The Reality Of Slums In India

Slums in urban India symbolise both hope and despair. They are the entry point for impoverished villagers seeking to escape their deprivation. Living conditions in them, however, are often so unspeakable that the declared aim of the government is to have a slum-free India. But if the first detailed census of slum households in the country is anything to go by, they are very varied in nature, and therefore the government's attitude to, and policy for, slums needs to be much more nuanced. What can be said unequivocally is that a slum is no fit place to live. 

In fact, the census covers not just officially recognised and notified slums but others as well, and the criteria used to identify a slum is any place which is home to at least 60-70 households and is unfit to live in for a variety of reasons like the nature of the shelter available, overcrowding, the lack of sanitation and drinking water. Nearly twice as many households in slums do not have in-premise latrines or drinking water sources as do urban households overall. Forty-five per cent of slum houses are one-room units; 82 per cent of slum households have three to eight members.

But, significantly, slum households are not all that far behind total urban households when it comes to asset ownership. Households in slums that own television sets (70 per cent versus 77) and computers (10 per cent versus 19) have the same difference of around eight percentage points with total urban households. And virtually the same percentage of slum households (63.5) own mobile handsets as total urban households (64.3). A similar pattern is visible elsewhere. Fifty-one per cent of households in slums use gas for cooking, compared to 65 per cent of urban households overall. 

In having in-premises bathing facilities, houses in slums at 81 per cent are not far behind all urban households (87 per cent). And with some indicators, the difference entirely disappears. Around 70 per cent of slum and total urban households own their houses. Slightly more slum households (74 per cent) have access to water on tap than overall urban households (70.6 per cent). Roughly the same proportion of urban and slum households (just over 90 per cent) have access to electricity for lighting.

It should be clear from this that slums are not a dead-end. They contain households which have access to income and to resources not too far behind the rest of the city. They are also the location for much productive activity: As many as 16.7 per cent of all slum houses are used for non-residential purposes like office, shop, workshop and factory. Government policy, thus, should avoid the thought of slum clearance altogether - both immoral and unfeasible, not to mention unnecessary - and turn itself on its head. 

Its aim should instead be to improve conditions in slums in key areas. Most importantly, in sanitation services, and by providing safe drinking water. Next on the agenda should be a proper drainage system and one for disposal of garbage. Improving the housing stock and easing overcrowding can come thereafter. Handing over slums to builders to provide low-cost housing has not worked, and may not in the future.

CRICKETER YOUSUF PATHAN TIES THE KNOT

Cricketer Yusuf Pathan talks with his brother Irfan Pathan during his wedding in Mumbai onWednesday.
Out-of-favour India all-rounder Yusuf Pathan tied the knot with fiancee Afreen, at a family function.
The 30-year-old big-hitting batsman had got engaged in Vadodara last year to Afreen who was born
and brought up in Mumbai but practices physiotherapy in Vadodara.

Students On High In AP Suicides Record

Police records say it all. At least 49 of the 115 suicide cases recorded by the State Crime Records Bureau in the last three years were that of students. But what remains unexplained and unaccounted is the systemic failure of academic institutions, in which a person spends one-fourth of his/her life, to recognize and act on students’ concerns. Are our academic institutions indifferent to troubles that plague a student’s life, starting from heartbreaks to academic pressures, economic insecurities and discriminations based on caste, class and gender? The answer, unfortunately, seems yes. 

Of the many injustices the education system inflicts on students in the state, the most striking one seems to be that of limiting their choices by trying to fit them into a mould right from childhood. “Students are given only two career choices - medical or engineering studies. There is no attempt to accommodate diverse interests as everyone is expected to fit into the same mould,” said Diana Monteiro, a clinical psychologist from the city. 
    
And as the schedules of top private techno schools and intermediate colleges indicate, the path to gaining admission into leading technical or medical colleges is by rote learning for 18 hours a day. “The pressure to fit in is so high that students run away from these campuses. But they are brought back to the same institutions by parents who are ignorant of the effect of such strict academic set-ups. There are students who run away three or four times from the same corporate colleges and are brought back,” said Prof N Beena, a city psychologist. An examination of suicide cases reveals that apart from academic pressures, there could be other reasons like heartbreaks behind a student taking the extreme step. 

Though officials at educational institutions generally wash their hands off in such cases, counsellors and social scientists think otherwise. “Educational institutions which care for the welfare of students should not wash their hands off even if suicides seem to stem from heartbreaks. It is not because of a single point of failure that a person tries to commit suicide. Hence each of these cases requires investigation and implementation of immediate corrective measures,” said social scientist C Ramachandraiah. 
    
There could be a plethora of underlying factors that lead to suicides in undergraduate colleges and universities. “From not releasing scholarships to publically humiliating those who have failed in examinations by putting up their names on the notice board, educational institutions act in the most insensitive way to students who cannot perform,” said Prof G Haragopal, a human rights specialist. “Alarmingly, a majority of such students who go through this trauma come from less privileged backgrounds,” he added. 
    
Researchers, while admitting that suicides plague the student community at large, point out that a certain pattern emerges when one goes into the student’s backgrounds. Counsellors and human rights activists assert that students coming from less privileged socioeconomic backgrounds are at a higher risk of suicides in hostile or unreceptive academic set-ups. In several cases, caste discrimination has been one of the main causes, a fact that educationists find alarming. 
    
Maintaining that educational institutions and the society in general should take up the responsibility for preventing suicides, human rights activist and professor at Delhi University, M S S Pandian said: “Suicide is not an individual’s failure. It is the failure of a society to keep the individual alive. The least that educational institutions could do is be democratic and inclusive to all students who walk in.” 

INN View 
The fact that a staggering 43% of suicides in the last three years involved students is indeed a worrying scenario and the government should immediately introduce some preventive mechanism and follow the High Court’s directive. There have been several recommendation reports on improving counselling systems inside universities that are gathering dust. Immediate steps should be taken to safeguard the lives of students.

A New 'Pratha' Is UnVeil in Gujarat

Girls ditch grooms in parched Gujarat villages. A number of eligible bachelors in the drought-struck Dedan village near Amreli are ruing their luck. The acute water crisis here has cast a dark cloud over their chances of getting married. 
    
