Working Paper - Raising Private Sector Capital For Affordable Housing

Working Paper on
Raising Private Sector Capital for
AFFORDABLE
HOUSING
TITLE Working Paper on Raising Private Sector Capital for Affordable Housing
YEAR January, 2016
Nitin Sukh, YES Institute (YI), YES BANK

AUTHORS Swati Sharma, YES Institute (YI), YES BANK
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Contents
Executive Summary 7
01. Introduction 9
1.1 Real Estate Sector: Economic Impact 11
1.2 Real Estate: Social Impact 12
02. Policy Landscape 13
2.1 Housing for All by 2022 15
2.2 Real Estate Regulation Bill – Proposed 15
2.3 Real-estate and investment trusts (REIT)s 16
2.4 Urban Development Policy: Land and Zoning Regulations 16
03. Housing Finance 17
3.1 Housing for All Mission 18
3.2 Pension Funds 18
04. Innovative Housing Models 21
4.1 Equity Model for Affordable Housing 22
4.2 Leveraging Infrastructure Investment 25
4.3 Social Housing – REIT 26
4.4 Research and Development 26
05. Way Forward 28
06 References 29
Executive Summary
While affordable housing has been pre-dominantly led by successive
Indian governments, developing housing for all must also be considered a
serious business opportunity driven by organic market forces. The demand
for affordable housing clearly exists; however, the private sector cannot
develop affordable housing given the high cost of capital, high cost of land,
difficulties in land acquisition, expensive construction techniques, volatile
cost of building material, corruption and scant regulation of the sector.
The ambition of this paper is to highlight interesting financing models

currently in play in India and abroad, given the existing scenario of the
affordable housing ecosystem, and also aims to seek inputs from
stakeholders along the value chain on how to overcome bottlenecks and fill
policy gaps to accelerate private sector’s autonomous participation. Inputs
from stakeholders will be sought through surveys and interviews post the
‘‘Livable Habitat and Sustainable Urban Agenda’ Summit in January 2015.
Therefore, the YES Institute in collaboration with IIT-KGP takes this study
forward with the belief that the private sector real estate market can
develop housing for the bottom of the pyramid.
Working Paper on Raising Private Sector Capital for Affordable Housing | 7

1
Introduction
1 Introduction
Housing, defined as a basic need of civilized society, will play a significant role in building up a ‘smart
India’ and secure the country’s economic growth. The Universal Declaration of Human Rights and the 1966
International Covenant on Economic, Social and Cultural Rights recognizes adequate housing as a part of
the right to an adequate standard of living.
The Universal Declaration of Human Rights states that:
“Everyone has the right to a standard of living adequate for the health and well-being of himself and of his
family, including food, clothing, housing and medical care and necessary social services, and the right to
security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood
in circumstances beyond his control”.
By 2030, nearly 590 million people will reside in Indian cities. Supply of formal affordable housing has
constantly lagged behind household
Figure 1: Housing Shortage
projections. The Technical Group on Urban
Housing Shortage (2012-17) has pegged Housing Shortage (Mn)
the total housing shortage at 18.78 million
dwelling units of which over 96% pertain to LIG, 7.41,
the Economically Weaker Sections (EWS) 40%
and Low Income Group (LIG) categories EWS,
(Fig. 1)1. 10.55,
56%
The National Housing Bank (NHB) has
estimated a requirement of approximately
INR 8.5 Lakh crore for construction of MIG &
Above ,
affordable housing in slum and non-slum 0.82, 4%
areas.
Source: Report on the Technical Group on Urban Housing Shortage (TG-12)
1
Technical Group on Urban Housing Shortage (2012-17)
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Table 1: Investment Estimates for Affordable Housing
Slum Area Non-slum Total Unit Cost Total Cost
Units
(Million) Area (Million) (Million) (INR) (INR crore)
Need for fresh housing units 10.61 5.68 16.29 3,50,000 5,70,150
Incremental housing to 4.78 7.89 12.27 60,000 76,020
address congestion
Provision of infrastructure for 10.61 5.68 10.61 1,20,000 1,20,320
new housing units
Upgradation of infrastructure 10.58 0 10.85 70,000 70,000
in existing slums
Source: National Housing Bank
Since overall Government resources are limited, it is essential that administrative structures and policy
frameworks facilitate and encourage resource mobilization from the market and private sector through
lucrative policies and bond markets.
The housing shortage is exacerbated by lack of basic infrastructure. Studies conducted by the Ministry
of Rural Development and the Ministry of Housing and Urban Poverty Alleviation estimated that almost a
quarter of Indian households lack adequate housing facility.
The growth of housing sector is significantly hampered due to structural issues like:
99 High gestation period of housing projects,
99 Limited and expensive capital,
99 Spiraling land and construction cost,
99 High fees and taxes,
99 Unfavorable development norms and lack of affordability housing for the Economically Weaker Section
(EWS) and Lower Income Group (LIG) households.
The private sector developers predominantly target luxury, high and upper middle segments which fetch
higher returns as compared to low income housing.
The launch of Housing for All by 2022, Atal Mission for Rejuvenation and Urban Transformation (AMRUT)
and Smart City mission is intended to give the necessary fillip to develop an ‘Inclusive Urban India’. As per
estimates, the vision for “Housing for All by 2022,’ would require development of about 11 crore houses
with investments of over USD 2 trillion2.
1.1 Real Estate Sector: Economic Impact
The real estate sector comprising housing, retail, hospitality, health and education is of strategic economic
importance to the Indian economy, as it is the second largest employment generator after agriculture and
contributes about 6% to India’s GDP3. The growth in this sector has been pushed by economic growth and
the demand for office space as well as urban and semi-urban accommodations. The sector with its backward
and forward linkages to 250 ancillary industries has the potential to generate significant employment
opportunities and provide a quantum leap to the ‘Make in India’ mantra raised by the government.
2
KPMG, NAREDCO Funding the Vision- “Housing for All by 2022’
3
CREDAI

