Sunday, January 8, 2000 |
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HOUSING and urban infrastructure development have today become the key areas where major reforms are required. The problems that face this sector are manifold. One is the huge disparity between the demand of 6 million housing units compared to the current 2.5 million units added annually. According to V. Suresh, CMD, HUDCO, there is also a need to source Rs 2 out of every Rs 3 that are to be spent to cover housing shortfall along with increased private-public sector partnership. Along with the huge deficit is the real estate slump, which has not shown any sign of receding, partly due to the fact that the product being offered is not tuned to the demand. Housing available off the shelf is mostly in the creamy layer segment and the need is to build housing units valued around Rs 5 lakh. Along with the middle segment is the vast urban slum population which is projected to go up from 2.63 crore in 1991 to 3.85 crore in Delhi and from 4.31 crore to 6.59 crore in Mumbai by the year 2001.In addition to the housing woes are the infrastructure issues of water supply, sanitation and sewerage, solid waste disposal and power. Here again it is not a question of willingness or capacity to pay but of establishing the required infrastructure and making it available at the right price. |
Based on the requirements projected in the
Ninth Plan in the urban areas 167.6 lakh units are
required for which a fund corpus of Rs 1,21,370 crore is
required against a total availability of Rs 34,000 crore
from the formal sector. In the rural areas the total
housing requirement is of 162.5 lakh units that would
cost Rs 29,000 crore and again the total funds available
are only Rs 18,000 crore. This leads to a huge deficit,
leading to a demand ratio of 1:3 in the urban supply
scenario and 1:1.6 in the rural areas. Urban
infrastructure over the next ten years needs a total
outlay of Rs 2,50,000 crore, according to estimates of
the Rakesh Mohan Committee and this requirement also
includes costs for finishing pending projects. The outlay
for the Ninth Plan makes arrangements for just Rs 12000
crore thus leaving a shortfall of more than ten times the
requirement. All these facts in the background of the
worst-ever recession in the real estate market have made
housing a priority area for damage control, say experts. Housing on its own has the potential for giving a kick-start to the economy, according to Suresh. With crucial backward and forward linkages to 280 associated industries, it is the second largest employment provider after agriculture. An investment of Rs 1 crore in the housing industry contributes to the generation of 750 man years of employment (see chart) Besides the job generation capability, housing investments propel the cement sector forward and estimates peg a 35 million ton requirement of cement alone to meet the formal Ninth Plan requirements. With the Budget recommendations and the National Housing and Habitat Policy in place, the immediate task is to set out regulations for private sector participation in both housing and infrastructure. While private investment is perhaps the best immediate solution for housing and urban infrastructure, certain changes are required to attract this investment, says Krishan Rajivan, the CEO of the Tamil Nadu Urban Development Fund (TNDUF). For attracting private investment in urban infrastructure, an essential factor is a strong regulatory base along with assured cash flow. To ease financing problems, debt financing of long term is needed so that it results in asset creation in the urban infrastructure segment. Also local bodies need to be upgraded if they are expected to plan and give on contract projects to private partners at their level. Along with increased private participation in urban infrastructure also comes the main issue of willing payments by the people for the basic necessities, says Rajivan. The overseas scenario in this sector is quite different and foreign direct investment is a major source of financing, says Sidhartha Yog, Head of Research (South Asia), Richard Ellis. Institution sources of funding are available in the form of real estate mutual funds, pension funds, and insurance companies . In India, the present sources of financing are all traditional like that of owner /developer equity, pre -sales revenues and finances from the unorganised sector, says Yog. There is a paucity of funds from institutional investors. This along with high financing costs causes great stress on security and mortgage and depletes the total finances available for housing. A major need thus exists for low cost funds from organised sources, protection of end users and more competitiveness.
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