Hardeep Puri: Flagship schemes are ‘roaring’, major issue is to find the money to fund them

In an exclusive interview with Moneycontrol’s Vandana Ramnani, Union Minister for Housing and Urban Affairs Hardeep S Puri, talks at length about Smart Cities, challenges in the implementation of RERA and the progress on the rental housing scheme. Reacting to the Parliamentary Committee on Urban Development’s criticism that only about 21% of the Rs 36,400 crore allocated have been spent on the flagship programmes so far, he says that he welcomes Parliament scrutiny and claims the schemes are roaring. The problem is to find money for these schemes. As for bridging the trust deficit between homebuyers and the Centre, Puri agrees that it was the absence of a regulator that gave an upper hand to the real estate developer but is quick to state that even homebuyers are to be blamed for signing one-sided contracts.

He also tells Moneycontrol that he will be meeting Delhi CM Arvind Kejriwal on Friday and that the rental housing policy is work in progress. Here's teh full transcript of the interview:

The Parliamentary Committee on urban development has raised questions about the on-ground implementation of flagship schemes such as PMAY and Smart Cities wherein they have noted that only 21 percent on an average have been spent so far out of the Rs 36,400 crore allocated? Do you think that the utilisation should have been much higher?

I welcome parliamentary scrutiny not only because I am a member of parliament but that is the essence of democracy. Having said that I would urge some caution in looking at different reports. For instance, and I do not want to focus on only one report. The progress of flagship schemes has to be assessed in terms of delivery on the ground and that delivery on the ground is empirically measurable.

Let me give you an example. If you are looking at the Swatch Bharat scheme and I deal with the urban part of the Swachh Bharat Scheme. If you are looking at the number of toilets to be built, the number of toilets to be built has a defined target in terms of individual household units and also in terms of community toilets. If you look at the total number of toilets to be built under the Swachh Bharat scheme which has a deadline of October 2019, again out of the 67 lakh we have already built 52 lakh.

So, it is not only doing well, it is doing very well. For the smart cities project, it is not that the smart cities project started in June 2015 and therefore we should have had the smart cities in place. It is not how it works. A total of 100 cities have to be designated as smart cities through a process of competition. By May 2016 we had only declared 20, the last nine were declared only a few weeks ago.

There is a usual time lag of 15 to 18 months before the smart cities, once the title has been conferred, sets up what is called the special purpose vehicle (SPV). I judge progress differently. Out of 99 smart cities how many have special purpose vehicle? The answer is 89. After a special purpose vehicle is set up, you need a consultant maybe earlier or later and this is again through a competition, the consultant takes some time to come on, then they start preparing individual projects for tendering.

In one of the schemes which I refer to, the figure that we utilised was based on the utilisation certificates. Anyone who has a nodding acquaintance with how the government functions, utilisation certificates are sometimes sent two years later. I welcome scrutiny etc but my job as minister for housing and urban affairs is to see whether the schemes are working. I have a slightly different take on this. I think the schemes are roaring. My problem is to find the money. For instance, under Pradhan Mantri Awas Yojana (PMAY) we have to ensure that every Indian has a home which he or she can call their own by 2022, the title will be in the name of the lady of the house giving gender empowerment, dignity of the girl child. I think we have to build something like 11 million units or 12 million units by 2022.

I am required to sanction 300,000 to 500,000 every month. We do not have the money for that. We have just set up an affordable housing fund. This cannot come from the government budget. There are four verticals and each of the verticals is doing well. My major issue now is to find the money for these schemes. We are being innovative. We have just got Rs 8000 crore out of the Rs 60,000 crore we had required. We just got that money because we owe the states that money. They are working well.

Will we see higher figures on spending next year?

Figures are already very high. I am not worried about the figures. Even on smart cities, the scheme started in June 2015 and it takes 18 months. You started it only in May 2016. If to May 2016 you add 18 months, where does it bring you? That is when it starts. You are actually looking at a situation where things are now beginning to roll off. So you need to look at the progress in terms of the tendering which is under process, preparing tenders, what is already been tendered etc. So, if you look at the overall figure, it is one of the fastest scheme implementation anywhere in the world.

What about the smart cities mission? When do we see actual smart cities hitting the ground?

You see out of the total of 99, 91 are brownfield projects where the city is there and you are redeveloping the same city. Many of them now have command and control centres. We have established an apex body of smart cities and we are holding the first meeting of the apex body sometimes towards the end of April or May. There will be 300 to 400 people there, they will be sharing experiences, you will have civil society, you will have private sector. Once that comes, you will get the buzz. That is when people will realise. Otherwise people will say, I live in such and such place, what’s smart about it?

What is a smart city, it is supposed to improve and provide ease of living for the aged people, for the younger people, for the differently abled. You are supposed to build more cycle tracks, more footpaths, more greening, more public transport, have cities which are not completely congested and reaching a choking point etc through design, through technology. Ration the use of water, electricity, make sure that as a result of technology, women feel safer.

