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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