Affordable housing needs a holistic look

By Rajshri Mehta & Ranjona Banerji in DNA India

Is the housing situation in Mumbai going to get any easier for the middle class person who aspired to own a home? To find out, we invited the realty men over to discuss the situation.

The panel had Sitaram Kunte, principal secretary (housing) for the Maharashtra government; Parag Munot, director with Kalpataru Constructions; Gautam Chatterjee, CEO of Maharashtra Housing and Area Development Authority (Mhada); Vikas Oberoi, MD of Oberoi Constructions; Aditi Vijayakar, executive director (residential) at Cushman & Wakefield; Boman Irani, MD of the Rustomjee Group; Nabil Patel, director at DB Realty; Santosh Naik, CEO & MD of Disha Direct Pravin Doshi, chairman of Acme Housing and Brotin Banerjee, CEO of Tata Housing.

While rates are still high, our experts feel that prospective buyers should take advantage of the economic recession to buy now when rates are a bit lower than they were even last year. As far as affordable housing in general is concerned, it seems that a public-private partnership is the best available option.


What is going to happen to affordable housing?
Sitaram Kunte: As secretary of the housing department, the focus is as mentioned in the national housing policy to see how much affordable housing stock arrives in the market.

We first need to see what is meant by affordable housing. The Central government has done this exercise by setting up a committee under HDFC chairman Deepak Parekh. The committee has defined affordable housing in two parameters: The minimum area each category of income should be living in and how much should he be paying for that area.

Say for example, a 300 sq ft flat is a decent livable area for a driver working in a government or private firm. Then, he should get it at 5 times his annual income which is defined as Rs 60,000 a year. So he should get a 300 sq ft flat worth Rs 3 lakh somewhere near his area of work. If he cannot get houses at that rate, then we have a problem that the market is not producing products that people could pay.

The other day at the seminar of Maharashtra golden jubilee celebrations, there was this talk to whether post-6th pay commission, the chief secretary who earns Rs 1 lakh a month could afford a house in Mumbai.

At this rate, he will probably get it at Dahisar. There is something wrong in the real estate market when such a large section of people cannot buy a flat. We need to look at the reasons. There may be problems of land supply, processes don’t work… there may be competition. Several factors are there.

We feel at the policy level at the government and even the private sector side, we are not able to crack this code on how to get affordable housing in sizeable numbers. This Diwali, if at all one can look for something, it would be affordable housing from the private sector.
Take the recent case when Mhada sold 4,000 affordable housing units and even in the thick of recession, they received 4.5 lakh applications. Mhada received almost Rs 1,400 crore with those 4.5 lakh applications. After the lottery, we returned that money and even after that, Mhada earned Rs 35-40 crore. So, there is money in the affordable sector. How that can be done is something both the private and government sector needs to contribute to.

Parag Munot: From the definition of affordable housing, it seems most people employed cannot afford a home. So, what can be changed? First is the raw material. Second is the FSI regulation, which allows only a certain amount of area to be consumed. We need to relook at Mumbai like another urban development. In places like Shanghai, Singapore the FSI ranges from 3.5 to 18, and not 1, as in this city. If the government does not take the initiative to increase FSI, affordability will always remain a myth for Mumbai.

Aditi Vijayakar: Actually, a large part of the city is underutilised. Which is why the pressure lands on suburban location in terms of infrastructure and access. You cannot have your drivers or bais come from back of beyond to service locations in South Mumbai. It is a huge challenge.

Brotin Banerjee: I think we need to grow tall. A city as congested as Mumbai has to grow taller and expand further. Infrastructure facilities have to be created. An FSI of 1 in the heart of city does not make sense. Shanghai, as a norm, has buildings of 70-80 floors.

Here, anyone making 70-80 floors is written about as if it is a big achievement. I am not saying this to deride anyone. But as a city, we need to go higher and thus, open up spaces.

Vikas Oberoi: When you are talking of providing a 300 sq ft flat at Rs 3 lakh, then you are looking at the development cost of Rs 1,000 a sq ft. But, there is no land component or infrastructure or process cost involved. Probably, our expectation is incorrect to expect a house at Rs 3 lakh. You need a reality check. Maybe you are paying little to the driver.

No one is talking about remuneration. We are trying to fit housing in the salary he is getting. Affordable housing, I guess, would probably start at Rs 2,000 to Rs 2,200 a sq ft and here, we have not considered land cost. There are two things to this. If you are looking at distant suburbs to create affordable housing, then build in infrastructure and amenities which they can afford, and ensure proper commutes from where they live and work. That can help to build affordable housing in distant locations.

One is clearly looking at the value. Or the government can probably subsidise another Rs 3 lakh. A fund can be created by the same luxury homes that one is trying to detest, to create this infrastructure. One can increase the FSI and generate revenue to build infrastructure that one requires to create homes in distant suburbs.