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TRANSCRIPT
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Dinesh Nagar
Case Study on Affordable Housing
Video
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Unauthorized Development
Snapshot on Unauthorized
colonies
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Challenges Faced
Why Slums ??Norms Good (current) Ugly (slums) Reasonable
Ground
Coverage
25 – 30 % 80% 50 – 60%
Roads 50 – 70 ft wide 12 – 18 ft wide 18 ft – 21 ft
maximuxm
Open 65% 20 % (almost nil other then roads) 30 – 40 %
Set Back 5 – 6 mtrs No difference in roads and set back 3 m
Internal
Development
2500 per meter Almost Nil Rationalize
EDC Rs 1000 (approx) per meter Nil Rationalize if not
elimnate
Government
Subsidy
Nil Municipality Money, DUDA,
MP/MLA funds, Development
Authority, slum rehabilitation funds
etc.
If any.
Permissions Landuse Conversion,
Environment, Pollution, Fire,
Map Approval, Structural
design, etc etc.
NIL Single Window
Clearance
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Change in the mindset of
“Either Or . .”
Take Away
• Existing government regulations and development norms discourage private sector participation for Low
Income Housing
• Poor are hence compelled to take available housing in slums/Unauthorized colonies
• Change in Mindset – Make Low Income Housing norms very simple and marginally better than slums.
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Case Study
• Introduction to Dinesh Nagar
• Regulatory Scenario
• Differential Policies• Rationalization of Norms
• Procedural Framework
• Land Use Conversion• Single Window clearances• Approval Process
• Home Finance Scenario
• Target Mismatch• Credit Appraisal Norms
• Fiscal Incentives
• Conclusion
About Garg Group
• Garg Group is an India based multifaceted businessgroup that collaborates with entrepreneurs to createsuccessful partnerships across multiple businessverticals. We have grown from our humblebeginnings to establish a significant niche thatextends beyond the traditional scope of a businessgroup.
• Garg Group has operations in Real Estate,Educational Institutions, Iron and steel trading,Publication, Art Gallery and Skill Development
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Introduction
• Dinesh Nagar is a real estate project with a target to provideaffordable housing to the Low Income Groups. It is first of a kindinitiative and claims to provide cheapest houses under privatesector ambit without any government subsidy in the NationalCapital Region, India (world’s largest urban conglomerate).
• The project is undertaken by the reputed Garg Group to furtherits social commitments and branded as product of DIA Housing.
• DIA Housing is an independent company focused to achieve atwin goal of maximizing social impact in Low Income Groupsand achieve sustainable profits for it shareholders. It is a perfectexample of social enterprise that makes a considerable positiveimpact on the lives of the consumers on hand and achievingscalability on the other.
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About Dinesh Nagar
• Location : Pilkhuwa, Hapur District (earlier Ghaziabad District)
• Authority: Hapur Pilakhuwa Development Authority
• Connectivity:• NH 24 Bus Station – 1 kms
• PilakhuwaRailway station – 1 kms (Trains to Delhi/Ghaziabad every 15 mins)
• Ghaziabad Collectorate – 23 kms
• Cannought Place – 50 kms
• Services
Internal roads, Road side lighting, Parking for two wheelers, zarks (Green Area), Overhead tanks for water, Sewerage Treatment Plant (for water disposal of sewerage), Commercial Complex, Junior High School, Rain Water Harvesting
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Dwelling Units
• Number of Dwelling Units : 1072
• Number of Floors = G + 3
• Number of Towers =
Type Area Launch Price
(2010)
Current
Price
A 450 4,99,000 5,99,000
B 470 5,51,000 6,50,000
C 505 5,96,000 6,95,000
I BHK 28
2 BHK 11
Demographic Analysis – Ghaziabad & NCR
� Maximum no. of households in NCR havean annual household expenditure of INR70,000 – 150,000
Urban India — Expenditure
Pyramid
16%(10MM)
37%(~23MM)
33%(~21MM)
14%(~9MM)
MHE: <Rs 2,500 pm
MHE: Rs 2,500–Rs 4,575 pm
MHE:Rs 4,575–Rs 9,625 pm
MHE: >Rs 9,625 pm
Target segment for this project
Source : ICICI bank research
Source: NHB Trends in Housing; CRIS Infac Report; Monitor Research
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Regulatory Framework
Differential Policies
Map EWS Arthala
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Dinesh Nagar
Layout Map
Various Housing Schemes
• EWS/LIG: It is the most liberal scheme till date that envisages the construction of Housing forEWS and LIG. However, Independent Private Participation is not possible.
• Affordable Housing: This scheme is in between the general Group Housing Scheme andEWS/LIG scheme in terms of liberalness. It is under this scheme Dinesh Nagar is approved.