As the National Council of Applied Economic Research (NCAER) study “Impact of Investments in the
Housing Sector on GDP and Employment in the Indian Economy,” points out, an increase of 1 unit in the
final demand of housing translates into induced cumulative revenues of 5.11 units in the economy. For
every lakh invested in the housing sector, 2.69 new jobs (2.65 informal and 0.4 formal) are created in the
economy. With induced effect, the number of jobs created would be 4.06 (3.95 informal and 0.11 formal).
For every investment in the housing sector, the household income increases by INR 0.41. With induced
effect, this is estimated to be INR 0.76. The Indian real estate market size is expected to touch US$ 180
billion by 2020. Accelerating growth in the sector through policy interventions can help turn-around the
sluggish GDP growth witnessed in the last few years.
Figure 2: Multiplier Effect of Real Estate Sector
Induced Impact
• Increased spending
capacity and demand
for goods and services,
Indirect Impact
taxes
• Jobs ad business from • better living conditions,
Direct impact suppliers to better productivity
• Accounts for 9% of the construction business
• Increased investment
GDP • Linkages with 250 in business
• Infrastructure creation industries
• For every rupee
• Employment • Ranks 3rd in terms of invested in housing, an
opportunity total linkage effect with additional INR 0.78
other sectors gets added to national
GDP
Source: YES Institute, YES BANK
1.2 Real Estate: Social Impact

Figure 3: Affordable Housing and
Impetus on planned urban development with focus on Distance from City Center
affordable housing can address multiple issues like rapid
and unplanned urbanization, slums, cleanliness, and drive
inclusive growth.
From a macro perspective, high cost of land within

Indian cities renders housing unaffordable for lower
income groups and economically weaker sections. This
has typically been the trend in other countries as well,
developing and developed. Low income housing projects
are pushed to the fringes which often disconnect poor
from their place of employment, discouraging them
from shifting residence from slums and unauthorized
colonies (Fig. 3). This can be addressed through mixed-
use development in strategic areas.
Source: JLL
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2
Policy Landscape

2 Policy Landscape
Defining Affordability
Housing has multifarious characteristics under its ambit such as cost, size, location and legal rights,
each influencing the deliverables, making it difficult to define affordability. According to the Task Force on
Affordable Housing set up by the Ministry of Housing and Urban Poverty Alleviation (MHUPA) in 2008,
housing affordability for various segments, categorized by the size of dwelling unit is derived from household
income.
Table 2: Affordable Housing and Income Categories
Size EMI/Rent
Economically weaker section Minimum of 300sqft super built-up area