Parents of many brides-to-be have broken off their daughters’ engagement with at least four young men in this village of around 12,000 in the past couple of months. 
    
The reason is that they don’t want their daughters to walk a minimum of 5km daily just to fetch drinking water. 
    
The water crisis in Saurashtra has been simmering for a while but now things are getting worse. The district received just 56% of its average annual rainfall last year, as against 93% in 2011. Fierce clashes between people and local civic authorities in Amreli over water are now becoming frequent. 
    
This state of affairs has had a deep impact on the marriage market. “We made all efforts to get our son married for three years. But the first question the girls’ parents ask is about the water situation,” says Valji Patel (name changed). In desperation, Patel has now shifted to Surat where he is hopeful his son will eventually find a bride. 
    
Among those who have stayed behind, there are numerous stories of engagements breaking over water woes. 
    
Sitting in his shop in Dedan, which has just one common well that has long dried up, Sameer Gori, 28, recounts how his engagement with a girl from Rajkot broke off because her parents didn’t want to send her to a village that was at the mercy of erratic and expensive water tankers. Sarpanch Nathu Rathod nods in agreement. 
    
“Nobody wants to give their daughters in marriage to our village and the situation is only getting worse. We have repeatedly requested the government to dig a borewell or supply tankers regularly. Otherwise, our village is doomed.” 

State declares 10 districts as water scarcity-hit 
    
Months after fierce clashes over water erupting across Gujarat, the government woke up to the gravity of the crisis and declared 10 districts with 3,918 villages scarcity-hit. 
    
Revenue minister Anandiben Patel nnounced in the state assembly on Tuesday that the government surveyed 69 talukas in 10 districts and found that 939 villages were facing severe water scarcity while 2,979 were partially hit. The affected districts are Kutch, Patan, Banaskantha, Ahmedabad, Rajkot, Jamnagar, Junagadh, Porbandar, Amreli and Bhavnagar. Saurashtra is the worst-hit as out of 3,918 villages, 3,745 are in this region alone. 
    
Patel said that the government was making efforts to provide water to the affected areas and employment under the Mahatma Gandhi National Rural Employee Guarantee Act for farmers whose crops have failed. She also said that government was providing fodder for cattle. Nearly 25 sheep died in Surendranagar district after consuming castor leaves.  

Headed For A Neuro Nightmare

A new study reveals that 35 lakh Indians will suffer from some form of brain disability every year. Are families equipped to deal with them?

There is a silent epidemic sweeping through India, and our society is ill prepared to deal with it. A recent study has estimated that every year about 35 lakh persons will get afflicted by ‘neurological’ disabilities, that is, physical damage of the brain causing loss of normal functioning. This does not include those born with congenital defects of the brain. 
    
Three major contributing factors creating this epidemic are dementia, stroke and traffic accidents, according to a study done by Abhijit Das and his colleagues at the Kessler Foundation Research Center, US, and K Radhakrishnan of the SCT Institute for Medical Sciences and Technology, Thiruvananthapuram. The study was published in the medical journal Neurology. 
    
Currently, it is estimated that about 37 lakh people suffer from dementia in India, and about 3-5 lakh are being added every year. Women, because of their higher life expectancy, feature in this statistic more than men. There are about 7.6 crore Indians over the age of 60 at present, that is, 7 per cent of the country’s population. This number is going to shoot up to 30 crore (17 per cent of the population) by 2051 as modern medicine increases life expectancy. Das and his colleagues estimate that by that year, the number of patients will triple with 16 lakh dementia patients added every year. 
    
The annual incidence of stroke in India is about 145 per 100,000 people with about 15 lakh new cases reported in 2010. The rate has increased 10-fold since 1969-70. Das estimates that in 30-40 per cent cases, long -term disability occurs. So, about 4.5 to 6 lakh people will be added to those with neurological disabilities every year due to stroke. “Stroke cases are increasing because of higher risk factors like hypertension and diabetes, linked to changes of lifestyle,” Das told TOI. 
    
Brain injuries caused by road traffic accidents are increasing at break neck speed. In 2011, the National Crime Records Bureau reported 136,834 deaths due to road traffic accidents, up by a staggering 70 per cent since just a decade ago. Das says that in the absence of head counts, the calculation of traumatic brain injuries resulting from road accidents can only be an estimate, that too on the lower side. He computes that 15-17 lakh people with long-term brain disability from traffic accidents are added every year in India. 
    
Putting all this together, we get a chilling statistic of 35 lakh people with brain disability added to the population every year — about 11,000 per day. 
    
Two types of brain-related disabilities have been deliberately left out by Das and his colleagues. One is epilepsy, which afflicts a staggering 1-1.2 crore according to estimates. Three quarters of these are “not getting suitable treatment” according to Das. They suffer from varying degrees of neurologic disability which may aggravate with lack of treatment. 
    
The other is psychiatric disorders. “I believe the demarcation between psychiatric and neurologic becomes arbitrary when you come to disabilities. Depression is seen in up to 40-60 per cent of people suffering from stroke or traumatic brain injury and is equally harmful. Psychological issues are very common in dementia as well (anxiety, psychosis, hallucination) and can be very disruptive for the family,” explains Das. 
    
India has very limited numbers of neurological and mental health facilities (1 bed per 40,000) and a dearth of mental health professionals (fewer than 3 psychiatrists/neurologists per million). So provision of neurologic and mental health care is very limited. Care-givers and attendants are also not trained to deal with such patients. 
    
But the biggest challenge is the family. Most neurological disability patients will finally come home. They may need help with their daily functions, they may suffer from psychological distress like hallucinations or memory loss, and in most cases they are aware of the degeneration or loss of control, at least in the initial stages. Families are not equipped to deal with all this — they may try to behave as if nothing is wrong, or they may treat the brain’s impairment as a fault of the patient. In poorer families, care giving may become minimal as the family has to pay attention to earning. 
    
And the neurologically impaired person will, because of age, depression or medication, develop other diseases or suffer falls, hugely increasing distress. 
    
This epidemic calls for making neurologic disability a public health priority in India and mandates urgent changes in national health policy, says Das. 

