A Short History of Housing Polices in Independent India

Post by Gaurav Mittal

Housing policies of the Government of India have come a long way since the 1950s. While at the start of “planned development” the policies were more welfare centric, later on these came to be driven by a well-defined constellation of economic interests. At the same time, the role of the government has also changed gradually from being a provider of housing to being merely a facilitator of housing activity. This article gives a short history of these gradual changes based on a reading of Five Year Plans, housing-related legislations and documents relating to various housing schemes . For an easier understanding it divides the period since 1950s into four phases. The first phase roughly comprises of the first two decades, when the initial policies were taking shape and the government was trying to address the problems of all sections of society . The second phase is roughly the period from the early 1970s to mid 1980s; in this period, the government accepted that it cannot serve all the sections of society and hence started focusing only on weaker sections (WS) . The third phase is roughly the period from the mid 1980s to early 2000s. In this period, neoliberal policies made their way into the discourse and its focus changed from physical provision of housing to its financing. The last phase refers to the last 10-12 years. In this period, the government has definitively adopted the role of facilitator. It is now promoting the participation of private sector in housing activities for all the sections of society , while itself taking a backseat in all these activities.

Phase I (1950-60s)

After its Independence, The Government of India was facing a huge housing challenge, especially in urban areas, due to large scale migration after the partition of country. So in these early years, the government took the responsibility for provision of housing, declaring that private sector had not been able to provide it sufficiently. This resulted in the central government bringing out various schemes for different sections of society in its early years. While constitutionally it was not clear which (centre or state) government should take this responsibility1, the Central government resolved to take a lead in Urban sector housing, and brought out schemes like Subsidised Housing Scheme for Industrial Workers (1952), Low Income Group Housing Scheme (1954), Middle Income Group Housing Scheme (1959) and Slum Clearance and Improvement Scheme (1956) etc. State Governments were asked to take up the responsibility of housing in rural areas.

These were the early days for Indian Government at the helm of power and hence, a lot of churning was going on within the government on various policy related. Sometimes, this churning resulted in sharp turns in government’s policies in these early years. In the housing sector, a sharp turn was visible in the central government’s policies on slums; while the First Plan called slums a ‘national problem’ and advocated its complete clearance from all the cities, the government soon realised that it neither had the monetary capacity, nor the institutional capacity to achieve these goals. Hence, the Second Plan immediately mellowed down on slum related issue and asked for the measures to be taken for improvement of the slums wherever it was feasible in addition to required clearances.

The early Plans also emphasised on building an institutional capacity to control the country’s urban growth and deliver decent housing to public. Hence, the government advocated the creation of various institutions, both at centre and state levels. While National Building Organisation was created in 1954 to facilitate research in building construction activity, Town and Country Planning Organisation came into existence in 1962 to facilitate spatial planning activities across the country. At the state level, various Housing Boards were created during the same period. The main objective of these housing boards was to take up housing activities for all the sections of society with a special focus on Lower Income Groups (LIG) .

During this period, the government was of the view that the prevalent proliferation of slums with haphazard urban growth in Indian cities can be controlled through the proper implementation of a Master Plan with a set of Development Control Rules. Hence, it vigorously pushed for creation of Master Plans for all the cities. It asked state governments to create special agencies to take up these activities, which would also be involved in controlling and developing the land in its boundaries. For this purpose, Delhi Development Authority (DDA) was created in national capital in 1957, which later on became a model for creation of other development authorities across many cities.

Phase II (Early 1970s – Mid 1980s)

After various experiments in the first phase, the government finally realised in the second phase that it cannot provide housing to all, as it envisaged earlier. This realisation was quite visible in the drop of number of housing related schemes floated by the government for the sections other than poor or socially backward. During this period, government housing schemes were especially focused on lower sections of the society. Other sections were encouraged to take up housing activities as self-provisioning activity with limited support from the government.

By this time, the government had also realised that slum clearance was not going to solve the problem of housing in the city; the Fourth Plan went to the extent of saying that “slum clearance often lead to creation of new slums”. Hence the government started focussing on low cost schemes like Environmental Improvement Scheme of Urban Slums (1972) and Sites and Services Scheme (1980) to tackle the problem of slum proliferation.

This period was also the first time when the government noted the economic significance of housing activities and its contribution to the country’s economy. Hence, with a vision of “controlled and well-directed growth” of the housing sector , the government created a national level Housing and Urban Development Corporation (HUDCO) in 1970. At its inception, HUDCO was envisaged as an institution which will work as the government’s nodal agency in promoting “sustainable habitat development to enhance the quality of life”.

Phase III (Mid 1980s – Early 2000s)

It was during this phase that neoliberal policies had started making their ways into India. The government was in the process of liberalizing the economy, which was also visible in its housing policies. Its housing policies had started talking about restricting government’s role as a provider of housing in the country and pushed it to take up the role of a facilitator in this sector. The Seventh Plan advised the government that “ Government’s role in the field of urban housing has per force to be promotional. The major effort will have to come from the private sector, Government’s role will have to be restricted to the improvement of slums, direct provision of housing to the weaker sections of the society and encouragement and support of housing finance institutions…” Even the responsibilities of slum improvement and weaker section housing were being tried to be pushed towards lower tiers of governments.