(EWS) Minimum of 269sqft (25sqm) carpet area
Low Income Group (LIG) Minimum of 500sqft super built-up area Not exceeding 30-40% of
Maximum of 517sqft (25sqm) carpet area gross monthly income of
buyer
Middle Income Group (MIG) 600-1,200sqft super built-up area
Maximum of 861sqft (80sqm) carpet area
Source: Task Force on Affordable Housing set up by the Ministry of Housing and Urban Poverty Alleviation (MHUPA)
Affordability is correlated to income and property prices. Several countries including India such as US
and Canada define affordability in relation to household income. If the monthly carrying cost of a
dwelling unit exceeds 30–40% of household income, the housing is considered unaffordable4.
1
http://www.cityvision.edu/ / National Housing Board
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2.1 Housing for All by 2022
The Housing for All Mission comprises the following components:
a) Slum rehabilitation of Slum Dwellers with participation of private developers using land as a resource;
b) Promotion of affordable housing for weaker section through credit linked subsidy;
c) Affordable housing in partnership with Public & Private sectors and
d) Subsidy for beneficiary-led individual house construction or enhancement.
Embodying the spirit of cooperative federalism, the Mission will provide flexibility to States for choosing
best options amongst four verticals of the Mission to meet the demand of housing in their states. The carpet
area of houses under this mission is up to 30 square meters. Each state is however; free to determine the
size of the house and other facilities.
The policy provides comprehensive implementation methodology:
Figure 4: Schemes under Housing for All by 2022

Affordable Housing Subsidy for Beneficiary
In Situ Slum Affordable Housing in
through Credit Linked led individual house
Redevelopment Partnership
Subsidy construction
99 Using land as a 99 Interest subvention 99 With private sector 99 For individuals of

resource subsidy for EWS and or public sector EWS category
LIG for new house or including parastatal requiring individual
99 With private
incremental housing agencies house
participation
99 EWS: Annual 99 Central assistance 99 State to prepare a
99 Extra FSI/TDR/FAR
household income per EWS house in separate project for
if required to make
up to INR 3 lakh affordable housing such beneficiaries
projects financially
and house size upto projects where
viable 99 No isolated/
30sqm 35% of constructed
splintered
houses are for EWS
99 LIG: Annual beneficiary to be
category
household income covered
between INR 3-6
lakhs and house size
upto 60sqm
Source: Housing for All by 2022
An interesting component of the program is the Technology Sub-Mission that looks at the following aspects:
a) Design & Planning
b) Innovative technologies & materials
c) Green buildings using natural resources and
d) Earthquake and other disaster resistant technologies and designs.
2.2 Real Estate Regulation Bill – Proposed
The proposed Real Estate Regulation Bill pending in Parliament is expected to lay down a much needed
institutional framework - mandatory registration, state level regulatory bodies, Appellate Tribunals and
standardization of practices. By ensuring transparency and streamlining of real estate activities including

registration, statutory approvals and curbing delays in delivery, the bill can reinvigorate trust of the average
consumer in the system.
While the Bill adequately addresses developer centric issues, there is immense scope for streamlining
the approvals required for a housing project and is the most pressing issue cited by developers for project
delays. Introducing an IT enabled interface between the Government, developers and consumer in line with
the e-governance and digital India would go a long way in actualizing a robust institutional framework for the
real estate sector and housing in particular.
2.3 Real-estate and investment trusts (REIT)s
Real Estate Investment Trusts will help provide a new source of funding for developers and investors
in infrastructure projects. The instrument can provide an alternate source of income for developers and
address liquidity concerns plaguing the real estate sector. The tax ‘pass through’ status accorded to REITs
also present an attractive avenue of investment for investors.
Figure 5: REIT structure
Sponsor Other unit holder

Not less than 25% Atlest 25%
for 3 years and not
less than 15% at all times Trustee
Banks Real Estate Investment Trust

Leverage upto 25% without
credit rating and >25% but Real Estate Investment
<50% with credit rating & Shares,
Investment Management Company
unit holders approval Shareholder
Management
Loans
Agreement
Promoters Other Investors
RE Dev Co
Property Co/ Atlesst 51%
Property sold by
Dev Co SPV1 SPV2 SPV3
Facilities Manager Asset 1 Asset 2 Asset 3 Asset 4

Management
of facilities on
an arms length
basis
Source: Brave New World for India’s Real Estate, EY, 2013
There is an urgent need to introduce the REITs framework to the housing sector as well.
2.4 Urban Development Policy: Land and Zoning Regulations

