AAR 308 - HOUSING

SEM-VI

UNIT-2
Housing Agencies and Policies

Dr. Dibya Jivan Pati

GITAM Deemed to be University
Visakhapatnam
PAST IMPERFECT AND INSTITUTIONAL FRAMEWORK
 NEED FOR INSTITUTIONAL FRAMEWORK
• Post the onset of industrial revolution till date,
housing has been indispensable in context of rapid In absence of house, people make slums, squatter and
urbanization as an economic function. other unintended settlements and makes our habitat
more challenging
• Hence, with the increase in migration pattern
towards the urban centres, it has initially been dealt
with algorithmic and quantitative promulgation with
an intent of only catering to the mass and devoid of
specific legitimised and institutional framework in
the initial years.

• With due course of time, incorporation of policy

based aspects came into the scenario with legalised
frameworks subjected to revisions with moving time
and demographic expanse.
HOUSING PROGRAMMES, AGENCIES, BOARDS AND
BANKS IN INDIA
“Housing, as a predominant land use of any city or village makes
the built environment. Therefore, planning and designing of housing
and human settlement is crucial to make our country beautiful.”
Mass housing construction involves higher investment and
employment generation. Therefore, we should take the housing
study not only as a subject of optional planning and policy also as
an economic and social science matters.
Finally lack of comprehensive knowledge in policy,
planning and strategy for housing lead to approximation
and human errors in planning and development causing
further difficulty.
 POST INDEPENDENCE ERA

•The current housing conditions in india have a legacy from the post independence
(1947) era of housing planning and policies, which, in turn, are interlinked with economic
and political drivers.

• The post independence emphasis on public investment in capital goods was the starting
point of policy building for democratic india, and this caused a reduction in the
involvement of public agencies, both financially and functionally, in the provision of social
goods such as housing.

• The partitioning of the country after independence led to a huge influx of refugees .
refugees mainly arrived landless and were desperately trying to settle in urban areas to
get involved in non-primary activities.
 POST INDEPENDENT ERA

• The government tried to settle them in towns by providing the refugees with land for
housing in newly established “model towns.” house prices increased unabated, because, on the
one hand, the urban population was increasing and, on the other, the private construction
industry, which was the major contributor in the provision of housing, was shrinking because
of scarcity and the high prices of building materials.

• As an immediate relief measure, the government expanded the pre-world war ii measure of
the rent control act in almost all major cities of the country, although it was otherwise levied
only in mumbai since 1918. Rent control further constrained the supply of rental houses in
urban india.

• Legislative controls on prices (such as the rent control act, which deals with the acquisition of
private housing by the government to fulfill the housing needs of government officials at
regulated prices) proved to be major hurdles for private developers who were mainly involved
in building activities and were not seeing any progress in the development of new housing, or
expansion or upkeep of the existing stock.
PLANNING COMMISSION OF INDIA

Now replaced by NITI Aayog

 PLANNING COMMISSION OF INDIA : 1951 – 1956

• Housing for industrial workers: the industrial housing scheme, formulated in 1949, provided subsidies
to private employers for construction of workers’ units under the condition that the rental charged to
workers will not exceed 10% of their income. The problem of this scheme was that when public sector
employees could not be provided with housing and had to rent in the private market, they were only
provided rental assistance equal to 10% of their income. This amount later became insufficient as the
market rents soared.

• Housing for lower- and middle-income groups were intended to be propagated, though there were no
explicit subsidies, encouragement was provided to private developers and cooperative housing societies
to meet housing shortage in the market through a number of facilities drafted.

• Empowering the statutory housing boards to guarantee loans which a private builder may obtain from a
bank or an insurance company to finance construction of buildings, the buildings in such cases being
hypothecated to the housing boards.
 PLANNING COMMISSION OF INDIA : 1951 – 1956

• Reorganizing the then existing system of distribution of essential building materials, such as steel,
cement, coal, etc., and taking steps to reduce the high prices of these materials which were all
subjected to price controls and for this purpose, conducting necessary investigations .

• Discouraging land holding in urban areas, for which purpose the taxation structure on vacant lands
should be so designed as to make all land holding unprofitable .

• During this period the industrial economy had taken root, with the share of manufacturing growing
from 11% to 18% of the country’s gross domestic product.

