Is housing really infrastructure?
"The truth is that while 'affordable housing' may qualify for the status, the luxury segment does not qualify in any way at all. One has to be therefore very careful. Putting affordable housing in the infrastructure category, would make funding would become soft and would attract a large number of entreprenuers to enter this segment in a dedicated manner," says PSN Rao, professor of housing, School of Planning and Architecture, New Delhi.
Puri says that one alternative would be to bring in the concept of special residential zones (SRZ) on the lines of the SEZ. "A SRZ could be a model of affordable housing development that represents an economic microcosm tailored to attract developers via various incentives and tax breaks. A significant feature would be subsidised rates for land and construction materials. Moreover, the government would put in place the necessary infrastructure to make the SRZ approachable and inhabitable."
In a recent move, the RBI turned down a proposal by the finance ministry to give the status to the real estate sector that was first reported by The Financial Express.
The central bank has cited concerns about the likely adverse implications of an increase in banks' exposure to the 'risky' sector, especially when banks' non-performing assets (NPAs) are on the rise in a slowing economy. The report said that the central bank was keen to ensure that the banks' risks on account of their exposure to the real estate sector are reduced so that there are no systemic problems. This is also the reason it restricted external commercial borrowings to projects rather than the sector as a whole.
"RBI is against easy loans to the housing sector as it believes that this can lead to speculative construction as happened in recent times in Dubai or to some extent currently in China. While RBI's concerns are valid, we feel that we are nowhere close to a bubble stage in terms of number of houses under construction in India," says Bajaj. "In fact the demand supply mismatch is largely responsible for the high housing prices in India. The LIG and EWS segments are completely under-served for want of funding."