India’s land and zoning regulations are mostly outdated and the limited institutional capacity at the level of
urban local bodies due to various reasons including very limited own financial resources present the biggest
challenge in improving provision of social services and amenities like housing and other social services.
Some of the key impediments in regulations include:
99 Complicated procedures for real estate and infrastructure development restrict the entry of private
players
99 Rigid urban land supply policy including F.A.R ratio
99 Insufficient spatial information, poor management of land resources and lack of transparency
99 Limited linkages between spatial and financial planning

3
Housing Finance

3 Housing Finance
3.1 Housing for All Mission
The following provisions have been made under the Housing for All Mission:
99 Central grant of INR 1 lakh per house, on an average, will be available under the slum rehabilitation
programme. A State Government would have flexibility in deploying this slum rehabilitation grant to
any slum rehabilitation project taken for development using land as a resource for providing houses
to slum dwellers.
99 Under the Credit Linked Interest Subsidy component, interest subsidy of 6.5% on housing loans
availed up to a tenure of 15 years will be provided to EWS/LIG categories. The NPV of the interest
subsidy will be calculated at a discount rate of 9% and subsidy will be available on a loan of INR 6
lakhs.
99 Central assistance at the rate of INR1.5 lakhs per house for EWS category will be provided under the
Affordable Housing in Partnership and Beneficiary-led individual house construction or enhancement.
State Government or their para-statals like Housing Boards can take up project of affordable housing
to avail the Central Government grant.
3.2 Pension Funds

Another way to reduce costs for borrowers is to use collective savings to reduce mortgage size and to
fund low-interest loans. The savings build up at relatively low interest rates and are used to fund low-rate
mortgages. Provident funds use mandatory savings such as pensions to fund housing loans, including
for low-income households. While based on solidarity principles that may seem alien to the govt policies,
this allows creative use of surplus funds, though the Government may simply offset the fund with lower
subsidy. However, this may be a more acceptable way voluntarily to unlock housing association long-term
‘free’ reserves.
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Model of private renting with a discounted long-lease rent: This addresses work incentives and augments
affordable supply by binding private landlords into long leases and sub-market rents. This model has grown
quickly in Ireland and may act to limit future social security expenditure.
3.3 Mortgage Backed Securitization Market (MBSM)

A type of asset backed security that is secured by a mortgage or collection of mortgages. These securities
must also be grouped in one of the top ratings as determined by a accredited credit rating agency, and usually
pay periodic payments that are similar to coupon payments. This off-balance sheet funding (securitization)
drive down the cost of funding. Yet it is not able to grow in India due to market inefficiency, which itself is a
creation of inefficiency of the tax and regulatory system.

4
Innovative
Housing Models
4 Innovative Housing Models
4.1 Equity Model for Affordable Housing
Model I: Social Equity Model for Affordable Housing
Collaborative community models could be established to systematically bring local citizens into a partnership
framework. The social equity model encourages citizens to contribute their land for development of
affordable housing with government providing basic services (Fig.7).
Figure 6: Social Equity Model for Affordable Housing
• Knowledge Based • Facilitators

Partnership NGO(s) • Synergetic Partnerships
• Advisory
• Knowledge Entrepreneur/
partnership Company
• Contribute Resources in form

• Capital & Overall of Land and Labor
• Risk Capital
Management, • Structured Participation in
• Private Sector Efficiency
• Return on Capital Management (cooperatives/ • Affordable Housing
• Support and inputs
• Sustainable environment producer) • Employment
• Development &
• Livelihood
Implementation
• Govt facilitation
Financiers /
• Fiscal Concessions/ Social Equity Investors
investment.
• Structuring, Social Equity • Showcase/ replication of
Government/ Inter government based inclusive devt. Established model.
Organization • Advisory , PPP • Platform for future
implementation, private knowledge initiatives
participation.
• Platform for Voice

Knowledge Bank • Knowledge based inputs
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Many variations of this model including the Delhi Land Pooling Policy can augment the supply of affordable
housing. Figure 8 provides a glimpse of the policy.
Figure 7: Delhi Land Pooling Policy
Category 1 Category 2
Land Owners with land above 20 hectares Land Owners with land above 20 hectares
Developer Entity with land above 20 hectares Developer Entity with land above 20 hectares
Land Use
Land Use Comm 3%
Comm 5% Land PSP 2%
Land
Land Retained returned
PSP 2% returned to DE,
by DDA
to DE 40% Land 48%
60% Residential
Retained 43%
by DDA,
Residential 52%
53%
Creation of Infrastructure +
PSP areas
Source: Delhi Land Pooling Policy
Model II: Community Land Trust (CLT) Model

The Community Land Trust model ensures permanent stewardship of land for community benefit and
provision of affordable housing. It offers solution to issues pertaining to sale of subsidized unit allotted to
lower income group with increase in price (Fig. 8).