Fall Proof 
Tips to prevent falls in the elderly, a big cause of brain injury and fractures:

Physical activity | Lack of regular exercise results in poor muscle tone, decreased strength, and loss of bone mass and flexibility. All contribute to falls and increase severity of injury. So elderly should do more physical activity. 

Be safe | Reach and bend properly, take time to recover balance when getting up, learn the proper way to fall, and learn how to recover after fall. Also, wear proper fitting shoes with low heels or rubber soles. 

Vision correction | Get regular checkups to detect age-related eye diseases like cataract and glaucoma. 

Environmental modification | At least one-third of all falls in the elderly involve environmental hazards in the home, like tripping over objects left on the floor, slippery floors, lack of grab bars for holding etc. 

Medications | Some medications commonly used in elderly (for hypertension, antidepressants etc) can cause dizziness and increase fall risk. Family and doctors should be aware of this symptom and change medicines if necessary. 

Head Count
DEMENTIA | A gradual decline of brain functions like memory, learning, language, comprehension and judgment due to physical changes in the brain in older people. After the age of 65, prevalence doubles every five years. Alzheimer’s is a type of dementia, accounting for up to 75 per cent of dementia cases. 3-5 lakh new patients every year; 16 lakh by 2051 

STROKE | Loss of brain function when blood flow to any part of the brain is stopped by blood clot(s) or a bursting of blood vessels. The patient can suffer from paralysis of one or more body parts, loss of speech and memory, bladder and bowel control problems. 4.5 to 6 lakh cases every year lead to brain disabilities 

ACCIDENT VICTIMS | 70 per cent of road accidents lead to traumatic brain injury, with long term disability in most cases. 15-17 lakh accident victims every year are left with brain disabilities

Bumps In The Road: India's Industrial Growth Seeks Solid Ground

For a small car, the Nano has traveled quite a bit. Just in October it has moved from Singur, in West Bengal -- where Tata Motors abandoned a production facility two years in the making and gearing for start-up -- to Sanand, in Gujarat. En route, Tata surveyed other sites for the production of its Rs100,000 ($2,000) automobile.

It hasn't been an easy ride. In Andhra Pradesh, the villagers of Seetarampuram, one of the sites offered by the state government, staged a protest, blockading the Bangalore-Mumbai highway for several hours. Like the farmers of Singur whose tactics eventually forced out the Nano, they resisted the industrial project. In Maharashtra, a senior politician publicly declared that the Nano was not wanted because the state was facing an electricity crisis.

The going has been smoother at Sanand, although bumps in the road still exist. The state government thought it was playing safe by allotting the Tatas 1,100 acres belonging to the Anand Agricultural University. But farmers have already petitioned the Gujarat High Court to stop the deal. They say that the British government acquired the land from them in 1902 on a 90-year lease, and that it should have been returned in 1992, but was not. Now that the land's value has risen sharply, they are demanding compensation. Land prices in neighboring areas have gone up from around Rs400,000 (US$8,000) per bigha (an Indian land unit equivalent to about 25,000 square feet) to Rs1.2 million (US$24,000) per bigha.

The Congress opposition in Gujarat, a state ruled by the rightist Bharatiya Janata Party, has hinted at a Singur-style agitation. But the agitation's purpose would not be to drive out the Tatas. It would aim to secure compensation for farmers deprived of their land a century ago.

The farmers, meanwhile, are organizing themselves under banners such as the Rashtriya Kisan Dal. Maharana JaiShiv Sinh Vaghela, the scion of the royal family of Sanand, an erstwhile princely state, has led a delegation of farmers to the state chief minister, Narendra Modi, to demand their share. 

Meanwhile, Anand Agricultural University has asked for equivalent land in other districts of Gujarat as compensation for the 1,100 acres it has surrendered for the Nano.

"The real debate is about the correct compensation price," says Rajesh Chakrabarti, assistant professor of finance at the Hyderabad-based Indian School of Business (ISB). "Once land is acquired, the value of the entire area goes up several times and the people who benefit the most are those who own land just outside the area of the acquired lands." Those initially dispossessed -- no matter how handsomely they may have been compensated -- are invariably left feeling they have been given a raw deal.

Soaring Land Prices
According to estimates by the business magazine Business Today, land prices in Singur rose from US$24,000 per acre to US$120,000 per acre. (They have dropped sharply since the Tata pullout.) Land prices associated with other projects and special economic zones (SEZs) have shown similar increases. 

Among them: the Reliance Haryana SEZ (from US$45,000 to US$200,000 per acre); the Reliance Mumbai SEZ (US$20,000 to US$100,000); the Reliance Maha Mumbai SEZ (US$10,000 to US$100,000); Tata Steel's Kalinganagar project in Orissa (US$6,500 to US$10,000); and the Renault Nissan plant at Oragadam in Tamil Nadu (US$40,000 to US$160,000).

"We follow an 1890s act for land acquisition," Chakrabarti explains. The huge projects that change neighboring lands' value by such huge multiples didn't exist back then. "So there is definitely need to change the laws in such a way that the people who are being evicted get compensated in a fair manner," Chakrabarti says.

The Nano's woes may have grabbed headlines, but land acquisition problems spread across sectors and the entire nation. The government of Uttar Pradesh, led by Bahujan Samaj Party president Kumari Mayawati, recently canceled a deal allotting 190 acres for a railway coach factory in Sonia Gandhi's parliamentary constituency Rai Bareli. Gandhi is the powerful chairwoman of the ruling United Progressive Alliance in Delhi. Mayawati gave in after Gandhi threatened to stage a protest and court arrest. But land has clearly become the currency of political vendetta, too.

