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Public-Private Partnership (PPP) policy for affordable housing to provide cheap houses

22, September, 2017


MUMBAI: Taking its efforts to achieve ‘Housing for All by 2022’ to another level, the central government has announced a new public-private partnership (PPP) policy for affordable housing that allows extending central assistance of up to Rs 2.50 lakh per house to be built by private builders even on private lands. 

Under this policy announced by Minister of Housing & Urban Affairs Shri Hardeep Singh Puri, eight PPP (Public Private Partnership) models have been provided for the private sector to invest in the affordable housing segment. It has also opened the potential for private investments in affordable housing projects on government lands in urban areas. 
 

While addressing real estate body NAREDCO’s summit, Puri explained that this policy seeks to assign risks among the government, developers and financial institutions, to those who can manage them the best, besides leveraging under-utilised and unutilised private and public lands towards meeting the target of Housing for All. 

“We are not being prescriptive or restrictive with these models. Land being a state subject, the governments can come up with more models that would help in pushing affordable housing efforts further,” Puri said. The two PPP models for private investments in affordable housing on private lands include extending central assistance of about Rs 2.50 lakh per house as interest subsidy on bank loans as upfront payment under the Credit Linked Subsidy Component (CLSS) component of Pradhan Mantri Awas yojana (Urban). Under the second option, central assistance of Rs 1.50 lakh per house to be built on private lands would be provided, in case the beneficiaries do not intend to take bank loans. 

Puri stated that eight PPP options, including six for promoting affordable housing with private investments using government lands, have been evolved after extensive consultations with the states, promoter bodies and other stakeholders. 

The six models using government lands are: 

1.DBT Model: Under this option, private builders can design, build and transfer houses built on government lands to public authorities. Government land is to be allocated based on the least cost of construction. Payments to builders will be made by the public authority based on progress of project as per agreed upon milestones and buyers will pay to the government. 

2. Mixed-Development Crosssubsidized Housing: Government land to be allotted based on number of affordable houses to be built on the plot offered to private builders, cross subsidizing this segment from revenues from high-end house building or commercial development. 

3. Annuity-Based Subsidized Housing: Builders will invest against deferred annuity payments by the government. Land allocation to builders is based on unit cost of construction.

4. Annuity-cum-Capital Grant Based Affordable Housing: Besides annuity payments, builders could be paid a share of project cost as upfront payment. 

5. Direct Relationship Ownership Housing: As against government mediated payments to builders and transfer of houses to beneficiaries in the above four models, under this option, promoters will directly deal with buyers and recover costs. Allocation of public land is based on unit cost of construction. 

6. Direct Relationship Rental Housing: Recovery of the costs by builders is through rental incomes from the houses built on government lands.

 
Source: economictimes.indiatimes.com


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