Kaam, Daam...thank you Ma’am: Indian Housing Policy and the Congress Manifesto
As the World’s largest democracy rumbles towards the finishing line in its polling marathon and with a final announcement due 23 May, neither of its major parties have been pulling their punches. The Congress Manifesto branded BJP’s Smart Cities Mission a “colossal failure and a waste of money with no visible results”. Unlike Jeremy Corbyn then, Rahul Ghandi doesn’t seem to have any difficulty getting off the fence, but spirited and unequivocal as his comments might be, is Congress right to be so critical of BJP’s performance in this crucial policy area?
In the Kaam (“Employment and Growth”) section of its Manifesto, the Congress Party rightly draws attention to the major implications of India’s increasing urbanisation: with more than a third of its population now living in the subcontinent’s sprawling urban conurbations and growing rapidly day by day, what is to be done about the significant macroeconomic challenges this creates? Certainly it feels like something of an understatement for Congress simply to highlight that “India’s Cities can become engines of growth’ when the real question is surely what does it all mean and where is the trend leading.
And it is here that the Manifesto falls strikingly short on detail. Rather than advancing concrete proposals, Congress promises instead that it expects to “formulate a comprehensive policy of urbanisation after wide consultation” and will “support State Governments to build new towns and cities” all of which means very little, and feel alarmingly like the kind of phrases Sir Humphrey Appleby might have coined (or Theresa May in “strong and stable mode”). Perhaps more bravely (or at least more concretely) Congress commits itself to giving the urban poor a “right to housing” and, until the right materialises, a programme of night shelters and clean water for all.
Especially on such an important issue, it all sounds troublingly like jam tomorrow. But doesn’t Nigel Farage remorselessly tell us manifestos and modern politics don’t mix. What should we make of it all? Has the Modi inspired Smart Cities Mission really been nothing short of a dismal failure?
Well, as with most (if not all) matters political, the BJP Policy has certainly not been an unmitigated diet of bread and roses, but to call it a “colossal failure” and a “waste of money” is going way, way too far the other way.
In July last year Prime Minister Modi announced that the Affordable Housing target would be met by 2022, with 5.4 Million homes already by then having received approval for construction out of the target total of 10 Million. And fast forward, by March this year the number of homes approved for construction had risen to 8 Million: well ahead of the rate required to pipeline a further 2 Million within the next two and a half years so as to meet target. Bear in mind too that 8 million figure already achieved is more than the entire number of properties approved for construction in the 10 years of Modi’s immediate predecessors in office.
The problem, as you might imagine, is the real world difference between approving a property for construction and actually building a property. As of March this year only 1.8 million of these 8 Million homes had actually been topped out and occupied. And whilst it takes roughly a year to secure administrative approval (a figure which has incidentally fallen as a result of the Modi “red tape “reforms), the average time it takes to build a property in India is still currently 8 months. That may be where Congress had intended to direct their fire, despite saying little if anything about what they might do instead.
So lets take a look at the nuts and bolts: there are three key factors giving rise to this serious drag in approval to final construction timing: first, an industry wide deficit across the subcontinent in construction technologies; second, a scarcity of urban land and third, the significantly higher price of land in areas such as Mumbai and Delhi. You can’t do much about land availability and market price, so the first of these three is by far the most important.
And that’s one reason why Modular Construction has now risen to the top of the political agenda in India, with a capacity to reduce construction times from 8 months to 6 weeks it is a genuine game changer, which makes it all the more odd that Congress hasn’t made more of its potential in their Manifesto rather than focusing on what are essentially tired and negative platitudes on this, an issue of the greatest social importance.
Modulex Construction is the World’s largest and India’s first Steel Modular Building Company, working to meet the challenge of the subcontinent’s urban housing shortages in a practical and focussed manner. It was established to harness the potential of India’s dynamic and fast evolving markets and to deliver opportunities for investors through Red Ribbon Asset Management.
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Whichever side comes out top in these elections, there will be no escaping the imperative to with the economic after effects of India’s status as the fastest growing large economy in the World, with a burgeoning and increasingly urbanised population projected to be the largest on the planet by 2022. That presents not only challenges but opportunities and that will inevitably make the subcontinent an attractive proposition for any investor.
And as the article points out, there is no escaping the sheer scale of the real estate challenge India currently faces. Traditional technologies just can’t cope with the sheer scale and pace of the delivery required, no matter how successful BJP policies might have been (and they have been successful) in cutting away the unacceptable levels of red tape that previously disfigured the subcontinent’s approval process.
No wonder then than Modular Construction has become policy priority for the Modi Administration. I expect it will only be a question of time before others follow suit…