Reviewing India’s Non-Ownership Housing Scheme

The recent COVID-19 pandemic-induced lockdown resulted in a mass reverse migration of urban migrants. The heart-wrenching plight of the urban migrants highlighted the deep-rooted problem of access to safe and affordable housing spaces in urban areas.

Encouraging ownership of housing is crucial. However, non-ownership housing is equally essential and pragmatic for urban areas. It is observed across the country that housing policies are skewed towards ownership-based housing. However, there are alternative and similarly relevant tenures that need attention.

Local governments often struggle to provide basic civic infrastructure for these areas, leading to poor housing conditions.

Migration and economic activity are intertwined. Non-ownership housing is vital for both horizontal and vertical mobility of people as it allows them to access suitable accommodation without buying it. Therefore, emphasis on the supply of rental housing is crucial. It also plays a significant role in the objective of housing for all.

Affordable rental housing complexes

Urban areas attract seasonal urban migrants who work in the construction and industrial sector. Most of these areas are concentrated and aggregated and require access to rental housing. Many migrant workers and urban poor stay in slums, informal settlements, and peri-urban areas. In the absence of a proper housing supply, there is a large-scale mushrooming of ill-planned, low-quality housing. Local governments often struggle to provide basic civic infrastructure for these areas, leading to poor housing conditions. Migrants generally prefer to stay closer to their place of livelihood and near their community network. There is a need for rental housing closer to the workplace at affordable rates to address the need of this segment.

The Ministry of Housing and Urban Affairs (MoHUA) has initiated Affordable Rental Housing Complexes (ARHCs), a sub-scheme under Pradhan Mantri Awas Yojana-Urban. The target group for ARHCs are urban migrants, economically weaker sections, and low-income groups. The government is promoting ARHCs by ensuring special provisions. It includes 50 percent additional FSI without extra payment, single window clearance, relaxation in existing rent control laws, etc.

Migrants generally prefer to stay closer to their place of livelihood and near their community network.

The government has designed two implementation models of the ARHC scheme.

• Model 1 – Utilising existing government-funded vacant houses to convert into ARHCs through Public Private partnerships or by Public Agencies

As the name suggests, the government seeks to utilise the existing inventory of vacant houses to address the demand for non-ownership housing. It has identified over 80,000 vacant homes owned by public agencies/enterprises across the country. The aim is to repair these houses and fulfil the infrastructure gap such as electricity, water, sewer, sanitation, road and related works. Both public and private agencies can participate in the management of ARHCs. The initiative wants to push for investment opportunities and promote entrepreneurship in the rental housing sector.

State/UT wise progress under Model 1 of the scheme

Source: Ministry of Housing and Urban Affairs- September 2022

From the above table, the following broad conclusions can be drawn:

1. There are approximately 108,000 government-constructed vacant houses, of which 83,000 potential homes were identified for conversion to ARHCs. Yet Model-1 of the scheme has showcased slow progress (7 percent). It highlights the systemic failure of the non-conversion of identified vacant houses into ARHCs.
2. Of the 36 states and union territories, only 13 have joined the scheme. The rest may not have vacant houses or are not participating in the scheme. There is an urgent need to incentivise ‘pull and push’ mechanisms for states with vacant homes to participate.
3. The 7-percent conversion rate also does not paint a complete picture. There is no visibility on the occupancy of converted houses.

• Model-2: Construction, Operation, and Maintenance of ARHCs by Public or Private Entities on their vacant land

The model seeks to promote rental housing construction on vacant land by public and private agencies. It aims to increase the supply of rental housing to meet the excess demand resulting in over and above Model-1. It promotes proactive participation from public and private entities in the provision of rental housing. It will propel new investment opportunities and promote entrepreneurship in the rental housing sector by encouraging private and public entities to efficiently utilise their vacant land for developing ARHCs. The government has given several incentives such as exemption from income tax and GST on any profits from these operations, offering lower interest rates for project finance, loans, etc.

State/ UT-wise progress under Model-2 of the Scheme

Source: PIB Delhi, March 2022

The above data showcases the following trends:

1. Just six states have showcased results under Model-2. Most states and UTs are not participating in the scheme.
2. Tamil Nadu and Telangana contribute 92 percent of the housing supply. If we deduct their contribution, only 6,000 houses are being constructed under Model-2 by other states. Though other states have participated in the scheme, they have not utilised their full potential. There is a need for active participation and utilisation of full potential by all the states in the country.
3. Further, as most of these houses will be constructed, they will take years to enter the market.

Way Forward

The government recognised the need for affordable non-ownership housing and developed suitable policies. It provided many incentives, including FAR, FSI, income tax, GST exemption, single-window approval, etc. However, the current policy does not address foundational issues in the rental housing space. In Model-1, the government must address pressing problems of quality construction, trunk infrastructure, and municipal services. Model-2 needs to focus on high land costs and the lack of substantial land size in required areas to develop ARHCs. The scheme was launched on 31 July 2020. Two years have passed since the scheme’s launch, and it is progressing at a snail’s pace. There is an urgent need to revise the existing policy to bring an enhanced focus on rental housing.