Two days of unveiling its second stimulus package to retain economic growth, the Centre has begun working in earnest to implement its promise of encouraging state governments to release land for low income and middle income housing schemes. The UPA government has called a meeting with states on January 20 to discuss the proposal.

?The economic slowdown has brought to the fore issues related to affordable housing. Private developers have focused only on high-end housing, whereas demand has been more in economically weaker sections, lower income and even middle-income group housing,? minister of state for housing and urban poverty alleviation Kumari Selja said on Monday.

A task force for affordable housing had been created by the ministry in January 2008, headed by HDFC chairman Deepak Parekh. In its report presented late December, the Parekh panel came up with some significant new ideas, many of which require reforms at the state level.

Calling for affordable housing to be put at the centre of public policy, the panel has asked that it be granted ?infrastructure? status. While it admits that defining affordable housing in a country as diverse as India is ?counter-productive,? it has suggested some indicative parameters about the size, cost and equated monthly installment that could constitute ?affordable?. (see chart)

Some of the key recommendations that require the states to show some initiative include upward revision of floor space index (FSI) and pushing in-situ housing development by bringing additional land into urban usage regularly. The panel has also suggested that an environment conducive to make investments in rental housing projects for economically weaker and lower income groups, a viable option.

Calling for a complete revamp of State Housing Boards, the Parekh panel has sought that they play a more active role in affordable housing projects, including through the Public Private Partnership route. Interestingly, it has also been mooted that all income earned by these boards through sale of land be ?ring fenced? so that a fixed proportion of it is redeployed only for affordable housing. A housing finance company focused only on micro-finance loans has also been suggested.

The proposals will be discussed with state ministers of housing, local self government and urban development on January 20, to seek their cooperation in obtaining land for housing and in reviving the state housing boards. This is meant to ensure that the reduced interest rates for low income home loans can be utilized by the maximum possible people. Moreover, a large scale housing programme also serves as a stimulus for the rest of the economy.

Pankaj Kapoor, CEO, Liases Foras, a Mumbai-based real estate research agency welcomes the move. ?Instead of giving FSI of seven to a 7-star hotel, the government should increase FSI in residential category so that the cost of housing becomes cheaper?, he said.

Mumbai has an FSI of 1.33 for residential apartments, where as Delhi has an FSI of 3.5 for smaller plots. Endorsing the initiative of promoting rental housing for lower income groups, Kapoor said that this will ensure that the migration population will have easy access to housing.

Incidentally, the West Bengal Housing Board has successfully implemented the private partnership model to create affordable housing. It employs cost subsidy model where a part of profit from sale of HIG apartments is used to subsidise LIG housing.

?The LIG apartments with an area of 400-550 sq ft costs only Rs 2 lakh,? says Rahul Todi, MD, Sharachi Developers. ?The in-situ development is possible and can be made affordable only if the FSI increases,? he said. Implementation of these proposals, especially involving state Housing Boards will be a tall order though. ?There should be a uniform policy for the States to follow,? said Prodipta Sen, vice president (marketing and corporate affairs), Alfa G: Corp.

As part of the first stimulus package unveiled in December, the Centre has already announced interest subsidy of 5% for economically weaker sections seeking home loans. As per the National Urban Housing and Habitat Policy, there is a shortfall of 24.7 million homes for the poor in India.