Here's a rundown of some other projects running into acquisition problems, for a variety of reasons: 

• Sterlite Industries, the Indian arm of the London-based metals and natural resources conglomerate Vedanta, has the go-ahead from the Supreme Court to mine bauxite in the Niyamgiri hills in the Kalahandi district of Orissa. But the indigenous tribal community treats the area as a shrine. Kumuti Majhi, a tribal leader, has visited London to explain to Vedanta shareholders that digging up Niyamgiri would be equivalent to demolishing St. Paul's Cathedral.
• Navi Mumbai airport, the much-needed lifeline for India's business capital, has stayed on the drawing board for years. The latest objection is from a government department. The Union environment ministry has refused to clear the project because mangrove forests occupy part of the area. The public-sector agency overseeing the project has offered to replant the mangroves -- which occupy just 7.3% of the total area -- elsewhere. But the Delhi bureaucrats are unmoved.
• Close to the proposed Navi Mumbai airport, at the Raigad SEZ, villagers and farmers have voted in a symbolic referendum. Activists claim that the referendum has produced a 95% vote against the project being set up by India's richest industrialist, Reliance Industries chief Mukesh Ambani. The farmers in Raigad, in Maharashtra, simply want a better deal. The project is being delayed while its promoters consider their next steps. Reliance, meanwhile, had appealed to the Bombay High Court opposing the Maharashtra government's decision to hold the referendum. While that judgment is pending, the Maharashtra government has announced that the Raigad referendum was unique and will not be repeated elsewhere in the state.
• In Jharkhand, the world's largest steel company, ArcelorMittal, is facing tribal opposition against a proposed 12-million-ton steel plant. The project needs 11,000 acres, including 2,400 acres for a township. The protests have been building since mid-October, when ArcelorMittal met villagers to hard-sell the plan. (The 700MW Koel-Karo hydroelectric project, which was proposed some 35 years ago in the same areas, battled opposition from villagers for decades before it was abandoned.)
• In West Bengal, the locals of the Chakchaka area in Cooch Behar district have launched an agitation against expansion of the local airport. The airport is critical because Chakchaka (part of a designated backward district) is being projected as a growth center by the West Bengal Industrial Infrastructure Development Corp. The Trinamool Congress, which spearheaded the Singur agitation, has been active here too, accusing the government of forcible land acquisition. (Meanwhile, things are moving smoothly at the Madurai airport in Tamil Nadu, where 614 acres are required for expansion.)

Large-scale Controversy
All projects can pose problems. But the SEZ arena is likely to witness the most controversy because the zones need large amounts of land. The Raigad SEZ, for instance, proposes to cover 25,000 acres; the Nano production facility needs just 1,100. Before the passage of the SEZ Act of 2005, just 19 SEZs functioned in the country. Many of them were barely limping along. Since the act's passage, some 260 new SEZs have been established. Prior to the act, state and central governments and private companies had invested some Rs7,745 crore (US$1.56 billion) in SEZs. From February 2006 to June 2008, an additional Rs73,348 crore (US$14.74 billion) was pumped in, according to Union Ministry of Commerce and Industry data. Some 100,000 jobs have been created. But land issues still bog down many of the zones.

This is proving expensive. According to a recent estimate by the Centre for Monitoring Indian Economy (CMIE), a Mumbai-based data agglomerator and think tank, projects worth a whopping Rs250,000 crore (US$50.23 billion) are encountering hurdles in acquiring land.

"We should not expect the government to allot us land," says Irfan Razack, chairman and managing director of the Bangalore-based Prestige Group, which has interests in real estate and infrastructure. 

"That's where the controversy comes in. Either the government must auction the land at market prices or the developer must have the capacity to buy the land and then go to the government for approvals. The heartburn comes when the government buys land at a subsidized price and allots it to the developer who then goes on to make big money." Razack is talking principally about SEZs. But what he says applies to large industrial projects as well. 

An additional catch is that the government may well subsidize the land it gives to a project like the Nano because such projects are expected to act as catalysts for further investment in the region or state. Tata Motors was supposed to pay US$200,000 a year for the first five years for the Singur land. 

This was to rise to US$2 million a year in the next 10 years, and $4 million a year after that. The government, meanwhile, paid US$24 million to the farmers as compensation. In the short term, the Tatas were required to pay peanuts. This lends itself to accusations of corporate houses profiteering.

Industry appears to be able to pay more. CMIE data show that in the five years ended March 2008, large-market-cap companies spent US$3.33 billion in land acquisition costs. These companies' total fixed capital expenditures were $113.97 billion. Land is just 2.9% of that total, leaving room for growth in what the companies can pay for land. Industrialists privately confess that they are prepared to pay more for land acquisition. But it has the danger of becoming a never-ending spiral.

No model has proved problem-free. Where the state has acquired land, farmers have cried foul over the rates. Where the private sector has tried to go it alone, accusations of intimidation have arisen. Landowners have realized the advantages of holding out. It often boils down to who blinks first. Says Chakrabarti of ISB: "There is the issue of sorting out 'hold-up' lands," where the landowner has asked for an exorbitant price because he knows that the project cannot proceed without his land.

Chakrabarti has a suggestion. "The government should definitely not do the entire acquisition on its own because, as soon as the government gets into the act, a lot of political forces come into play. On the other hand, the private sector cannot do it completely on its own because of the hold-up problem. One model is that the private partner acquires around 70%-80% of the total land required by paying a fair compensation. The remaining [including the hold-ups] can be acquired by the government by paying the same rate as what the private party has paid.

"There are other ways. Let us say the SEZ needs 1,000 acres. But the consortium [of private players and the government] can acquire 1,500 acres and then ration out the extra 500 on a pro-rata basis to those from whom the land has been acquired. That will mean that instead of giving just cash compensation, everyone will have some real estate holding in the developed area, which will enable them to get the appreciation benefits of that land. This, of course, requires multiparty negotiations, and I don't think it is in practice in India." And Chakrabarti points out a catch. "Being agriculturists, the landowners are not trained for anything else," he says. "They need to be provided with training so that their future is protected."

Comprehensive Ground Rules
What is needed is a comprehensive set of ground rules. They may be in the works, albeit belatedly. The government has been working on a replacement for the Land Acquisition Act of 1894 for a couple of years now. The prime minister's office has written to the Ministry of Parliamentary Affairs asking that the processing of bills related to land acquisition be expedited. Three bills are involved: the Rehabilitation and Resettlement Bill, 2007; the Compensatory Afforestation Fund Bill, 2008; and the Land Acquisition (Amendment) Bill, 2007.

