Prof Amitabh Kundu is happy that Budget 2017 focuses on infrastructure, rural development and skill development. The former dean of the School of Social Sciences, Jawaharlal Nehru University, however, points out that the Narendra Modi government is not doing much regarding affordable housing for the poor and pension for unorganised sector workers.
The government, he claims, has caved in to pressure from the housing lobby. Kundu, who headed the Technical Advisory Committee on Housing Start up Index at the RBI and the Committee to Estimate Shortage of Affordable Housing, pulls no punches in criticising the affordable housing scheme and the new pension scheme, both of which, he points out, are tilted towards the richer sections. If the government has to realise it goal of affordable housing for all by 2022, the focus must be on the poor, he adds.
Excerpts from the conversation:
What's your impression of the budget?
I am happy. There is emphasis on infrastructure, rural development; skill development plans have also got higher than average allocation. I am happy about the social security, about Skill India. I am also happy about the Income Tax, where the budget has not given much concession to the so-called middle class and granted concession to the lower income sections. They have not given in to middle-class pressure. Even on the corporate tax front, they have only given exemptions to small and medium enterprises, bringing the tax rate down to 25% which is desirable.
Is there anything in the budget that worries you?
Firstly, affordable housing. Arun Jaitley said in his speech that it is a major area of concern. It is one of the flagship missions. It is fine that the PMAY allocation has gone up to Rs 23,000 crore, which I think is desirable. The Housing Shortage Committee had said that 95% of the housing shortage is for economically weaker sections and low income groups. So you can't have only 5% of the total housing expenditure coming from the public sector and 95% from the private sector if the target is low income groups and economically weaker sections.
If you look at the data for the housing sector, there are not many takers for loans. The poor are not coming forward to take the loan of Rs 3 lakh which the government has announced. They revised it from Rs 1 lakh to Rs 3 lakh generally and for the low income groups from Rs 2 lakh to Rs 6 lakh, but still not many people from those sections are coming in.
What is the reason for this?
It is because they don't have proper documentation. Also, they cannot repay even monthly installments for the Rs 3 lakh loan; even though they pay only 2% interest and the government pays 5% of the amount, the installment still comes to Rs 1800 to Rs 2,000 per month. So the poor, who have a monthly income of Rs 6,000 per household, can't pay Rs 2,000 for a housing loan.
Modi has announced housing loans up to Rs 9 lakh will get a subsidy of 4% now and loans up to Rs 12 lakh will get a subsidy of 3%. So, now that you have hiked the loan to Rs 12 lakh, you find the middle class grabbing this opportunity. That Rs one lakh saved because of the government subsidy is huge for them. A person from the middle class will not build a house for Rs 12 lakh. He may build it for Rs 30 lakh after taking a Rs 12 lakh loan, on which he he will get this subsidy. He is not barred from getting this subsidy. This is absurd.
So, the government's focus has changed?
Yes, the focus has shifted from the poor to the housing sector. A lot of houses that are lying vacant, the middle class will go and buy those. They will get Rs one lakh subsidy for it, too. The poor can't even pay the installments for Rs 3 lakh loan. So, all these announcements - no tax for builders until the project is completed, Capital Gains Tax exemption - it is all for the middle class and the upper middle class. The thrust in the PMAY on the poor is now diluted. I am not saying it will not help the poor at all, but the focus has changed and it seems to be for facilitating the housing sector.
What is the extent of the housing shortage in the country?
If you are talking about affordable housing for all by 2022, you must focus on the poor. The shortage in housing for poor is about 18 million, which has now been revised to 20 million. Now the point is, when I was chairing the housing committee, I was told that 11 million houses are vacant. So more than 50% of the shortage is already available. All you have to do is to make sure that the vacant houses are brought to the market. Instead of doing that, you are facilitating the building of more vacant houses. And then you are helping the middle class buy those houses. It is totally the housing sector lobby that has prevailed. Similarly, there are issues with pension schemes as well.
What are the issues with the pension schemes?
They have introduced Varishtha Pension Yojna, in which the assured rate of return is 8%. I don't mind that. But who are the people who would benefit? Even I can put down a certain amount of money and get 8% return, which is higher than the market rate. But if you look at the Atal Pension Yojana, which is for the unorgainsed sector, you have to put down Rs 42 per month for a period of 42 years, and when you attain the age of 60, you get Rs 1,000 per month as pension. They are giving the unorganised sector only 7% rate of return on this scheme, according to my calculations. But in the new scheme, they are giving 8% to the richer section. This is absolutely not acceptable.
They have to do something about the Atal Pension Yojana. This disparity is not acceptable, since 7% is the rate the banks anyway provide. So you are really not doing anything for the unorganised sector. If they were to give 8% interest rate to the unorganised sector, the return on their monthly savings would be much higher.