Housing shortage and the resulting quality of life crisis are some of the much discussed and written issues during the 90s in India as well as abroad. A United Nations study (1990) has shown that the number of houses built for every 100 new households formed has decreased from 42 during 1970-74 to 38 in 1985-86. While world wide as much as 1.2 billion people live in poor housing, the United Nations Centre for Human Settlements (HABITAT) predicts that this number would double by the end of this century.The situation in India is equally alarming. It is widely observed that the national backlog in housing would be around 41 million in the year 2001. While the growth in the supply of housing in urban areas has outpaced the growth in the formation of urban households during the past decade, there is not much scope for delight when we examine the housing balance in absolute sense. It is observed that housing stock backlog is surmountable only if the housing stock grow at the rate of 6 per cent per year ascompared to the present rate of about 3 per cent. This is a tall order given the present housing development policies and institutional structure of the real estate industry in India.
One of the main issues influencing the supply of housing stock, particularly the low and middle-income housing, is the cost of housing. One way to help lower housing is through efficient financing of infrastructure. In recent years, a number of innovative infrastructure financing instruments have been developed in the United States and other countries in the west and east. Recently, infrastructure financing has drawn significant amount of attention of policy makers in India and institutional structures such as Infrastructure Financing and Development Corporation have been initiated. Even though one would argue that more teeth should be provided to these structures through strong political commitments, these initiatives are welcome.
More than the state wide infrastructure, the financing methods used in the provision of localinfrastructure influences the housing affordability. Municipalities in India usually turn to general taxation to finance infrastructure capital improvements. Even though some of the capital investments are allocated on the basis of income generation principle, a majority of small projects are financed through `pay-as-you-go' basis from the general revenues. Projects which are to be financed through the `pay-as-you-go' principle are undertaken using debt financing. In the absence of significant market borrowings either through debt financing (general obligation bonds) or project financing (revenue bonds), urban local bodies in India practice a combination of `pay-as-you-go' financing for small projects, debt financing for large infrastructure projects and public-private partnership in large scale housing projects.
Increasing reliance on capital markets and private sector participation provide a new institutional paradigm shift in the infrastructure development in urban India. However, internationalexperiences suggest that market-based infrastructure financing and participatory local governance encourage the application of exclusion principle in the provision of community/target group specific services. A flip side of this development is the unwillingness of local communities to use funds from the general tax revenues to finance specific community/target group specific projects. The California's proposition 13 and disapproval of the community to finance projects that have no general benefits to all citizens is a forerunner in these developments.
Many urban local bodies in India suffer from saturated property tax base, under valuation, and serious institutional and management rigidities in tax collection. Faced by the falling property tax revenue, urban local bodies turn to a large number of non-tax revenues, some are based on property value and others on fees and charges, to mobilise resources to meet their increasing expenditure needs. Sadly, infrastructure capital investment and capital improvementprogrammes are some of the least priority areas of our local bodies,not only because a large majority of them do not have the required financial and management systems to utilise debt financing, but also because they don't have the political will and institutional framework to implement structured debt financing. Some of the recently introduced project financing with escrow account mode suggest that many institutional issues are yet to be understood while introducing project financing in urban infrastructure sectors, particularly in those cities which suffer from serious revenue account deficit.(To be concluded)(The author is a urban management consultant)
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