The Land Acquisition Bill has just been vetted by the parliamentary standing committee concerned. The prime minister's office wants all this speeded up to get these bills on the statute books before it demits office next year. Sonia Gandhi told a farmers' rally at the end of September that the bills would be piloted through parliament soon.

The standing committee on the Land Acquisition Bill, which submitted its report on October 21, recommended that:

• States should be allowed to acquire 100% of the land required.
• The definition of "public purpose," which allows the state to take over land, should be expanded.
• States should be given more power to decide on use of agricultural land.
• The compensation benchmark should be the highest price paid in the last three years plus 50%.
• The report's submission doesn't necessarily mean that the Land Acquisition Act is on the fast track. 

"We have to examine the report," Raghuvansh Prasad Singh, the Union minister for rural development, told the Delhi-headquartered business daily Business Standard. "But it is not necessary that all the recommendations of the standing committee have to be accepted."

Political analysts in Delhi say the bills may not be passed this parliamentary session. Compensation is a contentious issue. The definition of "public purpose" is another. In Singapore, "public purpose" can mean residential buildings. Not so in India. The Nanos of the future may have some distance to travel to find a home.

What's Holding Back Affordable Housing In India?

When real estate developer Xrbia recently launched a 170-acre housing project in Hinjwadi, a suburb on the outskirts of Pune in Maharashtra, all the 3,400 apartment units were sold within a week. The biggest unit in this apartment complex was 550 square feet and the smallest was close to 250 square feet. The units were priced at Rs. 22 lakh (around US$40,000) and Rs. 9 lakh (US$ 16,000) respectively.

Pointing to the quick sale of these homes, Rajesh Krishnan, managing director and CEO of Brick Eagle, a Mumbai-based land banking firm that acquires land and promotes affordable housing in partnership with developers, says: "In a way, this shows the demand-supply gap [in the affordable housing segment in India]. People physically queue up under the sun to apply for allotment of these houses." He considers affordable housing in India to be homes that cost less than US$40,000.

There are other definitions, too. The ministry of housing and urban poverty alleviation (MHUPA) defines affordable housing for the middle-income group and below as one where the equated monthly installment (EMI) or rent does not exceed 30%-40% of a resident's gross monthly household income. Government officials have also created guidelines for the minimum size of the units. According to the Bangalore-based Value and Budget Housing Corporation (VBHC), which is headed by ex-Citibank employees Jaithirth (Jerry) Rao and P.S. Jayakumar, affordable housing costs within three-and-a-half times a resident's annual household income. "We do have some homes in the Rs. 20 lakh price point, but by and large, most of our homes are within Rs. 6 lakh and Rs. 15 lakh," says Jayakumar. "But the way it is defined generally, even homes between Rs. 25 lakh to Rs. 40 lakh are termed 'affordable'."

Vikram Jain who heads the low-income housing practice at the Monitor Group, a global management consulting and merchant banking firm, notes that typically, when large builders talk of affordable housing in India, the homes are in the Rs. 10 lakh to Rs. 25 lakh price range. "Our definition of low-income houses is those priced between Rs. 5 lakh and Rs. 10 lakh. We think people with a monthly household income of Rs. 12,500 and Rs. 25,000 can afford homes at this price point," says Jain.

Unmet Demand
Whatever the definition of affordable housing, no one disputes that there is a huge shortage in this segment. A report by global property management firm Jones Lang LaSalle (JLL) points out that according to MHUPA, the shortage of urban housing in India at the end of the 10th Five-Year Plan [2002-2007] was around 27.1 million dwellings to serve 66.3 million households. Eighty-eight percent of this shortage was estimated to be in the economically weaker section -- households with monthly per capita expenditure of up to Rs. 3,300. The income group with monthly per capita expenditure of Rs. 3,301 to Rs. 7,300 accounted for 11% of the shortage. "During the 11th Five-Year Plan, [MHUPA] estimated that the total housing requirement in Indian cities (including backlog) by end-2012 will be to the tune of 26.53 million dwelling units [to serve] 75.01 million households," the report notes. "If the current increase in backlog of housing is maintained, a minimum of 30 million additional houses will be required by 2020."

However, a recent report by the technical group on urban housing shortage (2012-2017) by MHUPA estimates that the when the 12th Plan (2012-2017) began this year, the housing shortage was down to 18.78 million. Industry analysts find this drop surprising. They point out that as mentioned in the new report, some of the parameters used to measure the housing shortage for 2012-2017 are in fact different from those used for the earlier projections. For instance, more recent census data has been used for the new report.

"While I am glad that [MHUPA] has taken steps to revise the projections based on more recent data, I don't think there is a genuine drop," says Hariharan Ganesan, assistant vice president for research and real estate intelligence service (REIS) at JLL India. "The drop is only because of the methodology they have used. Just because MHUPA's number [with respect to the housing shortage] has fallen, it does not mean that a good amount of supply has come up in affordable housing. We still have a long way to go."

So why is this demand not being met? Amitabh Kundu, professor at the school of social sciences at the Jawaharlal Nehru University in New Delhi, suggests that one reason is that the "concept of affordable housing has become highly politicized." Kundu, who was a member of the High Level Task Force on Affordable Housing for All constituted by MHUPA, points out that, in the name of affordable housing, "everyone is being included, including the middle and the upper class. People are using the vehicle of affordable housing to open the housing market. But just by facilitating the housing market you are not going to help the poor. We need to have strong enabling policies and very clear targeting."

According to Kundu, the public-private partnership is a good model to cater to the housing needs at the bottom of the pyramid but "not the way it is happening at present." He notes that currently, any builder can approach the government for subsidies in the name of constructing homes for the poor, and while there are stipulations, these are only on paper. "The private sector has to be engaged in a manner that results in proper targeting of the housing stock. You can't have subsidies and then sell in a non-transparent manner."

A New Approach
Traditionally, the big developers in India have focused on the high-end and upper-middle segments of the housing market as these fetch high margins. During the slowdown of 2008-2009, the market for high-priced homes contracted, and many companies saw an opportunity in lower-income segments. That's when the interest around mass "affordable housing" started gaining traction. Leading developers like DLF, Unitech, Tata Housing, Purvankara, Omaxe and others announced new projects in the Rs. 20 lakh per unit category. New players like Rao and Jayakumar also entered the fray. A recent entrant is Mahindra Lifespace, the real estate and infrastructure arm of auto-to-IT conglomerate the Mahindra Group. In addition, there are a host of smaller and regional players, including Foliage in Surat, Kanchan Ganga in Nagpur and Janaadhar in Bangalore.