• The housing programs, which were focused on providing housing for industrial workers, were
directly contributing to campus-like industrial townships.
 MAJOR INSTITUTIONAL DEVELOPMENT : POST 1956

• In 1957, in an attempt to streamline financing for housing, the minister for works, housing and supply
recommended establishing state housing corporations with the role to furnish debt finance for housing
projects with the central government providing the required subsidy.

• The overall investment in housing, as a percentage of total planned outlay, remained low at between
1.5% and 2% as fetched on the basis of assessment over the period of 1951 – 1956.

• The 1950s and 1960s were a period of major institutional development.

 MAJOR INSTITUTIONAL DEVELOPMENT : POST 1956

• In These Years, The Government Introduced State Housing Boards Mandated To Construct
Houses For Allotment To Public .

• The Ministry Of Works, Housing And Supply (Now MoHUPA*) At The Center With
Responsibility For Urban Poverty, Housing, And Employment Programs .

• The Central Public Works Department To Carry Out All Centrally Financed Civil Works .

• The National Buildings Organisation (NBO) Drafted A Mandate For Technology Transfer,
Experimentation, Development, And Dissemination Of Housing Statistics .

*MoHUPA stands for Ministry of Housing and Urban Poverty Alleviation.

 MAJOR INSTITUTIONAL DEVELOPMENT : POST 1956

• The town and country planning organisation, a technical wing of the ministry of urban
development, with responsibility for preparing the Master Plan For Delhi and
surrounding regions and to advise on the development of steel towns, river valley
projects .

• With emphasis on reducing the cost of housing supply, the NBO was also tasked to
develop low-cost housing designs and suggest ways to reduce costs through
appropriate choice of building materials and efficient utilization of labor.
 1965 – 1970

• India’s economy experienced slow growth and extreme volatility between 1965 and 1981.

• The major controls included regulation of domestic businesses with the monopolies and restrictive
trade practices act of 1969, nationalization of banking with the banking companies act of 1969,
controlled productivity through the industrial licensing acts of 1970 and 1973, and check on foreign
investment with the foreign exchange regulation act of 1973.

• The majority of the pre liberalization housing programs that were instituted prior to this period
focused on direct delivery of houses to beneficiaries, there were two major initiatives that characterized
the 1970s and the 1980s: the environmental improvement of urban slums scheme in 1972 and the sites
and services scheme in 1980.
 1965 – 1970

• Increasing land and material prices, which worsened the affordability level of the target group, meant
that increasingly larger subsidies would be needed to make housing affordable in the future.

• Capital investment programs and subsidies focusing on rural areas had strained government finances,
and the direct provision of affordable public housing for ownership was proving to be expensive.

• An incremental approach to provide access to transport, services and secure tenure was gaining
consideration in programs.

• During the pre-1970s period, the government was the only provider of financial support for house
building through its various schemes for public housing. the government implemented its schemes
through state housing boards that were responsible for allocating serviced land and construction of
houses to individuals based on social equity principles.
 1970 – 1985

• THE 1970S LAID THE FOUNDATIONS FOR GROWTH IN THE HOUSING FINANCE SECTOR.

• HOUSING FINANCE INSTITUTIONS SUCH AS THE HOUSING AND URBAN DEVELOPMENT

CORPORATION (HUDCO), THE HOUSING DEVELOPMENT FINANCE CORPORATION (HDFC), AND THE
NATIONAL HOUSING BANK (NHB) WERE SET UP TO MOBILIZE SAVINGS AND OTHER RESOURCES
FOR CHANNELING INVESTMENT IN HOUSING.

• THE ISSUE OF LACK OF FINANCING WAS ADDRESSED FROM THE DEMAND AS WELL AS THE
SUPPLY SIDE, PARTICULARLY FOR MIDDLE- AND HIGHER-INCOME GROUPS, BY PROVIDING
HOUSING LOANS FOR HOUSEHOLDS AS WELL AS CONSTRUCTION FINANCE FOR DEVELOPERS.
 1970 – 1985

• The Mandate For THE PUBLIC SECTOR COMPANY HUDCO was to assist and promote housing and
urban development programs with government agencies, which it fulfilled by providing finance for
sites and services and other house construction programs of housing boards. hudco’s social obligation
required them to provide at least 55% of the credit to E.W.S. AND L.I.G .HOUSEHOLDS.