Figure 8 Community Land Trust Model
Source: Community-Wealth.org

4.2 Leveraging Infrastructure Investment
Compared to current ‘zonal’ development trends, transit oriented development (TOD) allows for greater
access to mix of land uses - residential, office, shopping, civic, and entertainment, within easy walking
distance of a transit station. TOD encourages high density settlement and modal shift to mass transit
systems, thereby reducing emissions and improving the overall efficiency of cities.
With metro cities now planning for such interventions, it is essential to analyze site attributes and urban
grain to plan future character and built-form typology of the area. The blueprint for city development should
focus on creating housing and transportation options that equitably cater to the needs of all sections of the
society. Gains from transit oriented development can further be channelized towards affordable housing
and infra development.
Table 3: Equitable Transit Oriented Development
Transit Oriented Development
Case 1
Bay Area Transit Oriented Affordable Housing (TOAH) Fund, California
The Bay Area Transit Oriented Affordable Housing (TOAH) Fund, launched in 2011, provides financing
for equitable transit-oriented development (TOD) across the nine-county Bay Area by catalyzing the
development of affordable housing, community services, fresh foods markets and other neighborhood
assets. The USD 50 million TOAH Fund, provides developers affordable capital to purchase or improve
available property near transit lines for the development of affordable housing, retail space and other
critical services, such as child care centers and health clinics.
The TOAH Fund was made possible through a USD 10 million investment from the Metropolitan
Transportation Commission (MTC), a Bay Area regional transportation and planning body. The Low
Income Investment Fund is the Fund Manager and an originating lender, along with four other leading
CDFIs (Corporation for Supportive Housing, Enterprise Community Loan Fund, LISC, and the Northern
California Community Loan Fund). Private capital for the TOAH Fund was provided by Citi Community
Capital and Morgan Stanley, while program related investments were provided by philanthropies,
including the Ford Foundation, Living Cities, and The San Francisco Foundation. The Silicon Valley
Community Foundation also covered startup expenses.
Case 2
Hong Kong Metro – Infrastructure and Real Estate Financing Model
Government has granted ‘Land Development Rights’ to Mass Transit Railway (MTR), for which MTR
pays premium to the Government. MTR develops the real estate along the metro line to provide
housing and commercial real estate. Value enhancement in property developed by MTR in partnership
with the private sector to is used to finance new rail infrastructure. High density settlement around
transit lines also encourages transit ridership. The process helps in maximizing the land development
potential and ensures sustainable development. The returns from the value enhancement model can
be successfully employed to create affordable housing.

4.3 Social Housing – REIT
In this arrangement, the Government, which acts as an= impact investor, agrees to extend ‘Impact Payment’
for Affordable housing with an underwriting, that when the affordable housing is able to achieve the pre-
determined social impact, which in this case is providing basic living standards for all, the government shall
top up returns enabling the investor to earn a risk-adjusted commercial return.
An extension of ‘pay for success’ model, the Social REIT is a win-win situation, wherein social businesses
offering affordable housing are able to earn commercial risk adjusted return and government is able to
channelize funds in this direction. The risk of lower yields and repayment, however, rest with the impact
investor.
Figure 9: Social REIT
Social Investors
‘Impact payment’ tops up Social return to

commercial return
Investment in
Units
Impact Payment Government
Social Return
Management Fee
REIT Management Trustee / Govt
Social Housing REIT
Company Management Services Appointed
Trustee fees
Ownership of
assets
Net property
Income (from rental or
affordable housing)
Management Services
Company (maintenance of
properties) REIT Assets (properties)
Industries can bolster affordable housing initiatives by providing support under the corporate social
responsibility (CSR) initiatives (slum re-development or EWS housing), extending soft loans, providing
housing to the employees, thereby promoting the concept of walk to work. Apart from bridging the housing
gap, the initiatives can tremendously enhance labor productivity and improve the effectiveness of ‘Make
in India’.
4.4 Research and Development
The Technology Mission under the Housing for All by 2022 focuses on adoption of innovative, cost effective
and green technologies for the housing sector. Development of low-cost prefab housing and collapsible
shelter for the poor requires further research. Several models have been developed such as the IKEA Flat
Pack Shelter. India needs to further evolve models for its geo-climatic diversity.

