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Construction : Web Exclusive | July 2013 | Source : Construction Update

Incentives to builders for taking up projects for poor

For private builders, who are intending to build houses for economically weaker sections, the Centre is planning to increase cash incentives. The Union government will take up such housing projects in partnership with the private builders. For this, the government has reserved Rs 4,000 crore for this scheme over the next four years. Under the Affordable Housing in Partnership Scheme floated in 2009, the Centre was to pay private builders Rs 50,000 per dwelling unit or 25 per cent of the cost of civic services, 'whichever was less'.

Under the scheme, yet to be placed before the cabinet, each project must have a minimum of 200 housing units. And builders will have to reserve 25 per cent of these for economically weaker sections. Since the scheme found few takers, the government is planning to drop the 'whichever is less' clause and hike the amount to Rs 80,000. Overall, the subsidy used to end up being only Rs 10,000 per dwelling unit.

This was not very attractive for private builders, Arun Kumar Misra, the secretary, housing and urban poverty alleviation, said. The government will also ask states to exempt these builders from stamp duty and development charges and offer them other indirect benefits.

These exemptions will lead to further savings of Rs 70,000. So, a builder will get close to Rs 1.5 lakh for each unit, almost three times more than what was being offered earlier, sources said. According to housing ministry data, there is a shortage of 18.78 million dwelling units, of which over 96 per cent is in the economically weaker section and low income group categories.

This could go up to 38 million units by 2030, a projection by the Mckinsey Global Institute said. Persons who earn less than a lakh a year belong to the economically weaker sections. Those who earn less than Rs 2 lakh a year are classified in the lower income group. The government alone will not be able to handle this (shortage of dwelling units), we need private partnership. It may not be profitable for them to construct affordable housing, so we have to offer incentives, said Girija Vyas, the Housing and Poverty Alleviation Minister.

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