In the last meeting on the standing committee on parliament when the presentations were taking place, I was delighted to find the project manager from Surat saying that as a result of the technology that they are using in the smart cities project, crimes against women have come down sharply.

What about issues with West Bengal when it comes to smart city mission? Have those been ironed out?

There is a project that was included in the first list. What do I say? I have not seen any progress. So, I will be writing to the chief minister again. I think we have taken this up with the state government. But all that I can do is to encourage them to take advantage. You know because the selection of that city had taken place based on an application. But if there has been no action on that application, then we are at a loose end. We do not know what to do with it. As I said, I have been encouraging the government of West Bengal to move on this.

RERA was implemented last year and many states are yet to set up a websites. Many states have also diluted the provisions of the model act. We have also had some issues with North Eastern states where there were issues with land laws that were posing to be a constitutional challenge. Has something been done on all these fronts?

Are we pursuing the matter in a manner that we can resolve all the outstanding issues? The answer is yes. Let me start with what is a major mindset change. For 70 years, we have dealt with this sector without having a regulator. Which meant that you had a free for all. Unsuspecting buyers were conned into signing one-sided contracts. I don’t think they read the contracts which is a very poor sign. (It sends a) Poor message that unscrupulous builder or promoter was able to take money from them in installments and siphon the money off and invest it in land banks. And now you have these people screaming. So, are you better off with RERA or are you worst off? The unambiguous answer is that you are better off and RERA is wonderful from my point of view. That is why the unscrupulous builders and promoters challenged it.

They took the challenge and the Supreme Court asked the Bombay High Court to hear it and Bombay High Court has thrown it out. So, having a regulator is a great thing. I mean, you cannot run this sector without having a regulator. It took us eight years or so to resurrect it as it was languishing. Now it is only a few months old. In the process of implementing it, some state governments tweaked its provisions to leave the ongoing projects out of its ambit. But courts have taken cognizance of that. We have done whatever we could and we are willing to do more. And now we have a situation where the courts are actively stepping in. But RERA is not the only development.

If you look at the real estate sector, between GST, demonetisation, RERA, fiscal incentives, that we provided in two successful budgets, our push to affordable housing, I think the sector is being cleaned up. I am reluctant to answer the question when will it be totally cleaned up, that is an answer anybody will find it difficult to provide. No sector anywhere in the world is totally cleaned up. There are always weaknesses, distortions, but the more I look at it, we are now dealing with a situation where the kind of pre RERA world will no longer be possible. Now people will have the protection which the Act provides and the developer or the promoter is liable as he has assumed certain obligations. People who had black money, if you can call it that, instead of keeping it in gunny bags, they would go to a builder and tell him to keep it and say next time you launch a project, book two units in my name. So it created bubbles, it created artificial pricing in the real estate sector.

Now with demonetisation, GST, RERA, insolvency bill, our giving infrastructure status to affordable housing, GST rates on affordable housing coming down, I think you will see a turnaround. Some unscrupulous guys will choose not to be in the business or they will be driven out. But you will have a more rationalized market. And I don’t know whether we can ever get away with the 80:20:60:40:50:50 division between legitimate white and black but we are reaching a situation where we will see tremendous improvement in the sector.

Anything specific on the northeastern states?

Where there are genuine issues on land ownership and title, we need to resolve those. But if you have to look at the entire length and breadth of the country, the fact of the matter is that it is moving, I think everybody is coming under its ambit.

What is the government doing about the trust deficit that has built up between the homebuyers and the Centre?

This is partly on account of the fact that the absence of a regulator gave an upper hand to the promoter and developer. Under RERA that entity is liable now. I think they will now have to think twice before doing that. So you now have a legislative backup. Plus the courts are really dealing with focused and forensic. I was reading the paper today and one of the developers has been told by the apex court to deposit Rs 100 crore by a particular date and another Rs 100 crore by another date. So, I mean the homebuyers certainly realise that there is a Central government and a state government which is actually not only sympathetic to their (concerns)…but is willing along with the courts to create an enabling framework … you know mistakes have been made by homebuyers, make no mistake. You did not advise them to sign one-sided contracts. Nowhere in the world is it done that you give money and you get a house 10 years later or 15 years later. It is because the whole thing was anchored in the informal or the parallel economy. People were also in no hurry and there have been speculative black market operations there also. So, I think now with all these developments, these initiatives the government has taken we will see a distinctive improvement.

So, there is hope for homebuyers?

Yes, absolutely.

What about the Metro fare hike issue? Were you to have a meeting with the CM of Delhi?