IKEA Flat Pack Shelter Figure 10: IKEA Solar-Powered Flat Pack Shelter
The IKEA flat pack, easy to transport FEATURES & MATERIALS

shelter was developed in collaboration ROOF AND WALLS SHADE-NET
Made of lightweight semi-hard Metallic fabric deflects
between the IKEA Foundation and the plastic designed to last at least heat during day and
three years - compared to six retains it at night
United Nations High Commissioner months for conventional
refugee tent
for Refugees (UNCHR). True to IKEA’s
expertise in flat packing and assembly,
this 188-square foot emergency shelter
is easy to assemble and can be built in
just four hours. It is twice the size of a
regulation refugee tent and can sleep five SHADE-NET
Powers built-in lamp
people comfortably. The shelter comes and USB port
with solar-powered roofing, eliminating
the need for candles or kerosene lamps,
which can pose a danger of fire. Plus,
the roof deflects solar heat gain by 70%,
keeping the interior cool during hot Lamp
weather.
Curtains
Prefab Construction
Instacon- Instant Construction, Mohali, Windows
Punjab
Roof and wall
Utilizing pre-fabricated material, 10 storey panels snap onto
Plastic metal frame and
building was erected over a period of sheet secured by plastic
METAL FRAME
Held together by
flooring fasteners
two days in Mohali, Punjab. Time taken connectors & wires
for Pre-fabrication and laying concrete

foundation was 2 months, fittings
adding another month. The building is
Eco-friendly designed to consume less
power. It is also certified as earthquake
shock-proof by Center for Industrial and
Scientific Research (CISR).
The Building and other Construction Workers Welfare Cess Act, 1998 makes provision for the levy and
collection of cess at 1% of the cost of construction incurred by employers, with a view to augmenting
the resources of the Building and Other Construction workers’ Welfare Boards constituted under the
Act. Around Rs 27,000 crore collected through cess remains unspent with the state governments. This
amount can be channelized towards the development of foldable houses to provide adequate housing for
the construction workers in particular and urban poor in general. These models can be further evolved to
suit the various geo-climatic zones of the country and also incorporate disaster resistant and environment
friendly technologies.

5 Way Forward
The government’s key urban mission’s promise is a significant piece of creating an overall social security
net for the population. Development of 2-2.5 million houses a year is required to realize this vision by 2022.
This also presents a huge commercial opportunity for the industry and the sector can trigger multiplier
effect. The present landscape presents execution risks to fulfill the ambitious targets which would require
coherent policy responses:
99 Regulatory and policy frameworks have to be adjusted to speed up the process of land acquisition
and resettlement. The Government must provide fair and consistent land value data for rating,
compensation and taxation purposes. This is a small but crucial step before undertaking the long term
vision of building 100 SMART cities.
99 Clarify and organize institutional roles and responsibilities of key actors and cluster policies to effectively
channelize funds towards affordable housing
99 Single Window Clearance: Streamline approval process to ensure timely delivery of projects
99 Supply side incentives to developers for housing targeted at EWS and LIG population.
99 Creating an ecosystem for impact investing into affordable housing can help in delivering houses at
INR. 10 Lakh - opening the housing dream for slum dwellers.
99 Linking employment and skill development for poor with housing schemes can also improve access
to credit
Cities have a vital role to play in the realization of socio-economic goals of the country. In the wake of massive
housing shortage plaguing the country, it is imperative to take immediate steps to foster sustainable habitat
development for inclusive development.
Given the challenges, we are staring at a situation of unmanaged urban sprawl and diminishing greens
threatening the sustainability of Indian cities. Implementation of Geographic Information System (GIS) can
serve as an effective tool for mapping, spatial analysis, modeling, design optimization and data management
at the level of urban local bodies.
Establishment of single window clearance, easier land acquisition, rationalized direct and indirect tax
structure and other tax-based incentives for the real estate sector will enable competitive pricing for the end
user. Granting ‘infrastructure’ status and introduction of innovative financing models are needed to bolster
the role of private sector in developing affordable housing infrastructure. This will also lay the foundation
for development of 100 new cities, catering to the rising demand of migrant populations and economically
weaker sections.

