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Cabinet mulling FDI in housing sector, says Jethmalani

The Union Cabinet is considering allowing foreign direct investment in the housing sector and a four- member Cabinet sub-committee was examining the proposal, Union Urban Development Minister Ram Jethmalani said in Madras today.

He has already held talks with foreign firms and Non-Resident Indians or NRIs regarding investment in the housing sector and received a positive response from them.

"I am for FDI in the housing sector. The sub-committee which is examining the proposal has already met once," he added.

He said the nod for NRI investment in the housing sector had been given in 1993, but the investment influx was "rather meagre" at Rs 5.5 billion so far. "I now have a Rs 10 billion proposal from an NRI at Delhi itself," he disclosed.

Referring to the recent repeal of the Urban Land Ceiling Act, he wanted the state governments to follow suit and repeal their respective urban land ceiling laws to ensure "liberation" of land and fall in land costs to facilitate major housing expansion.

"It only takes an assembly resolution to repeal the laws. Gujarat, Maharashtra and Andhra Pradesh have indicated that the urban land ceiling laws would be repealed," he added.

Jethamalani said a national slum development policy, envisaging clearing of slums and providing decent habitats to slum-dwellers in cities, using housing projects financed by the private sector, would be formulated within the next week or ten days.

Admitting that the Centre had not been able to keep its commitment of constructing two million houses in one year, he said this was due to obstacles in the housing laws, which had to be removed. However, a majority of these housing projects had commenced and the government would strive hard to complete them soon and take up similar targets every successive year, he added.

He said the Union Budget had hiked the equity base for Housing and Development Corporation by Rs 4.73 billion to boost housing activities involving partnerships between HUDCO and private firms.

He said the idea of a regulatory mechanism was at the "proposal" stage. "I think it should not be a statutory authority and regulation can be done by an administrative body," he added.

Jethmalani said with the housing sector receiving a boost, he expected rent control measures to become redundant. "Rent control was a product of wartime housing scarcity."

"I expect the state governments to take the lead and repeal the rent control laws. No future construction would have rent control in Delhi and some states, including Maharashtra have agreed to consider following suit", he said.

HUDCO chairman V Suresh said a number of state governments, represented by officials at a seminar organised by HUDCO and The Times Research Foundation last week, wanted to restructure their housing boards on the lines of corporate firms.

Jethmalani said the funds needed to fulfil the Ninth Plan commitment of building 15 million urban housing units for the low-income groups were estimated at Rs 1.5 trillion. "This will have to come through private sector participation in a big way," he added.

Jethmalani said indications were that funds available from the formal sector during the Ninth Plan for urban housing would be Rs 520 billion and for infrastructure Rs 250 billion, as against the requirement of Rs 1.5 trillion and Rs 2.5 trillion respectively. The requirements are simply gigantic, he added.

The repeal of the urban land ceiling laws resulted in the fall in land costs, he observed.

To increase the flow of low cost funds from the banking sector into housing, the Budget had proposed hiking the contribution of incremental deposits from 1.5 per cent to three per cent, extension of section 80-1(a) benefits for houses up to 1,500 sq ft from the earlier 1,000 sq ft and raising the income tax benefit for interest paid on housing loans from Rs 35,000 to Rs 75,000.

He wanted the Tamil Nadu government to repeal the Urban Land Ceiling Laws to give a boost to the housing sector in the state.

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