Ashutosh Limaye, head of research and real estate intelligence services at JLL India, says that this segment is too fragmented to arrive at a reasonable estimate of the total number of players. But he expects it to only grow. "There is huge unmet demand and I don't see that contracting for the next 20 years. This is a sunrise sector and I expect it to increase multiple times."

But is some of the sheen wearing off? Take DLF, the country's largest developer. In 2009, DLF announced that it would build 100,000 flats in the under Rs. 20 lakh per unit category across the major cities. However, in a recent interview with the business daily Economic Times, Rajeev Talwar, executive director at DLF, notes that "such projects are not viable anymore. In 2009 there was a downturn in the global economy ... but now prices have gone up and it does not make much business sense to launch such projects."

Monitor group's Jain does not agree. He feels that it is a mind-set issue, pointing out that under the traditional model, developers buy a huge piece of land in the city and begin constructing at the periphery of this property. They then wait for the price of rest of the land to appreciate before constructing further. "They treat land as an asset; construction is incidental. A developer buys land for say Rs. 100 a square foot, holds on to it for a few years and then sells it for as high as Rs, 10,000 a square foot. That's the kinds of margins possible in this game."

The business model for affordable homes needs to be very different, some experts suggest. Developers need to buy land on the outskirts of the cities because it is cheaper there. More importantly, they need to treat this land as inventory. Cycle times must be short and all the units must be sold and constructed at one go. Further, the units need to be small in size and well designed for efficient use of space.

In this model, the land cost is recovered through down payments and construction is financed by the construction-linked payments made by the customers. Jain says that this is a "risk-free" model. "One can get decent margins of around 20% while the IRR [internal rate of return] can be as high as 40%," he notes. Pointing out that a car company does not wait for the cost of steel to increase so that it can inflate the price of automobiles, Jain suggests that developers need to bring in a manufacturing mindset if they want to be successful in the affordable and low-income housing segment. "Essentially it's a volume game and not a margin game," adds JLL's Limaye. "Developers who don't understand the nuances of this market find the going tough."

Multiple Roadblocks
But there are other issues, too. Take land itself, for instance. It is not easily available and the records are not properly maintained. This makes acquiring land a time consuming, cumbersome and expensive process. The JLL report points out that "With high population density, which is growing due to rapid urbanization, there is a huge demand for land in urban India. The real shortage has been further exacerbated artificially by poorly conceived central, state and municipal regulations. As a result, land prices in India are much higher than intrinsic levels that can support mass real estate developments."

Then there is the protracted process of obtaining a host of government approvals from multiple agencies before construction can begin. Sometimes this can take as long as 18 to 24 months. "This inordinate delay adds to the cost and can make the project unviable," says Jayakumar, VBHC's managing director. Speaking to the Times of India recently, VBHC chairman Rao pushed for a single-window clearance for the affordable housing segment. "The laws of the land are really drafted to encourage the construction of Rs. 1 crore villas or Rs. 80 lakh apartments," Rao said. "They positively discourage homes that cost Rs. 10 lakh to Rs. 15 lakh." Noting that the government already has a single window clearance process for township projects that are spread over 100-plus acres, Limaye adds: "They need to do it for smaller projects, too."

Inadequate infrastructure is another challenge. As mentioned earlier, to keep costs down, developers typically must buy land in peri-urban locations. But roads and the public transportation system in these areas are often not adequately developed, which make the developments unattractive to lower-income citizens who depend largely on public transportation to get around. In some cases, the developer also needs to provide the last mile connectivity for basic amenities like power and water, adding additional costs.

"Land should also come with physical infrastructure, such as access to public transport, sewage treatment lines, and water and power supplies. Without these, no project would be saleable," says Brotin Banerjee, managing director and CEO of Tata Housing. "Right now, we don't have enough serviced land around our cities for affordable housing to pick up," notes Limaye. The increase in cost of construction also impacts this segment the most. According to industry estimates, construction costs account for more than 50% of the total price of affordable units, while in the case of luxury projects it is only around 20%.

At the customer end, obtaining financing is a key constraint. One main reason for this is that this customer segment is employed largely in the unorganized sector and typically lacks documents that show proof of address, salary and other information that is mandatory to avail of loans from the frontline banks. "We find that 75% of our target consumers have regular income but don't have the required documents," notes Monitor's Jain. "Housing finance organizations need to take a fundamentally different approach. They need to assess the customers through field verifications ... and not the documents."

The Way Ahead
Industry analysts and developers believe that if the government takes the initiative to remove the roadblocks, the segment could move to the fast track. They say that if infrastructure is developed outside the city limits, then the market forces will ensure steady supply. And within the city limits, granting of additional floor space index (FSI – the ratio between the built-up area and the plot area) can spur the sector. "The principal issue is that government polices come in the way of affordable housing. If land is available easily and the approvals process is speeded up, the rest of the issues can be managed," says Jayakumar of VBHC.

VBHC currently has two ongoing projects, one each in Bangalore and Chennai. Between the two, it has sold 1,400 units that are 350 square feet to 720 square feet in size at the average price of Rs. 2,200 per square foot. Of these, 400 have been handed over to the buyers. Going forward, the vision is to create a million homes across the country in 10 years. "We believe that it is possible to have a profitable proposition in affordable housing," Jayakumar notes. "But the project and cost management needs to be very strong." He adds that VHBC has invested substantially in technology that helps speed up construction. The company's investors include housing finance company HDFC, Monitor Group and private equity firm Carlyle.

Tata Housing, which earlier focused only on premium homes, launched a subsidiary called Smart Value Homes (SVH) in 2009 to address the middle and low-income segments. SVH has two brands -- Shubh Griha, comprising apartments priced between Rs. 4 lakh and Rs. 10 lakh, and New Haven in the Rs. 12 lakh to Rs. 35 lakh price range. Currently, SVH is developing three townships in Gujarat. "We plan to take both the brands pan-India in the next two to three years," says Brotin.

