A path towards affordable homes for all - Hindustan Times
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A path towards affordable homes for all

Apr 12, 2024 01:28 PM IST

This article is authored by Keval Valambhia, chief operating officer, CREDAI-MCHI.

In today's fast-growing cities worldwide, including bustling hubs like Mumbai in India, finding a decent and affordable place to live has become a major challenge. It's estimated that by 2025, the world will need about 440 million new houses, and India alone faces a shortage of around 18.78 million homes. This shortage isn't just about numbers; it affects families struggling to find a place they can call home without breaking the bank.

Homes in Mumbai (Photo by Anshuman Poyrekar/ Hindustan Times) PREMIUM
Homes in Mumbai (Photo by Anshuman Poyrekar/ Hindustan Times)

Traditionally, governments have played a crucial role in providing housing to their citizens, especially after World War II. However, since the 1990s, there has been a noticeable shift in this approach. Instead of directly building homes, governments are now focusing on enabling and regulating the housing market. They believe that the private sector, with its efficiency, capacity, and innovative spirit, can do a better job of providing housing options.

But here's the catch: While the private sector excels in catering to certain income groups, it often overlooks those with lower incomes who still need affordable housing. These are the people who are not adequately served by either the government or the market. Why does this happen? Well, it comes down to profitability and risk.

For developers, building homes for lower-income groups may not be as profitable as luxury projects. There are higher risks involved, such as uncertain returns on investment and potential difficulties in recovering costs. This situation creates a gap in the housing market, leaving many people stranded in their search for affordable homes.

So, what's the solution? One promising strategy gaining attention is called Inclusionary Housing (IH) or Inclusionary Zoning and Regulations (IZR). This strategy aims to address the housing needs of those "less catered" groups who are often left out of the housing equation.

Let's break down how Inclusionary Housing works:

* Setting affordable housing targets: Governments can set targets for private developers, requiring them to allocate a certain percentage of their projects to affordable housing units. For example, in Mumbai, developers might be mandated to reserve a certain percentage of their new apartment complexes for low-income families.

* Incentives and subsidies: To encourage developers to comply with these targets, governments can offer incentives such as subsidised premium payment and reduced approval charges, tax breaks, expedited approvals, or subsidies for building affordable units. These incentives make it more financially viable for developers to include affordable housing in their projects.

* Mixed-Income communities: Inclusionary Housing promotes the concept of mixed-income communities, where people from diverse economic backgrounds live together. This not only fosters social inclusion but also creates vibrant and sustainable neighbourhoods.

* Long-Term impact: By integrating affordable housing into market-driven developments, Inclusionary Housing ensures that the supply of affordable homes keeps pace with urban growth. It's a long-term solution that benefits both developers and residents.

Now, let's see how Inclusionary Housing could make a difference in a city like Mumbai. Mumbai, known for its soaring skyscrapers and bustling streets, is also infamous for its high property prices. For many residents, especially those with lower incomes, buying or renting a home in Mumbai's prime locations is simply out of reach.

However, with the implementation of Inclusionary Housing policies, the landscape could change. Imagine a new residential complex coming up in a coveted area of Mumbai. Under Inclusionary Housing regulations:

* The developer would need to allocate a portion of the project, for affordable housing units.

* In return, the developer might receive incentives like subsidised premium payments, reduced approval charges, reduced taxes, faster approvals, or access to government subsidies.

* Low-income families who previously struggled to find affordable homes in Mumbai could now have access to decent housing options within the same neighbourhood.

This not only addresses the housing shortage but also promotes inclusivity and social cohesion within the city. It's a win-win situation where developers contribute to community welfare while still maintaining profitability.

The housing crisis is a complex issue that requires innovative solutions like Inclusionary Housing. By bridging the gap between market forces and social needs, we can create a future where everyone has a place to call home, even in the heart of bustling megacities like Mumbai.

This article is authored by Keval Valambhia, chief operating officer, CREDAI-MCHI.

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