• HDFC (HOUSING DEVELOPMENT FINANCE CORPORATION), set up as private sector entity, focused
on retail lending based on market principles and targeted mainly middle- and high-income households.
the success of HDFC led to the emergence of several HOUSING FINANCE COMPANIES (HFC), either as
private sector or joint ventures with the government, banks or insurance company sponsorship. an
important event of the 1980s was the setting up of the NHB in 1987 with the objective of channeling
formal sector resources into housing finance through the promotion of a sound, healthy, and cost-
effective housing finance system.
 1970 – 1985

• THE DEVOLUTION OF RESPONSIBILITY TO PROVIDE HOUSING TO L.I.G. AND E.W.S. FROM THE
CENTRAL GOVERNMENT TO THE STATE GOVERNMENTS AND THEIR HOUSING BOARDS ALSO
USHERED IN CHANGES IN THE WAY THESE HOUSES WERE FINANCED.

• COST RECOVERY BECAME A KEY FEATURE OF THE PROGRAMS, WHILE THE SUBSIDIES WERE
EARMARKED FOR INFRASTRUCTURE OR SANITATION FACILITIES.

• HUDCO PROVIDED LOANS TO STATE GOVERNMENTS, WHICH SUPPLEMENTED INTERNAL

FUNDS OF THESE GOVERNMENTS IN FINANCING THEIR PROGRAMS.
 1970 – 1985

• THOUGH THE MACROECONOMIC* POLICIES CONTINUED THEIR BIAS TOWARD RURAL,

THERE WAS A GROWING RECOGNITION THAT URBAN POVERTY WAS DIFFERENT FROM
RURAL POVERTY AND THAT THERE WAS A DISTINCTION BETWEEN URBAN AND
RURAL HOUSING ISSUES.

• THIS WAS ALSO REFLECTED IN THE PROGRAMS SUCH AS INTEGRATED DEVELOPMENT

OF SMALL AND MEDIUM TOWN (IDSMT) 1979, THE PROGRAM ATTEMPTED TO
DECENTRALIZE THE URBAN CONCENTRATION BY DEVELOPING URBAN
INFRASTRUCTURE IN SMALL AND MEDIUM TOWNS.

*Macroeconomics is a branch of economics that studies how an overall economy—the market or

other systems that operate on a large scale—behaves. Macroeconomics studies economy-wide
phenomena such as inflation, price levels, rate of economic growth, national income, gross
domestic product (GDP), and changes in unemployment.

https://www.investopedia.com/
 1985 – 1990

• THE FORMULATION OF THE 1988 NATIONAL HOUSING POLICY

• THE ROLE OF GOVERNMENT CHANGED FROM A DIRECT PROVIDER OF FINISHED HOUSING,

FINANCE, OR DEVELOPED SITES TO THAT OF A FACILITATOR CHANNELING PRIVATE SECTOR
INVESTMENT IN HOUSING AND ENCOURAGING PRIVATE SECTOR LED CONSTRUCTION.

• THE GOVERNMENT’S ROLE VIEWED AS THAT OF AN ORGANIZER OF A LEGAL, REGULATORY,

AND FINANCIAL FRAMEWORK WITHIN WHICH HOUSING COULD BE DEVELOPED AND
SUPPLIED BY THE PRIVATE SECTOR.

• TO BOOST THE FLOW OF FUNDS FOR HOUSING, THE RESERVE BANK OF INDIA (RBI) ISSUED
GUIDELINES THAT ALLOWED THE SCHEDULED COMMERCIAL BANKS TO ALLOCATE 1.5% OF
THEIR INCREMENTAL DEPOSITS TO HOUSING.
 1985 – 1990

• THE REGULATOR ALSO REQUIRED THAT 30% OF THESE FUNDS WERE LENT
DIRECTLY TO INDIVIDUALS AND 70% WERE LENT INDIRECTLY TO AGENCIES FOR
AUGMENTING THE SUPPLY OF SERVICED LAND, CONSTRUCTED UNITS, AND
SUBSCRIPTION TO GUARANTEED BONDS AND DEBENTURES OF THE NHB AND
HUDCO.