I keep meeting him all the time. I think he is coming for lunch on Friday. But look, when the CM is with me, he perhaps shows understanding but neither he or I have control or decisive say on fare fixation. I have said this many times and happy to repeat it again on your programme, it was a very wise decision to keep the fare fixation away from the Central government and the state government. And this was a very good insurance policy to insulate the fare fixation scheme and process from the temptations of populist politics. People say after you raised the fare, ridership went down. Wait a minute.. ridership goes up and down on account of a number of factors. Actually, the ridership has not gone down. In May 2017 it went down a little and then went up. In October you had the next one, January February again it is rising. But is ridership the only measure of success in a scheme?

Let’s say you made the Metro completely free what would happen? Who would pay the money back with capital money borrowed? I look at a project from whether it is financially viable? If you don’t do that due diligence, then you have the situation that you are having in Delhi. (Take the bus fleet issue) 11,000 is the size of the bus fleet, 7000 buses short, who is responsible for that? They are going to buy 1000 buses a year now, it has taken them three years to buy 1000 buses. It will take them 21 years to buy 7000, by that time the previous fleet would have run aground. Look, either you can govern in a mature, professional manner or make a big thing about ridership is not coming… who measures ridership?

There are seasons when ridership comes down, Today, I saw an interesting graph in one of the papers, which is about the amount of distance that you travel. Now people are travelling much long distances. Earlier when the fare was very low, people were taking short rides, now when you are travelling much longer distances paying slightly higher fares, the metro is serving its purpose. I attended a meeting of COMET which is an international organization that deals with the Metros and Delhi Metro is a member of that. First, let’s get the figures right, Delhi Metro is going to be the world’s fourth-largest metro. It has already crossed 252 km. I think another week we will be inaugurating another stretch. What happens? You look at the capacity utilisation? I was appalled by the people who said that ridership has fallen! Delhi Metro has the highest capacity utilisation in the world. If it has the highest utilisation in the world, people are using it. How can you say that ridership has fallen?

You are adding routes, there is exploitation. I had said in response to a parliament question that you have to charge fares according to the cost of money, what you borrowed, the kind of services that you provide. The overall objective is to provide a first-class global facility which it is. For which you have to charge people. For eight to nine years there was no increase in fare. What I said in parliament is that what I could do is to be able to find a special dispensation for students and for senior citizens. I was told that was difficult because there is the ethics factor. Somebody takes a concessional student pass, somebody else uses it. What I said is that you put it on the Aadhaar.  

I have requested DMRC to work it out but I am very hopeful. If you are clear about what you want, you can work out a system where this is operational. This is one way but let them work out the technology. I don’t want a situation where if we are providing a 25 percent to 30 percent concession rate for students or senior citizens, I don’t want the non-entitled people to use it, it makes a mockery of fare fixation structure.

What about the rental housing scheme?

It is work in progress. We have already had some consultation. We need to do another meeting.

Tell us about the global housing challenge?

I made an announcement on it at the World Urban Forum in Kuala Lumpur in the beginning of February. I think in a few months’ time we will be completing that. It will be an opportunity provided to all global participants to come and showcase their green technologies in the construction industry. And then those who decide to contribute to that, we will find ways of seeking their participation in this massive planned urbanization effort which is underway.

Do you subscribe to the view that land prices are indeed very high across the country and is something being done about it?

Whether I subscribe to the view or not. You know what the reality is. Why is it so? I also have my theories. I think it is incumbent on governments to follow a policy which leads to rational pricing that the markets will ensure. We have a peculiar situation you have, on the one hand you have a 2011 study that says that we are 18 million houses short, when we do the validation through the state governments and the union territories, the figure comes down from 18 to 11 or 12 and then at the same time you have some 11 million houses or even more vacant. Why do people not give them on rent? Because there are complications. We are building affordable housing to make do the deficit. We are coming out with a rental policy. Once you have that happy equilibrium, this will again become more rational. Much of pricing thing on land is speculative. That is why people went on investing in land banks thinking that prices will always go up and suddenly the prices drop. And then they are stuck with this mess.

Where are we when it comes to linking Aadhar with property purchase?

Somebody asked me this question and I gave an answer on my own. Somebody suggested I had deliberately floated a trial balloon. The honest truth is that I was speaking on my own behalf. But a few days later PM was addressing the HT Summit (function) and he also mentioned it. Then they thought that perhaps there was coordinated talk. No, I personally think it is the logical flow of events. If there are benami transactions, I think technology is the only way to discovering those, incidentally it is the only way you can fight corruption. And that is why you get resistance on technology. But in the end it is technology that wins over.

I remember many years ago, when they were trying to computerize the income tax department. There was a big hue and cry. No, no jobs will be lost. Technology sometimes results in displacement of jobs. It also produces other jobs. And if you get a more rational market or land or other things, I think you will get more jobs.

For the year 2019, what will be the top focus areas for you?

I am very clear in my mind. Delivery, implementation; delivery, implementation and delivery, implementation. When you go to buy a house, you look at location, location, location. Want to develop a country – education, education, education. When I come to my flagship programmes – implementation, implementation and we are implementing well.