It has been a while since anything concrete has been done about creating more affordable housing in India. Considering the great need for budget homes, it is remarkable that there is so little interest being shown in providing them. Of course, Indian developers have their own constraints – the cost of bank borrowing, the lack of realistic incentives from the authorities, the ever-increasing cost of land are just a few of them.
Meanwhile, the Government is busy battling inflation and simultaneously trying to keep India’s economic growth from sinking even further. It is very evident that, despite its obvious linkages to the economy, the real estate sector is not on its priority list at the moment.
In cities like Pune, even middle income home buyers are struggling to find homes within their budgets. Pune property rates have gone through the roof, with many blaming investors from Mumbai for this fact. The employment situation is far from brilliant in Pune these days. People are unable to increase their financial situations by shifting to better jobs because the job market has shrunk considerably over the last one year. Interest rates are also astronomical. Many aspiring home buyers are looking at buying small 1 BHK flats in dilapidated housing societies – projects so old that most banks to grant home loans for them.
What is the solution? Is there another model of affordable housing that would help both the EWS and middle class to realize their dream of home ownership? While this is a difficult challenge in land-strapped cities like Mumbai, Pune still has enough land to spare to offer one possible solution. This solution, which requires the involvement of both the Government and the developer community, is Special Residential Zones (SRZs).
The concept of Special Residential Zones or SRZs is not a new one. It has been discussed in the past and is, in fact, nothing but a natural extensions of the existing SEZ model tailored to the Indian residential property market context.
A Special Residential Zone is a model of affordable housing development that creates a separate economic microcosm or entity. The model can be tailored to attract developers by means of various incentives and tax breaks. A important feature of a SRZ would be subsidized rates for land and construction materials, which would be a further incentive for developers to get involved. In this model, the Government would provide the necessary infrastructure to make the SRZ approachable and inhabitable. In other circumstances, developers would have to see to this themselves.
The SRZ model calls for a change in certain fiscal policies, and also for simplified parameters for development approvals and sanctions. The primary objectives would be one of social responsibility, though part of the incentives for developers would be a commercial component.
In the SRZ model, the Government would incentivize the development of affordable residential units. The long-term objectives would include the lowering of housing prices in certain areas, since the SRZ model will eventually alter local property market dynamics.
As in the SEZ model, the land on which the units are developed would be long-term leasehold. In other words, the property buyer would own the property, but not the land it stands on. As everywhere else, ownership dynamics would conceivably change once the property has been occupied for over 12 years.
True, the concept of SRZs still needs to be developed. However, the point here is that it can be implemented very well around Pune, since there are considerable land parcels available on the periphery that would make the SRZ model possible.