• THE INVOLVEMENT OF INSURANCE COMPANIES AND SCHEDULED COMMERCIAL

BANKS INCREASED AFTER THE SETTING UP IN 1988 OF THE NHB, WHICH FLOATED
SEPARATE HFCS TO AVAIL THE NHB’S REFINANCE FACILITIES AND TAX
CONCESSIONS.

• THE LIFE INSURANCE CORPORATION OF INDIA SET UP ITS OWN HFC IN 1989
 1991 – 2000: POST LIBERALIZATION

• DETERIORATING HOUSING CONDITIONS IN CITIES, URBANIZATION TRENDS,

WORSENING AFFORDABILITY, AND THE GROWING RECOGNITION OF THE
IMPORTANCE OF URBAN CENTERS IN THE NATION’S ECONOMY BROUGHT THE
POLICY FOCUS DURING THE 1990S ON TO CITIES, AND IT WAS ACKNOWLEDGED
THAT URBAN CENTERS REQUIRED A DIFFERENT MANAGERIAL AND POLICY
APPROACH THAN THE RURAL AREAS.

• WHILE THE DEVOLUTION OF RESPONSIBILITY REGARDING HOUSING HAD BEGUN IN

EARLIER DECADES, THE POWER DISTRIBUTION BETWEEN THE THREE LEVELS OF
GOVERNMENT (CENTRAL, STATE, AND LOCAL) REALIGNED MORE BROADLY WITH
THE 74TH CONSTITUTIONAL AMENDMENT IN 1992.
 ECONOMIC GLOBALIZATION: POST 2000

• THE POST-2000 MACROECONOMIC ENVIRONMENT OF ECONOMIC GLOBALIZATION

REINFORCED THE CENTRALITY OF CITIES. THE GLOBAL FOCUS SHIFTED FROM
COMPETITIVENESS OF NATIONS TO COMPETITIVENESS OF CITIES. GIVEN THIS
BACKGROUND, A MAJOR URBAN FOCUSED CAPITAL INVESTMENT AND URBAN REFORM
PROGRAM CALLED JAWAHARLAL NEHRU NATIONAL URBAN RENEWAL MISSION (JNNURM)
WAS LAUNCHED IN 2002.

• THE PROGRAM ALSO AIMED TO REFORM THE PROPERTY TAX SYSTEM, RATIONALIZE
TARIFFS FOR SERVICES TO AUGMENT LOCAL GOVERNMENT FINANCES, AND BOOST
INVESTMENT IN URBAN INFRASTRUCTURE.

• JNNURM ALSO MANDATED TO REPEAL THE URBAN LAND CEILING AND REGULATION ACT,
WHICH HAD LOCKED TRACTS OF LAND IN LEGAL LITIGATION AND HAD HINDERED THE
SUPPLY OF HOUSING.
 ECONOMIC GLOBALIZATION: POST 2000

• A major program for slum dwellers and the urban poor, Rajiv Awas Yojana (RAY), was
launched in 2011, with the preparatory phase during 2011–2013.

• Despite its superior architecture, R.A.Y. did not get much response from ulbs and cities
(Planning Commission Of India 2012–2017). in june 2015, r.a.y. was replaced by a new program
called Housing For All (Urban) Mission and P.M.A.Y. (PRADHAN MANTRI AWAAS YOJANA).

•This mission will provide central assistance to ULBS and other implementing agencies through
states for in situ rehabilitation of existing slum dwellers using land as a resource through
private participation, interest rate subsidies on loans for housing of E.W.S. and L.I.G. households,
financial assistance from the central government for the development of affordable housing by
states and ULBS in partnership with the private sector, and subsidies for beneficiary-led
individual house construction or enhancement for e.w.s. households.
 SELF-STUDY

https://pmaymis.gov.in/

http://arhc.mohua.gov.in/

https://pmaymis.gov.in/PDF/HF
A_Guidelines/hfa_Guidelines.pdf
Design a chronological pattern of major events/reforms/changes that
took place since post-independence era on the Housing market in India.
Use your own ideas and ways of creating the chart giving brief and
important points of incidences.
 NITI AAYOG
National Institution for Transforming India
NITI Aayog was established in 2015 to replace the Planning Commission, which was established in 1950. Some of
the objectives include:

• To evolve a shared vision of national development priorities, sectors and strategies with the active
involvement of the states in the light of national objectives. The vision of the NITI Aayog will then provide a
framework for ‘national agenda’ for the Prime Minister and the Chief Ministers to provide impetus to.

