While real estate industry analysts have expressed largely unanimous approval for new minister for housing and urban poverty alleviation Ajay Maken’s edict that private developers will have to reserve 35% of houses or 15% floor area ratio (FAR), whichever is higher, for economically weaker sections (EWS) under the Rajiv Awas Yojana, builders say the move will inevitably lead to further escalation in property prices.
The builder’s apex body Confederation of Real Estate Developers’ Associations of India (CREDAI) has submitted a memorandum to the housing ministry urging that Maken rethink his proposal. “Such a directive, without any incentives to the developer community, would only burden the open-market buyers, mainly from the middle-income group (MIG), who will be forced to cross-subsidise the lower-income group (LIG) or EWS,” it said.
“If we construct 100 homes, we won’t be able to sell 35 of them. We will have to hand them over to the government so they are passed on to the EWS. This means we are losing a large chunk of our profit. So, naturally we’ll have to sell the remaining flats at a steep rate,” said a builder on condition of anonymity.
Meanwhile, CREDAI chairman Lalit Kumar Jain says the government needs to look at the larger picture.
“The government should come up with proposals where the EWS and LIG can be accommodated in flats that are in smaller buildings. Because, taller buildings mean lifts, and other maintenance costs. Who will pay these?” asked Jain.
Jain termed Maken’s plan populist and said such proposals garner attention, even if they aren’t passed in the end. The CREDAI memo suggested that there’s a need for special housing zones with tax exemptions, and these zones should have tenements smaller than 80 sq m.