According to Brotin, economies of scale and developing a standard product have helped his team to keep the costs low. "[We use] a lot of construction [related] technological innovations and specific design strategies, including adequate lighting and ventilation and optimal use of materials. [This has] helped us attain economies of scale [and] keep costs under control. We have also tied up with long-term supply contractors for steel, cement, tiles and other materials used in the business."

Affordable housing projects provide for low-risk, reasonable-return opportunities, notes Shailesh Ghorpade, CEO of Azure Capital Advisors. "Due to huge latent demand, saleability is not an issue for such projects. While margins are lower in affordable housing than in luxury projects, investment returns in terms of IRR are attractive due to faster sales velocity. This is a segment which balances the risk-return profile of any fund's portfolio." For Azure, affordability is based on income levels of the residents in the catchment area. The firm has invested in a residential development project in Dahej in Gujarat. The units in the project are priced at around Rs. 8 lakh.

But Ghorpade does not expect a rush of private equity players to enter this space in the near future. "Structurally speaking, there are normally three entities in any development -- the land owner, the developer and the PE fund. The project should be able to create value for all three players. With the present land costs, lack of government support and a limit on sales realization, there is not enough value created for the PE fund. The second issue is scale. Affordable projects are viable if the scale is large. For example, 800 to 1,000 units make a critical mass. However, scale also means increased complexity in execution, which can erode the already thin margins." Pointing out that affordable housing is more susceptible to cost overruns, which in turn can make the projects unviable, Ghorpade adds: "PE players need to proactively participate in monitoring the development of such projects ensuring cost control and project timelines. If done so, this segment provides attractive investment opportunities especially considering the risk return spectrum."

So what is the way ahead for affordable housing in India? "Affordable housing is a financially viable proposition," says Limaye of JLL. "There is so much demand that as long as the pricing is good, you are bound to sell at a healthy absorption rate. But for this to happen, all stakeholders need to have a common vision and work toward it."

Gruh Finance: Serving The Underserved In Housing Sector

The food at Narayandas Futarmal’s roadside eatery at Vasna, Ahmedabad, in the western Indian state of Gujarat, is very popular with the locals. Located right outside the state government’s sprawling agricultural produce market, the eatery, run by 67-year-old Futarmal and his two sons, ages 28 and 23, serves puris (fried whole-wheat tortillas) with potato curry and lentil cutlets to a steady stream of farmers and wholesale dealers for around 25 U.S. cents a plate. For Futarmal’s family of six, which currently resides in a rented 200 square-foot home, the eatery fetches a monthly income of around US$1,100.

In September, Futarmal and his sons applied for a housing loan at Gruh Finance to buy a 450 square-foot home priced at US$14,396. They were not sure if they would be granted the loan. Typically, mortgages require a plethora of financial documentation, including proof of income. The Futarmals had no tax credentials to back them. But at Gruh Finance, they were able to secure a loan of US$8,373 at 12.7% interest per annum. The family dipped into its savings for the upfront down payment of US$5,905. With a 20-year repayment tenure, Futarmal has to pay an equated monthly installment (EMI) of US$96. “It’s a humbling experience every time we give [someone] a cheque [towards buying a home],” says Sudhin Choksey, Gruh’s managing director.

Gruh Finance, formerly known as the Gujarat Rural Housing Finance Corporation, is India’s first specialized rural mortgage entity for the underserved and informal sector. It was conceived by H.T. Parekh, who set up the Housing Development Finance Corporation (HDFC), India’s leading mortgage finance firm. Along with IFC Washington and the Aga Khan Fund for Economic Development (AKFED), HDFC set up Gruh in 1986 with a clear mandate to provide mortgage finance to the economically weaker sections in rural India.

Over the years, while Gruh has expanded its customer base, it draws a large number of homebuyers from the bottom of the pyramid. Around 30% of Gruh’s loan disbursal is to those in the informal sector in both rural and urban India. The salaried class, professionals and small businessmen constitute the rest. “Gruh has cracked the model of providing loans to low-end customers. It provides the fuel for driving the low-income housing development,” notes Ashish Karamchandani, partner at the Monitor Group, a global management consulting and merchant banking firm.

A Role Model
According to industry professionals, Gruh has redefined personal selling. Rajnish Dhall, managing director and CEO of Micro Housing Finance Corporation, a Mumbai-based new entrant in which Monitor has a stake, says that his organization is modeling itself on Gruh. “Unlike many players who are purely business driven and lack passion, Gruh has an element of empathy. We admire their track record and their [financial] numbers speak for themselves,” Dhall notes.

Taral Bakeri, partner at Ahmedabad-based Santosh Associates, says his firm has built 3,000 units ranging from 500 to 600 square-feet since 1995 for the low-income group. According to Bakeri, his customers seek housing mortgage from State Bank of India, Gruh and HDFC. “Gruh is the only finance company which gives loans to [our] buyers with no income proof. This is very helpful for us,” Bakeri adds.

It hasn’t been an easy journey for Gruh, though. When the organization first approached rural home-buyers, it had to work hard at changing the mindset of this debt-averse group, grapple with unclear land titles and wean people away from the local moneylender. The organization’s staff also had to understand the intricacies of every self-employed customer’s livelihood and devise new models of identifying the borrowers’ income and repayment threshold. In the case of Futarmal for instance, Gruh appraised the family based on their everyday living habits, their bills for staples like sugar and oil bought for the eatery, the consistency of daily sales, the existence of an active bank account, the ability to provide a guarantor for the mortgage and their savings. Another plus for the Futarmals was that the loan was attached to all three male members of the family.

At present, financing homes in rural areas with a population of around 50,000 accounts for 48% of Gruh’s business. The rest comes from financing homes in urban towns. Gruh’s current asset portfolio is US$887 million, with loan disbursements doubling in the past five years from US$119 million in 2008 to US$280 million in the fiscal year ending March 2012. During the same period, operating profit rose from US$1.18 million to US$30 million, while the cost-to income ratio is down from 22% to 20%.