• To foster collaborative federalism through structured support initiatives and mechanisms with the states on a
continuous basis, recognizing that strong states make a strong nation.

• To develop mechanisms to formulate credible plans at the village level and aggregate these progressively at
higher levels.

• To pay special attention to the sections of our society that may be at risk of not benefitting adequately from
economic progress.

• To create a knowledge, innovation and entrepreneurial support system through a collaborative community of
national and international experts, practitioners and other partners.

Original Source: https://tinyurl.com/7zsxpdd4

HOUSING FINANCE
 TYPES OF LOANS
CONCEPT
Making finance available with affordable interest to •Home Purchase Loans
avail a house at the time of need. •Home Construction Loans

WHY •Home Improvement Loans

•For purchasing home, land, apartment •Home Extension Loans
•Renovation of owned home
•Project financing •Home Conversion Loans
•Transfer of existing loan •Land Purchase Loans
•Enhancement of existing loan
•Stamp Duty Loans
CATEGORY •Bridge Loans
•Project Finance: for housing projects
•Retail finance: for individual house owner •Balance Transfer Loans
•Refinance Loans
•Loans to NRIs
WHO PROVIDES ?
• Housing finance Institutions under the overall
control of RBI
• HUDCO, HDFC, SBI, PNB etc
• Microfinance institution in the rural and
informal sector
• Bandhan

HOW IT OPERATES
• Apply for home with a booking money
• Apply for home loan
• Inspection and assessment of eligibility
• Approval
• Disbursement of finance as the contract with
matching margin money
• Repayment starts as per agreement
ELIGIBILITY, REPAYMENT PERIODS AND EMI
• Eligibility depends on HFIs. However, house/land acts as a collateral security.
• Repayment by usually maximum 30 years
• EMI is determined by the surplus from the monthly emolument's maximum up to 60%
• Interest rate
• Reduced in a regular basis from 17% (1996) to 8% in 2005 and now about 9.5%
• Interest subsidy available

PROBLEMS
• Access by common people
• Diversity in the product
• Transparency and accountability of financier
• Non-repayment and NPA
HOUSING POLICIES
 HOUSING POLICIES

Flowchart showing implementation of the enacted policy by Ministry

(Source: PMAY Guideline)
 PMAY 2015 is one such mission which seeks to address

the housing requirement of urban poor including slum

dwellers through some defined objectives as initiated by
MoHUPA (MINISTRY OF HOUSING URBAN POVERTY
ALLEVIATION)
 P.M.A.Y. (Pradhan Mantri Awas Yojana)
• 1st CLAUSE : IN SITU SLUM REDEVELOPMENT

SLUM REHABILITATION OF SLUM DWELLERS WITH

PARTICIPATION OF PRIVATE DEVELOPERS USING
LAND AS A RESOURCE :

- Using land as a resource

- With private participation

- Extra FSI/*TDR/FAR if required to make

projects financially viable

*Transferable Development Rights (TDR) is a legal tool that

allows property owners to transfer their development rights to
another location. TDR can be used to build over the permissible
Floor Space Index (FSI) in a given location.
 P.M.A.Y. (Pradhan Mantri Awas Yojana)
2nd CLAUSE : CREDIT LINKED SUBSIDY

PROMOTION OF AFFORDABLE HOUSING FOR WEAKER SECTION

THROUGH CREDIT LINKED SUBSIDY :

- Interest subvention subsidy for EWS and LIG for new house or

incremental housing

- EWS: Annual Household Income Up to Rs.3 lakhs and house sizes

upto 30 sq.m

- LIG: Annual Household Income Between Rs.3-6 lakhs and house

sizes upto 60 sq.m

- One Lakh Scheme - https://pmay-

urban.gov.in/about#:~:text=%E2%80%9CIn%2Dsitu%E2%80%9

D%20Slum%20Redevelopment,with%20participation%20of%20

private%20developer.
 P.M.A.Y. (Pradhan Mantri Awas Yojana)
3rd CLAUSE : AFFORDABLE HOUSING IN PARTNERSHIP

AFFORDABLE HOUSING IN PARTNERSHIP WITH PUBLIC &

PRIVATE SECTORS:

- With private sector or public sector including Parastatal agencies

- Central Assistance per EWS house in affordable housing projects

where 35% of constructed houses are for EWS category

*Parastatal bodies are government-owned or controlled organizations that are

responsible for specific services or functions, such as urban development and
management. Parastatal bodies are subject to scrutiny by Parliament and their
parent Ministries.

