A key step for inclusive growth

By Amrit Abhijat

In a major push to affordable housing, the finance minister announced the extension of the tax holiday to the segment till March 2022. Income tax exemption has also been given for notified ‘affordable rental’ housing projects.

The issue of housing for urban migrants/poor in India came to the fore during the nationwide lockdown last year. In the wake of the Covid-19 pandemic, unprecedented reverse mass-migration ensued. Tens of thousands of migrants and poor were seen on India’s highways, walking back hundreds and thousands of kilometres to the security of their homes in rural areas.

It spurred a re-imagination of the need for affordable rental housing as the mainstay of the migrant workforce in the cities. The Cabinet approved the Affordable Rental Housing Complexes (ARHCs) scheme. As a sub-scheme of the Pradhan Mantri Awas Yojana–Urban (PMAY-U), it ties in with the Atmanirbhar Bharat vision, too.

ARHC marks a strategic shift from ownership-based intervention to a rental-based social housing scheme, and corrects the historical negligence of the vital productive force of migrants. The beneficiaries of ARHCs will be varied groups of urban migrants and poor, including industrial and construction workers, migrants working with market/trade associations, educational/health institutions, hospitality sector, long-term tourists/visitors, students or any other category as deemed fit by the states/UTs.

The scheme will be implemented through two models. In Model 1, existing government-funded (central and State) vacant houses will be utilised by converting them into ARHCs administered in the PPP mode or through public agencies, which will operate them for a concession period of 25 years. In Model 2, public/private entities will construct, operate and maintain ARHCs on their own available vacant land for a period of 25 years. In order to secure the interest of intended beneficiaries, ARHCs projects will have a mix of single-bedroom houses with living area, kitchen, toilet and bathroom and dormitories. It will also provide for the construction of—subject to a cap of one-third of all dwelling units in the project—double-bedroom units with living area, kitchen, toilet and bathroom, to address the requirement of those with families.

ARHC has been designed after a series of consultations with stakeholders and is a win-win proposition for both the urban migrants as well as private entities. It will attract investment and entrepreneurship to the rental housing sector. The government has extended the benefit of project finance credit facility at a lower interest rate through a concessional window by inclusion of ARHC in the harmonised master list as an infrastructure sub-sector. Further, with RBI permitting the issue of long-term bonds by banks for financing of infrastructure and affordable housing, long-term project loan requirements for this segment at a lower interest rate will be facilitated. Entities can also avail loans at lower rates from banks under priority sector lending or from housing finance companies through the Affordable Housing Fund (AHF). Refinance under AHF, from the National Housing Bank, will also be available to eligible institutions. The internal rate of return is projected at 12-14% as a result of this capital infusion.

ARHC also addresses the critical need for unlocking the potential of the land available with public and private agencies by relaxing land-use norms, where part of it can be used for rental purpose and rest for commercial use. Finding suitable land in the city near the centres where migrants work/study is fraught with challenges. ARHCs will result in value-capture of the land. In addition, a host of incentives and benefits are being extended to the entities such as concessional project finance, exemption in income tax & GST, use-permission changes for houses on vacant land and free 50% additional FAR/FSI; trunk infrastructure up to the project site, municipal charges on a par with residential property, and single- window and time-bound (within 30 days) approval of all ARHC projects are other steps to facilitate the segment. Moreover, a Technology Innovation Grant (TIG) of `600 crore has been provisioned to promote business innovation by using alternative construction technologies.

ARHCs will prevent the proliferation of slums, apart from addressing the issues of health, hygiene and productivity of migrants and their families. They will lead to responsible entrepreneurship and fulfilment of ethical duty towards the ‘less privileged’, and this makes them a critical step in inclusive growth.

The author is Mission director, Pradhan Mantri Awas Yojana (Urban)