• Group Housing: This is a general scheme under which most of the group housing projects arepassed
Item Actual EWS/LIG Recommended
Number of Dwelling units 1072 1,234 1686
Cost Per Dwelling Unit 5,94,645 5,67,693 5,03,927
Effective* FAR 114% 135% 200%
Effective Ground Coverage 27.88% 33.75% 50%
Comparing Affordable and EWS/LIG scheme for a 10 acre Land size:
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Comparison of Polices
Norms Units EWS LIGAffordable
Housing
Group
Housing
FAR 2 2 1.75 2.5*
Ground
Coverage50% 50% 45% 35%
Density (dwelling units) 650 500 350 200
Approach
Road **sqm 9 9 12 12
Car
Parking***sqm NA 1 for 4 units 1 for 2 units 1 – 1.5 per unit
Parks 10% - 15% 15% 15%
Plinth area Sqm 20 - 35 36 - 45 40 - 110
In sqm EWS/LIG Affordable/GH
Block to Block 4.5 6
Block to Road 3 5
Set Back
Source: U.P Government G.O number 5899/8-3-09-214 Vividh / 09 Dated 14th January 2010, U.P Government Building Bye laws
EWS/LIG scheme not tenable
for private developers
1. Target beneficiaries would be decided by Government.
2. Pricing of the flats would be decided by the Government
Source: U.P Government G.O number 5899/8-3-09-214 Vividh / 09 Dated 14th January 2010
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Price Comparison
Floor Price per sqft
at Govt.
Scheme*
Price per sqft at
Dinesh Nagar*
Ground
Floor
2,000 1225
First Floor 1480 1200
Second
Floor
1460 1175
Third Floor 1440 1130
In Spite of :
1. Location is not as well connected
2. Land Cost is generally not
included in government schemes
3. Differential norms on schemes
*2010 prices
Take Away
• No unnecessary regulation: Approve maps of private individuals ordevelopers under EWS/LIG schemes without any restrictions bygovernment.
• Only right buyer will come: The nature of product is such anddemand is so high that only poor will buy it in a free marketsituation. Hence, it should not be regulated
• Create supply, market forces will adjust price: Regulation of sale priceby government has virtually blocked the entry of privatedevelopers. If there is supply market will itself adjust the prices.
In addition to social good this will generate huge employment andrevenue for government.
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Regulatory Framework
Rationalization of norms
Calculation Method of FAR and
Ground Coverage
Sno.Item
Area (in
sqm)
Percentage of
Total
Land
A Land For Group Housing 40,920 100%
B Commercial 2,040 5.0%
C School 2,000 4.9%
D Parking 3,636 8.9%
E Park 6,240 15.2%
F Road/Open area 15,594 38.1%
GGroup Housing
residential coverage27,003 66.0%
HTotal Flat Area Ground
Floor Coverage11,406 27.8%
I Total Built up Area 45600 11.4%
• Total Land –(Commercial + school + Parks + Parking)
• A – (B + C + D + E)
Group Housing Coverage area is calculated
• Multiply number of Towers with number of floors and area per floor
Total Flat Area Ground Coverage is Calculated
• FAR = I/G
• In this case: 45600/27,003 = 1.69
FAR is calculated by dividing Total Flat area with Group Housing Residential Coverage
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72 FT wide road
12 meters
22 meters
5 meters5 meters
Parks, Parking, School,
ServicesItem Current
Status
Recommended
Parks 15% of the
plot area
• The requirement of the parks should be reduced to a rational level
• If there is a green/agricultural land in the vicinity of the project the
requirement could either be ruled out or kept at bare minimum
Parking 13.75 sqm
for 2 units
• To be kept minimum. Comparing this to slums, it could be waved off.
School 2000 sqm • If there is a school in the vicinity of the project the requirement could
be ruled out
• Development authorities could keep provisions in Master plan and
developers should be exempt
Services STP,
OHT,
Electricity
• Service requirement of STP, Overhead tank, etc. can be relaxed to an
optimum level for this segment – Development Authorities should be
mandated to provide civic amenities
• This does not imply compromising on safety – but optimizing the
requirements
Open Spaces 38% of the
plot area
Other than parking and parks there is 38% area in open spaces. This
should be backward calculated after achieving 50% ground coverage and
200% FAR
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Impact of norms on cost of
the Dwelling Unit
Assumption
Cost of Construction 700
Comparison on Costing
Item Actual
EWS/LIG scheme (on
DN) Recommended
Total Covered Area (insqm) 45,600 54,006 73,752
Group Housing residential coverage 27,003 27,003 36,876
Total Flat Area Ground Floor Coverage 11,406 13,502 18,438
Effective FAR 114% 135% 200%
FAR 169% 200% 200%
Ground Coverage achieved 42.24% 50% 50%
Effective Ground Coverage 27.88% 33.75% 50%
Density achieved / per hectare 268 308.61 421
Total Dwelling Units 1072 1,234.42 1,685.76
Additional construction cost 34,34,59,200 40,67,73,192 55,55,00,064
Total Project Cost 63,74,59,200 70,07,73,192 84,95,00,064
Total Cost of a Dwelling Unit 5,94,645 5,67,693 503927
Avg Size (in sqm) 35 35 35
Cost per meter 16,990 16,220 14398
Cost per sqft 1,579 1,507 1338
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Procedural Framework
Procedural Challenges
Land Use Conversion
• Issue: The private developer is required to obtain conversion of the land use that is already in R-Zone in Master Plan from agricultural to non-agricultural from the revenue authorities
• Recommendation: If any land use is upgraded in the Master Plan such conversion shall be suo-moto deemed to be due compliance and no separate application needs to be moved before Revenue Authorities.