Functions
Parastatals in India are responsible for many city-level functions, including urban
planning, land use regulation, water supply, and slum upgradation.
 P.M.A.Y. (Pradhan Mantri Awas Yojana)

4th CLAUSE : BENEFICIARY LED HOUSE CONSTRUCTION

SUBSIDY FOR BENEFICIARY-LED INDIVIDUAL HOUSE

CONSTRUCTION:

- For individuals of EWS category requiring individual house

- State to prepare a separate project for such beneficiaries

- No isolated/ splintered beneficiary to be covered.

https://pmay-urban.gov.in/glimpses-of-progress/BLC/28/city/0
 IMPLEMENTATION METHODOLOGY

Source: H.F.A. (Housing For All) Guideline, P.M.A.Y., M.O.H.U.P.A.

 BASIC DEFINITIONS: POLICY IMPLICATIONS

AFFORDABLE HOUSING PROJECT

Housing projects where 35% of the houses are constructed for EWS category

BENEFICIARY
A beneficiary family will comprise husband, wife and unmarried children. The beneficiary family should
not own a pucca house (an all-weather dwelling unit) either in his/her name or in the name of any
member of his/her family in any part of India.

CARPET AREA
Area enclosed within the walls, actual area to lay the carpet.
This area does not include the thickness of the inner walls.
 BASIC DEFINITIONS: POLICY IMPLICATIONS
CENTRAL NODAL AGENCIES
Nodal Agencies identified by Ministry for the purposes of implementation of
Credit linked subsidy component of the mission.

ECONOMICALLY WEAKER SECTION (EWS)

EWS households are defined as households having an annual income up to
Rs.3,00,000 (Rupees Three Lakhs).
States/UTs shall have the flexibility to redefine the annual income criteria as per
local conditions in consultation with the Centre.

EWS HOUSE
An all-weather single unit or a unit in a multi-storeyed super structure having
carpet area of upto 30 sq. m. with adequate basic civic services and
infrastructure services like toilet, water, electricity etc. States can determine the
area of EWS as per their local needs with information to Ministry.
 BASIC DEFINITIONS: POLICY IMPLICATIONS

“FLOOR AREA RATIO” (FAR)/FSI

The quotient obtained by dividing the total covered area (plinth area) on all the floors by the area of
the plot:
If States/Cities have some variations in this definition, State/City definitions will be accepted under
the mission

IMPLEMENTING AGENCIES
Implementing agencies are the agencies such as Urban Local Bodies, Development Authorities,
Housing Boards etc. which are selected by State Government/SLSMC* for implementing Housing for
All Mission.
State Level Sanctioning and Monitoring Committee*

LOW INCOME GROUP (LIG)

LIG households are defined as households having an annual income between Rs.3,00,001 (Rupees
Three Lakhs One) up to Rs.6,00,000 (Rupees Six Lakhs). States/UTs shall have the flexibility to
redefine the annual income criteria as per local conditions in consultation with the Centre.
 BASIC DEFINITIONS: POLICY IMPLICATIONS
SLUM
A compact area of at least 300 population or about 60-70 households of poorly built congested
tenements, in unhygienic environment usually with inadequate infrastructure and lacking in proper
sanitary and drinking water facilities.

STATE LAND NODAL AGENCIES (SLNAS)

Nodal Agency designated by the State Governments for implementing the Mission

TRANSFER OF DEVELOPMENT RIGHTS (TDR)

TDR means making available certain amount of additional built-up area in lieu of the area
relinquished or surrendered by the owner of the land, so that he can use extra built-up area himself
in some other land.

* Special Note: TDR definition as mentioned aforesaid is strictly in context of the concerned
policy implementation and not certainly for developing privately under joint venturing
scheme as the TDR concept will vary therein