AP GO's, a dampener

The real-estate activity in Hyderabad has virtually come to a standstill, with builders preferring to shelve their plans, thanks to G.O. No. 288. The order, issued a couple of months ago, mandates that builders allocate 25 per cent of the total built-up area for the low and middle-income groups.If builders think that this is a dampener, a fresh Order (G.O. No. 470) issued on Friday would add to their woes. It also contains similar provisions for all the development activity within 1 km on either side of the 162-km Outer Ring Road that encircles the city."Five per cent would go to economically weaker sections (EWS), and 10 per cent each for low and middle-income groups (LIG, MIG) in all projects that are over one acre," says Mr C Sekhar Reddy, President of Builders' Forum.The order also stipulates a plot size of up to 100 sq.m for LIG and MIG housing units. Builders, small and big, feel that this would burden the real-estate in Hyderabad, which has already been running through a very bad patch. "This is totally unreasonable and impractical. No one is submitting applications of late, fearing that the projects could be unviable," says Mr Sekhar Reddy.

An agitated Builders' Forum met the Chief Minister, Dr Y.S. Rajasekhara Reddy, and Urban Development officials to seek doing away with the provisions and look for practical alternatives. The Government, however, argues that this order is in tune with National Housing Policy and Jawaharlal Nehru National Urban Renewal Mission to provide affordable housing to the people.In case of layout development, the HUDA (Hyderabad Urban Development Authority) should be given 5 per cent of the total area free of cost. The 25 per cent allotment norm to EWS, LIG and MIG holds good here as well."The owner of any land or groups of owners and developers who intend to sub-divide or layout the land in such areas into building plots are required to mortgage 25 per cent of the saleable land to HUDA as surety for carrying out the developments and complying with other conditions in the given time. In case of failure, HUDA is empowered to sell the mortgaged plots and utilise the amount for completing the development works," says the order.

Industry contention:

Mr Bhawarlal Jain, Director, Sunway Opus International Private Ltd, says there is no denying that the real-estate sector has social responsibility. "But the thing is, developers spend a fortune on buying the land parcel and development. It would be difficult for us to give them at affordable costs," he says. While echoing his views, Mr Sekhar Reddy points out that after they spend a lot of money on buying, development and construction, the cost of the units will go up significantly.Explaining the cost aspect, Mr Reddy says a typical 440 sq.ft house for economically weaker sections could cost Rs 13.20 lakh (at Rs 3,000 per sq.ft) even if developers offered them lower prices in most of the areas. "You need to add registration fee, value added tax and other costs that will increase the total cost by at least another Rs 4 lakh. Can the economically weaker section afford this," he asks. The costs for LIG and MIG housing too would go up proportionately."Space availability should be a parameter for the social mandate. The mandate should be for townships with land area more than 400 acres. Townships with land area less than 400 acres cannot provide small houses at affordable prices," according to Mr Sumith Reddy, Head, Residential Townships Vertical of Maytas Properties (AP region).

Wrong signals:

Mr Sekhar Reddy says the builders have had a few rounds of discussions with the Government. "We pay a hefty fee to the Government on several heads. Land cost in a project is about 40 per cent. Costs of all other inputs, including the fee, are shooting up, making the per sq.ft rates spiral. I don't think people in the lower and middle-income groups could go for the flats, considering the huge costs," he says. He argues that these provisions are not in the original draft circulated by the Government for soliciting views. This, according to him, would send wrong signals to the investors from the outside. "The private sector can't do it. It can be done in public-private partnerships. If the Government can contribute land, we can provide our expertise and ensure affordable housing for the targeted sections," he says.

Follow Hong Kong model:

Mr Anand Reddy, Director of PBEL, an Indo-Israeli joint venture, feels the Government should contribute its mite. "There are two things that are crucial in this. The Government should ensure proper infrastructure support. Besides, it should offer incentives (such as waiver of taxes and fee) for the projects."According to him, every consumer pays 40 per cent of the housing cost to Government in various forms. "If this is waived off, they can get affordable housing," he says.He suggests that the Government follow the Hong Kong model. "The Government and private developers formed Hong Kong Housing Authority that provides subsidised loans (up to 0 per cent) to the needy. Besides, they build commercial space and the revenue generated out of it will again be ploughed back into the affordable housing scheme," he says.

Social barriers:

"This could also create social issues as well. It will create a problem as this GO creates an awkward situation with people of different levels of income requiring to stay together. It will lead to socio-economic mismatch," says a builder who doesn't want to be quoted."The GO is not practical because the government is trying to demand some area, free of cost, without giving any incentives to builders," Mr K Ravinder Reddy, Chairman of Janapriya Engineers Syndicate, a real-estate company that pioneered affordable housing in Andhra Pradesh, feels."It also overlaps with plans of builders to provide group housing projects targeted at the middle class. It is a hindrance to development and will be a mismatch of rich and poor living in the same group housing," he adds.