Single Window System
• Issue: The process of obtaining approvals from multiple departments including fire, pollution, environment, structure etc. results in harassment and delays.
• Recommendation: The development authority should be made the nodal agency for getting the approval relating to environment, pollution and fire safety etc.
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Approval Process
• Issue: At present there is no time limit prescribed for approval of building plans already vetted by the approved architect resulting in undue delays.
• Recommendation:
• A reasonable time of 30-45 days should be fixed for approval of building plans already vetted by the approved architect, failing which the submission of Plans should be taken as approval itself.
• Approval by panel of Architects
Completion Certificate
• Issue: The process of obtaining completion certificate from the Development Authority also results in delays.
• Recommendation: Instead of Development Authority, the practice of obtaining completion certificate from the panel of architects approved by the development authority should be adopted.
Home Finance
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Target Mismatch
For Loan Amount 4,00,000 5,00,000 6,00,000
Sno Bank Interest 15 Years 20 Years 15 Years 20 Years 15 Years 20 Years
1 SBI 10.25 4360 3928 5450 4910 6540 5892
2 PnB 10.75 4484 4060 5605 5075 6726 6090
3 Adhar 11.5 4672 4272 5840 5340 7008 6408
4 Muthoot 15 5600 5268 7000 6585 8400 7902
5 Shubham 16.5 6032 5704 7540 7130 9048 8556
Banks EMI range Income of range of
potential customers
Public bank (SBI) 4,000 to 6,000 12,000 to 18,000
HFC (Shubham) 6,000 to 9,000 18,000 to 27,000
Encourage Public banks to
lend to informal segment
Key Challenges:
• No separate credit assessment norms – Public Banks have
same credit assessment norms for rich and poor
alike.
• Administrative reluctance – Bank executives generally
show lack of interest in doing small ticket size loans
• Interest subsidy scheme – Interest subsidy scheme shall
does not help if the loan itself disbursed
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RTI Response
• Are there any separate norms for assessing home loans of Home Buyers of Income less than Rs 1 lakh
per annum?
Did Not
Anwer, 8
No, 8
Yes, 1
Major Changes that wereincorporated in the AffordableHousing Risk Model
1. Removal of scoring parameters:
• Net Worth/Loan amount
• Other Expenses/Monthly Income
2. Changes in Scoring pattern
• Income < 2 Lakhs– From 0/16 to 9/16
• Increase in EMI/NMI ratio
3. Change in cut-off range for selection
SBI Pilot
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Take Aways
• Separate credit appraisal norms/mechanisms to be made to assess & approve housing loans for house buyers below taxable income i.e Rs 2 Lakhs pa.
• The Securitization & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 takes care of recovery of loan by financial institutions. Hence, for the workers of the unorganized sector loans should be provided with only house as collateral without asking for any other collateral or income proof/guarantee information.
• A dedicated gaurantee fund be established in respect of housing for Economically Weaker Section and Low Income Housing.
• Specific quota to be set for Nationalized banks for lending of home loans of less than 10 lakhs.
• Reduction of cost of capital for Housing Finance Companies operating in this sector
Incentives
What is the scope of the Scheme of Affordable Housing in Partnership?
• The ‘partnership’ in the above scheme is the partnership between Central and State Government.
Highlights:
• Central Government assistance under this scheme is meant for the provision of civic services
• Central Assistance under the scheme will be limited to least of Rs. 50,000 per Dwelling Unit for all dwelling units taking EWS, LIG and MIG units together which are proposed in the project
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What are the fiscal incentives for Housing
Projects in Affordable Housing?
TAXATION
Income Tax: Sec 35AD of the Income Tax Act provides for investment linked incentives to certain specified businesses by way of deduction in respect of capital expenditure which includes Affordable Housing.
Service tax: Service tax is exempt for affordable housing projects for dwelling units upto 60 sq mtr.
BUT, both the above schemes cover only Projects which have prior sanction of the competent authority empowered under the Scheme of Affordable Housing in Partnership framed by the MHUPA which is meant for State Government Projects.
Thus no fiscal incentive at all is available to Private Developers.
Recommendation Summary
• The Scope of Affordable Housing must be expanded to delimit the same from a single Government
Scheme of AHP.
• Income from Affordable Housing should be allowed tax holiday on the line of Infrastructure Projects
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Questions on Definitions
• Can Low Income Housing be included in “Infrastructure” definition?
• What should be the common acceptable definition for Affordable Housing that can be generalized for
the Private and Public Sector?
Thank You