Kolkata Community Portal || Kolkata Community Portal - News, Reviews, Comments & Discussion

Funding Row May Hit UPA Flagship Housing Scheme

By akansha, Section Development
Posted on Mon Jan 25, 2010 at 12:26:07 AM EST

UPA-2's ambitious scheme to make India "slum free" is embroiled in a controversy as Planning Commission and housing ministry are at loggerheads over funding of the Rajiv Awas Yojana (RAY). As a result, RAY may get just a token allocation in the budget.

While the ministry has worked out the cost of its flagship scheme to make India slum-free at Rs 8-9 lakh crore over a period of 10 years, the Commission differs over the funding that Centre should provide.

With latest estimates suggesting the swelling of the slum population to around 90 million 35% of urban population it will be tough to provide houses to all poor people.

While the ministry wants Centre to contribute Rs 1.50 lakh crore, the Commission wants the amount to be lower and has suggested that the contribution of states and private parties be increased further to reduce the Centre's share.

The ministry, however, feels that Centre would need to make substantial contribution to spur investment from states and private partners for RAY. Sources said the ministry has asked for around Rs 3,500 crore in the 2010-11 budget to begin with. The Commission is, however, not very receptive to this demand as well.

The Kumari Selja-headed ministry is now expected to petition PM Manmohan Singh to get more funds in the next fiscal to "seriously" launch the scheme.

"If there is not enough funding from the Central kitty, then both private players and states will not be motivated to invest in the projects," argued an official.

Source: Times Of India By Mahendra Kumar Singh Funding row may hit UPA flagship housing scheme

Click On "Full Story" For More....

In metros and tier-I cities, it will be quite easy to attract private developers and real estate companies as even after providing houses to slum dwellers at nominal cost, the private players can develop residential and commercial complexes with relaxed floor space index and FAR to cross-subsidise the project and earn profits.

But in tier-II and III cities and smaller towns, cross-subsidisation may not work because it may not be as profitable to develop commercial and residential spaces.

"In these cities, where developing real estate is not such a profitable proposition, private players will not show much interest unless government makes it attractive for them by pumping in a considerable amount," said an official.

By agreeing to grant legal property rights to slum dwellers, state governments are contributing significantly to slum clearing and upgradation projects.

In the absence of any major incentive from Centre, the ministry fears that the projects may not take off at all. It also feels that even if private developers launch a project, the cost of houses may be too high for the poor defeating the scheme's purpose.

According to the plan, Centre will not only give capital subsidy but also interest subsidy for RAY projects. To make the scheme more workable, Centre would provide viability gap funding of up to 40%. While in most cases it is expected to be in situ development if the private developer comes up with the parcel of land, the Centre will develop the infrastructure.

< Get Online to Put Your Telco In Line | DLF Sells 15-acre Bangalore Property for 120 crore >