Affordable housing: The Shanghai Model

With India taking various steps to create an affordable housing segment, Shanghai’s experience could come handy in developing its own infrastructure here

Unlike Mumbai — one of the costliest real estate markets— which has relied on giving free houses to slum dwellers and construction of a few low-cost houses for the general public, Shanghai has adopted four approaches to affordable housing for different types of residents

With India having rolled out an ambitious ‘Housing for All’ programme, it is hardly a surprise to see local planners and authorities looking for cues — such as the strategic approach adopted by Shanghai— a city very often compared with Mumbai, to bring an over four-fold increase in its per capita living space over the past three decades.

On the second day of the three-day BRICS cities conclave that started on Thursday in Mumbai, Huang Rong, deputy secretary, General of Shanghai Municipal Committee, gave a detailed presentation on affordable housing in Shanghai.

Unlike Mumbai — one of the costliest real estate markets— which has relied on giving free houses to slum dwellers and construction of a few low-cost houses for the general public, Shanghai has adopted four approaches to affordable housing for different types of residents — low rent housing, a public rental housing system, houses on shared ownership, and houses for people relocated from old dilapidated buildings.

“Shanghai was among the first cities in China to reform the housing system. We set up a housing provident fund, low-cost housing. We have taken up many large measures and government projects. Shanghai was the first in China to also launch a low-rent housing system,” Huang Rong informed.

Shanghai’s low-rent housing system, under which the government does not provide ownership of the houses, is targeted at the city’s poorest families who find great difficulty in finding housing. The delegate said, the public rental housing too is based on a no-ownership model, but is particularly for the migrant population in Shanghai with stable incomes and jobs.

“Shanghai launched the public rental housing system in 2010. There is no income criteria. Rentals are a bit lower than the market rates. They are for a limited period, and there is no income criteria. The model is managed through market operation and government support,” Huang Rong said.

Mumbai too had toyed with the idea of a rental housing system in areas such as the Mumbai Metropolitan Region to prevent proliferation of slums by constructing and renting out 160-square-feet houses with rents ranging from Rs 800 to Rs 1,500 per month. However, the scheme failed to take off with a tepid response from developers, and a thought in hindsight that the government cannot be an efficient landlord and manage rentals, making these houses prone to encroachment. The scheme was ultimately scrapped and turned into an affordable housing scheme.

Mum-Shanghai-graph-1Besides houses on rent, the Shanghai administration also provides options of shared ownership to low and middle-income group families, where the government partly owns the house.

“The cost of construction is regarded as the basis, and we consider the payment capabilities of applicants. The owner occupier has right to use the entire apartment, but at the time of sale, the proceeds are shared with the government in a fair manner,” Huang Rong said.

While Mumbai has been facing several hurdles in evacuating and redeveloping old dilapidated buildings, grappling with issues such as tussles between landlords and tenants, reluctance of tenants to leave their houses, and political pressure, Shanghai, under a communist framework, has swiftly removed 78 million square metres of old battered apartments in recent years.

Simultaneously, Shanghai builds houses to relocate those who have been evicted from old shaky apartments. Since 2002, the administration has built 9,70,000 apartments for those who had to be relocated from rickety buildings.

The government also tries to control real estate prices in the city by adjusting demand and supply through release of land, encouraging small and medium-sized apartments, and purchase restriction policies, Huang Rong added.

Pankaj Kapoor, managing director at Liases Foras, a Mumbai-based real estate consultancy firm, said, “Our government too had been talking about rental housing, housing for the economically weaker sections by mandating developers to construct a certain percentage for the sector, but the problem in India is that urban local bodies haven’t really participated in affordable housing. Urban local bodies did not do certain things that they were meant to do when they were instituted. Conceptually, Shanghai’s approaches are good, and even doable, but there should be intent.”

However, Kapoor said that adjusting demand and supply through controlling the release of land may not be the best approach to rein in property prices. “This approach was tried in Mumbai too and is a main reason for the growth of slums and skyrocketing of property prices,” he said.

As part of the Union government’s ‘Housing for All’ initiative, formulated under the Pradhan Mantri Awas Yojana, the Narendra Modi-led government has also charted out four approaches to provide affordable housing — slum redevelopment on the existing plot, an interest subsidy scheme, creation of housing stock on a public private partnership model, and beneficiary-led individual houses. Using these approaches, the government plans to create houses of up to 30 square metre (323 square feet) for the weaker sections, and 60 square metres (646 square feet) for the lower-income groups.

However, the slum redevelopment scheme of the Union government’s programme will not be implemented in Mumbai, as it only promises subsidised housing whereas successive governments have stuck to a ‘free housing’ policy for slum dwellers, a major votebank in Mumbai.

The slum rehabilitation scheme in Mumbai, where at least 42 per cent of the population lives in slums, allows private developers to house slum dwellers living in structures built before January 2000 in highrises constructed on a portion of the plot that the slum occupies. As an incentive, builders are granted a higher construction area and are allowed to commercially exploit the remaining public land free of cost. The scheme, which was launched two decades ago with the intention of housing 8 lakh families within five years, has managed to rehabilitate a little over 1.5 lakh families until now.

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