real alternative to controlling prices in any product. The policy says that this will be possible only if competition is allowed, encouraged and even incentivised.

IMPACT OF THE POLICY :

Consider mandating sales through specifying carpet area; there are some perceptions that this will bring down prices; it will not. This will lead to transparency to the purchaser who will now know what he is buying and the space will not be camouflaged under ‘super built’ and ‘super-super’ built up area.

While the total price of the unit may not change as the carpet area will be less than the super built area, the rate per square for carpet area will be higher. The malpractice of builders counting areas such as flower boxes in sellable area will be stopped.

The scrapping of the ULC Act is another welcome step. This is something that is about 20 years overdue. There are vested interests that are keeping this harmful act in place, as a lot of malpractices exist due to this Act. An urgent repeal without any delay, as done in other states, across the country, is required.

The policy has proposed re-development of slums and utilization of government lands for this through a ‘transparent competitive bidding’. It is a laudable step as is the proposal of rating developers. As a matter of fact only ‘rated’ developers should be permitted for such redevelopment schemes.

A very significant cost in real estate development is the cost of time for clearances. Real estate development is a highly capital – intensive activity; hence, delays lead to extremely high costs.

Therefore, the initiative proposed of fast track clearances at various levels is again a step in the right direction.

TIMELY IMPLEMENTATION MATTERS :

In the coming days, as the government moves forward in reviewing and adopting this draft policy, it should be kept in mind that the policy needs to be finalized on ‘as soon as possible’ (ASAP) basis.

We must also realize, that it is a ‘policy’ and after its approval, various legislations will need to be brought forward, rules and regulations will need to be amended, schemes that have been suggested will need to be formulated.

All this is going to take a significant amount of time, and debate at every level, so time is really of the essence in this policy. The sooner the policy moves into implementation mode the better will it be.

In addition, the policy suggestions needs to be implemented at all levels and not in a skewed manner where only a few of the recommendations are taken forward on fast track. If this is done, it will lead to some serious distortions and the intent of the policy will not fructify.

As an example there is a policy recommendation to prevent and remove encroachments on public lands and take firm action. This can only be effectively done if there are alternatives available and if supply is significantly increased.

If speedy action is taken and if all that is in the policy, is acted upon and turned into reality, the positive impact on availability of housing for all sections, softening of prices, increase in the GDP of the state, and increased employment opportunities will be significant.

Economists and the Central Government have all endorsed the fact that the real estate sector is one of the fastest growing sectors in the country. Large scale urbanization is taking place and it is expected that Maharashtra will have an urban population in its towns and cities of around 50% of the total state population in the not too distant future. This will lead to a huge impact at every level of the society.

KEY CONCERNS

In the policy the road map that been defined needs to define ‘start dates’, instead of focusing on ‘end dates’.

While the National Policy has addressed urban infrastructure wherein issues of roads, water, drainage, connectivity, hospitals, educational institutes, parks and playgrounds, sports fields and stadiums are all considered a part of urban infrastructure and closely linked to housing have been considered, this draft state policy has not given enough attention to Infrastructure development. Perhaps a separate urban infrastructure policy may be needed.

There have been some opinions on increased FSI (Floor Space Index). Some are in favour of an increased FSI while others are not. If FSI is increased along with improved quality infrastructure this will be the most economic way forward. Finally, the key to overall growth and development in the best interest of the people is the speedy finalization and early implementation of the draft policy, even if it is done with no changes, because its time for action, people need to see results on the ground.

Mr. Kumar Gera, Managing Director, Gera Developments, is also Chairman CREDAI, Task Force member of the National Housing & Habitat Policy 2006 and a former member of Planning Board, Government of Maharashtra