“Gruh’s loan asset quality has improved substantially,” says Gruh chairman Keki Mistry. Adds Choksey, “We’ve taken good credit risk and our recovery efficiency is better.” The company’s gross non-performing assets are down to 0.52% compared to 5% in the late 1990s. This is due to a host of reasons. For instance, demand for housing is on the rise, and property prices in both rural and urban India have gone up. In turn, this has impacted the ticket size of Gruh’s mortgages and has brought in new categories of customers. “Our customer may not necessarily be low-end. He could be a shopkeeper who is able to provide income proof,” Mistry notes.

With two-thirds of India’s 1.2 billion population residing in the hinterland, this is a huge market for mortgage players. Industry experts say that India’s mortgage loan-to-GDP ratio, which is in the range of 8% to 9%, is low compared to other Asian countries like China (20%), Hong Kong (43%) and Singapore (54%). According to a 2010 Monitor inclusive markets report, the market for rural mortgages in India in the US$5,660 to US$18,867 band comprises more than 20 million households and is a US$188 billion market. Another report from the Boston Consulting Group and the Federation of Indian Chambers of Commerce & Industry estimates that the total home mortgage market in India would increase from around US$110 billion in March 2011 to a whopping US$800 billion by 2020.

Gearing Up for Growth
Gruh is gearing up to take control of a bigger slice of this growing market. It has expanded its business to semi-urban and urban destinations outside Gujarat and is now present in several other states including Maharashtra, Rajasthan, Chhattisgarh, Karnataka and Tamil Nadu. “We want to penetrate deeper and it is easy to get into adjoining states,” says Choksey. He refers to the expansion as a “military operation, which combs the ground”. In Mumbai, for instance, the company reaches out to people on the outskirts. This strategy is two-pronged: Not only is it easy to access customers away from the city center, the price of real estate here is also less expensive, thus connecting the organization with new builders. “As the builders grow, so do we,” notes Suresh Iyer, head of operations at Gruh.

This expansion has further increased the diversity of Gruh’s customers. From only farmers earlier, the organization’s borrowers now include factory workers, small businessmen, roadside cobblers and tea vendors. These consumers have a lot in common: Many of them earlier relied on local moneylenders and ubiquitous non-banking finance companies (NBFCs) for their funding needs and are families from lower and middle-income households. Many of the customers are self-employed, earn in cash and have irregular incomes. This makes it tough for financiers to gauge their credit-worthiness.

Accessing funds, too, hasn’t been easy for Gruh. To address this issue, Gruh hit the bourse in 1992. As a result, the focus shifted to return on investment. In a bid to scale up operations, Gruh diversified into consumer finance. It also started providing construction funds to some real estate developers. The moves proved costly. The real estate crash in the mid-1990s very nearly sounded the death knell for Gruh with an outstanding of US$849 million.

At this time, Choksey, who was then a general manager at Gruh, was appointed managing director with the mandate to clean up the portfolio. He changed the delivery mechanism, stopped lending to developers and went about recovering some bad loans. “We created mortgage in lieu of receivables,” says Choksey. Gruh acquired land from builders who had defaulted, leveled it and sold it in lots. In some cases, the company even acquired flats and disposed them off. Under Choksey, Gruh was soon back on track.

New Challenges Ahead
But now there are pressures of a different kind. To boost the economy, one of the sectors that the government is focusing on is low-income housing. In the 2012-2013 Budget, the government has given permission to public and private enterprises for external commercial borrowings for low-cost affordable housing projects in order to expand the sector. In August, the National Housing Bank (NHB), the nodal agency for housing finance in India, slashed the interest rate by 1% on refinance to banks and HFCs on loans up to US$9,434 to boost affordable finance for low income homes in urban areas. On October 31, the NHB launched the Credit Risk Guarantee Fund Scheme to trigger the credit markets with loans up to US$9,300 for providing housing to the economically weaker section of people. “This is like insurance for housing finance companies,” notes Gruh’s Iyer. All these measures are likely to see banks and housing finance companies lend more to the informal sector.

With access to funds becoming easier and demand for housing increasing, corporate players are also making a beeline for the housing sector. Monitor’s Karamchandani says there are 40 developers in the low-income housing segment. Firms like Tata Housing and Value and Budget Housing Corporation (VHBC) set up by Bangalore-based Jerry Rao have launched homes in the US$13,207 to US$ 9,432 price bracket. Mahindra Rural Housing Finance, which is part of the auto-to-IT conglomerate the Mahindra Group, is providing housing mortgages to its automobile customers. Down south, the Muragappa Group’s asset management arm -- Cholamandalam Investment -- has recently announced plans to enter the segment.

The increased activity in the housing finance arena means both opportunities and increased competition for Gruh. “The market is large, housing demand is universal and the asset is immovable, providing big opportunities to players,” according to Rajesh Chakrabarti, assistant professor of finance at the Indian School of Business. Educationist and management consultant Prafull Anubhai Shah, a director at Gruh, says that the company is well entrenched in small and medium towns. “Over the years, [we] have established a great network and have experienced staff with an enviable record of providing customer-friendly service. [So] we do not anticipate any adverse impact due to competition,” he notes. But Gruh, he adds, will have to “innovate new products, maintain the same level of service with far-flung offices and larger staff and build well-knit management teams”.

Others like Amitabh Kundu, professor at the school of social sciences at the New Delhi-based Jawaharlal Nehru University, are not so gung-ho. “Many households with low levels of earning would default due to lack of affordability and fluctuations in income,” he cautions. Vikram Jain, who leads the low-income housing practice at Monitor Inclusive Markets doesn’t agree. According to Jain, these customers are not risky. “Having put down a large down payment on a home, the customers are keen to pay the installments on time,” he says. Jain adds a caveat though: Housing finance companies face developer risk, as they would be stuck with a large portfolio of mortgages where projects are delayed or even stalled. Even as Gruh lends only to home buyers and not developers, increasing competition will put pressure on margins -- Gruh’s average spread is 2.5% to 3%.

But Choksey is confident and believes that Gruh has a head-start with its understanding of the income patterns and the needs of rural consumers. Adds Shah: “In the service industry, business transparency, trust and empathy play a key role. This is Gruh’s distinct competitive advantage.”