References
Report of the Technical Group on Urban Housing Shortage (2012-17), Government of India. Ministry of
Housing and Urban Poverty Alleviation
www.nbo.nic.in/Images/PDF/urban-housing-shortage.pdf
Annual Report 2013-14, National Housing Board (NHB),

http://www.nhb.org.in/Publications/Annual-Report-2013-14-English.pdf
Report on Trend and Progress of Housing in India, 2012, National Housing Board (NHB),
http://www.nhb.org.in/Publications/Report-Trend-and-Progress-of-Housing-in-India-2012.pdf
Impact of Investments in the Housing Sector on GDP and Employment in the Indian Economy, National
Council of Applied Economic Research (NCAER)
Housing for All (Urban), Scheme Guidelines, 2015, Government of India, Ministry of Housing and Urban
Poverty Alleviation
Emerging Global Economic Situation: Opportunities and Policy Issues for Services Sector, January 2014,
Government of India, Ministry of Finance Department of Economic Affairs Economic Division
Available at: http://finmin.nic.in/workingpaper/EmergGlobalEcoServiceSector.pdf
Task Force on Affordable Housing set up by the Ministry of Housing and Urban Poverty Alleviation
(MHUPA) in 2008
Ministry of Corporate Affairs, Annexure point 15 on CSR, http://www.mca.gov.in/Ministry/pdf/General_

Circular_21_2014.pdf
Brave New World for India’s Real Estate, 2013, Ernst & Young,

YES BANK, India’s fifth largest private sector Bank with a pan India presence across all
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Working Paper on

Raising Private Sector Capital for

YEAR January, 2016

Nitin Sukh, YES Institute (YI), YES BANK

No part of this publication may be reproduced in any form by photo, photoprint,

YES BANK Ltd. Northern Regional Office

9th Floor, Nehru Centre, Dr. Annie Besant Road,

Tel : +91 22 6669 9000

1.1 Real Estate Sector: Economic Impact 11

1.2 Real Estate: Social Impact 12

02. Policy Landscape 13

2.1 Housing for All by 2022 15

2.2 Real Estate Regulation Bill – Proposed 15

2.3 Real-estate and investment trusts (REIT)s 16

2.4 Urban Development Policy: Land and Zoning Regulations 16

03. Housing Finance 17

3.1 Housing for All Mission 18

3.2 Pension Funds 18

04. Innovative Housing Models 21

4.1 Equity Model for Affordable Housing 22

4.2 Leveraging Infrastructure Investment 25

4.3 Social Housing – REIT 26

4.4 Research and Development 26

05. Way Forward 28

The ambition of this paper is to highlight interesting financing models

Working Paper on Raising Private Sector Capital for Affordable Housing | 7

The Universal Declaration of Human Rights states that:

99 High gestation period of housing projects,

99 Limited and expensive capital,

99 Spiraling land and construction cost,

99 High fees and taxes,

1.1 Real Estate Sector: Economic Impact

Working Paper on Raising Private Sector Capital for Affordable Housing | 11

Figure 2: Multiplier Effect of Real Estate Sector

Source: YES Institute, YES BANK

1.2 Real Estate: Social Impact

From a macro perspective, high cost of land within

12 | Working Paper on Raising Private Sector Capital for Affordable Housing

Working Paper on Raising Private Sector Capital for Affordable Housing | 13

Table 2: Affordable Housing and Income Categories

Economically weaker section Minimum of 300sqft super built-up area

The Housing for All Mission comprises the following components:

c) Affordable housing in partnership with Public & Private sectors and

d) Subsidy for beneficiary-led individual house construction or enhancement.

The policy provides comprehensive implementation methodology:

Figure 4: Schemes under Housing for All by 2022

99 Using land as a 99 Interest subvention 99 With private sector 99 For individuals of

Source: Housing for All by 2022

a) Design & Planning

b) Innovative technologies & materials

c) Green buildings using natural resources and

d) Earthquake and other disaster resistant technologies and designs.

2.2 Real Estate Regulation Bill – Proposed

Working Paper on Raising Private Sector Capital for Affordable Housing | 15

2.3 Real-estate and investment trusts (REIT)s

Sponsor Other unit holder

Banks Real Estate Investment Trust

Facilities Manager Asset 1 Asset 2 Asset 3 Asset 4

2.4 Urban Development Policy: Land and Zoning Regulations

16 | Working Paper on Raising Private Sector Capital for Affordable Housing

Working Paper on Raising Private Sector Capital for Affordable Housing | 17

3.2 Pension Funds

3.3 Mortgage Backed Securitization Market (MBSM)