Quite dramatically, the Ninth Plan had declared that “Housing is State [Government’s] subject” (point 3.7.106, Ninth Five Year Plan). It was a controversial statement because as explained above, the Constitution of India does not mention housing under any of the three lists, listed in its seventh schedule. Yet, it has been internalised and repeated (most of the times clubbed with land, urban development and infrastructure) in many government documents over the years without any proper explanation. Simultaneously, a push for decentralisation, through the 74 th Constitutional amendment, made Urban Local Bodies responsible for providing services in their jurisdictions, which also included housing.

This downward push of responsibilities resulted in the emergence of a particular kind of housing schemes for poorer section, which were designed by the centre but required matching funds from state and local level governments and were supposed to be implemented by ULBs (these are better known as Centrally Sponsored Schemes). Some examples of such schemes are Urban Basic Services Scheme (1986, later renamed as Urban Basic Services for Poor in 1991), Nehru Rozgar Yojna’s Scheme of Housing and Shelter Upgradation (1990) and National Slum Development Programme (1996). It is important here to note that previous housing schemes were also designed by the centre, but those never came with the clause of matching fund requirements from State or Local governments, which made a lot of difference in the implementation of schemes.

In this period, the Central Government’s focus shifted to facilitating the financing activities for housing rather than providing it physically on ground, as was the norm before. The Seventh Plan admitted that “The most crucial need for housing development… [is to establish] a proper and diversified institutional structure for housing finance…” To serve this purpose, the National Housing Bank (NHB) was created in 1987. Parallel to the creation of NHB, commercial banks and other Housing Finance Institutions were directed by the government to participate on a larger scale in housing finance activities. It resulted in easy availability of housing finances for private sector with cheap interest rates. Private builders took advantage of this opportunity and started taking up housing activities in an unprecedented manner. At the same time, government-sponsored housing agencies like HUDCO and various other state-level housing boards were pushed to compete with private players for funds from the open market, without any shield of government’s support. These agencies were mostly serving the poorer sections of society, which had a limited repayment capacity and hence were not able to compete with private developers. As a result, these agencies started losing their ground in housing market, very rapidly.

HUDCO was one agency, which bore most of the brunt of these policies. The government withdrew its income tax exemption in 1991-92 and then slowly cut off its equity support too. It was also suggested that HUDCO should strengthen its infrastructure wing to focus on land and infrastructure development to maintain its credit rating. All these pressures from different quarters ultimately resulted in a shift in HUDCO’s focus from providing housing to weaker sections of society to funding large scale infrastructure projects, which promised good returns and hence good ratings.

In the same period, to facilitate private sector investment in housing, the government also tried to either amend or repeal few laws which it called archaic. As a result Urban Land Ceiling and Regulation Act and Rent Control Acts were repealed in most of the cities. Even the Development Control Rules were changed and experimented with in many cities. It allowed builders to construct buildings with higher Floor Space Indexes (FSIs) with no physical infrastructure on ground to support the resulted densities.

Phase IV (Early 2000s onwards)

Phase IV is, by and large, a continuation of the neoliberal tendencies of Phase III, but on a larger scale. By now, the government had comfortably placed itself in the role of facilitator of housing activities. Finally, it also declared that it does not have the kind of monetary capacities to fund the urban development and housing activities in the country as much a s required. Hence it started looking for ways to attract private sector investment in this sector.

The central government’s schemes in this phase, which were focused only on weaker sections of society (Valmiki Ambedkar Awas Yojna in 2001, which was later merged with BSUP under JnNURM in 2005 and then in Rajiv Awas Yojna in 2013) are advocated to be implemented on Public Private Partnership (PPP) basis. With a focus on facilitating private investment in this sector, Government has allowed 100% FDI in housing sector and the latest budget (2014-15) has gone one step further in this direction by listing slum redevelopment as a CSR activity to attract more private funds.

During this period, government has also retracted from its master-plan-led development route, which was promoted vigorously in the first few plans, and has started openly criticising it. According to the Eleventh Plan, “The Master Plan concept has also not been useful in addressing India’s large and widely spread slums. By locking-in the supply of buildable land and space, the Master Plan, inter alia, inhibits the development of housing markets and contributes to the proliferation of slums.” This led the government to try a different route of development planning led by City Development Plans (CDPs) in its latest scheme called Jawaharlal Nehru Urban Renewal Mission (JnNURM). However, this route also seems to have failed in producing desired results and hence was severely criticised in the Twelfth Plan.

1# The subject of housing is not specifically mentioned in the seventh schedule of the Constitution of India which deals with matters coming within the purview of the Union and State Legislatures.

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