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Can’t afford a House in the City, No worry, Govt. now ready to give you cash subsidy to Rent a House

Urban Housing​​​October,19,2015: THE MINISTRY of Housing and Urban Poverty Alleviation is considering introduction of subsidies, in the form of direct benefit transfer, that would be provided to economically weaker sections (EWS) and low income group (LIG) households towards their rent payments. 

The draft National Urban Rental Housing Policy introduces the concept of providing housing vouchers to the urban poor, equivalent to a certain cash amount to partially offset the cost of rent incurred by them. However, the draft policy defines the Centre’s role as a “facilitator” and “enabler” for promoting rental housing. It says the Centre would “encourage states to provide subsidies for low-income tenants”.

“The draft policy will be placed before an inter-ministerial group. Once the concept of housing vouchers gets their approval, a proposal will be sent to the finance ministry, asking that we should be allowed to subsidise rents paid by the urban poor through central assistance. If approved, the subsidy can be rolled out as a separate scheme,” said a ministry source.

The draft policy borrows the income criteria used by the recently launched Pradhan Mantri Awas Yojana (PMAY). Accordingly, EWS includes all households with an annual income up to Rs 3 lakh and LIG refers to households with an annual income of Rs 3 lakh to Rs 6 lakh.

The beneficiary would be required to contribute 30 per cent of income as rent, while the subsidy scheme would account for the remaining rent amount up to a certain sum. The policy cites Census 2011 data, which shows that 27 per cent of urban residents live in rental units.

The draft rental policy is mostly prescriptive in nature and talks about the need for states to promote rental housing for specific categories. These include social rental housing with direct or indirect support from state governments for EWS and LIG segments, need-based rental housing for migrant labour, single women and students as well as market-driven private rental housing as an interim arrangement for aspiring home buyers.

The voucher scheme is supposed to act as an intervention for LIG and EWS segments who are forced to seek accommodation elsewhere in the face of inadequate social rental housing. The concept of vouchers is borrowed from the US which, as part of its federal housing policy, started the housing choice voucher programme in the early seventies to supplements rent payments.

The US Department of Housing and Urban Development administers the funds to public housing agencies which then transfer the subsidy directly to the landlord. Prior to the launch of PMAY, the expenditure finance committee had approved an outlay of Rs 6,000 crore for construction of rental units. Creation of rental housing was initially meant to be part of the PMAY which would have made its implementation binding on states.

However, the PMAY, launched in June this year, announced only four verticals, all for providing central funding for affordable housing on ownership basis. The draft National Urban Rental Housing Policy notes that so far, most interventions by the government have been in the area of home ownership, which is not enough to address the issue of affordability gap that leads to slum proliferation in cities.

Another significant suggestion is the creation of mass rental units for employees or for the urban poor as part of corporate social responsibility. It states that companies should be allowed 100 per cent deduction in capital expenditure incurred in such cases. 

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