Unlock the Capital’s economic potential

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Unlock the Capital’s economic potential

Wednesday, 22 January 2020 | Prerna Prabhakar

Regularising unauthorised colonies is a long-standing issue that needs to be resolved soon because not only will it benefit the people living in these areas but will also add to the Government’s coffers and provide an entry point for residents into the formal financial markets 

Delhi’s urban planning policies have been characterised by the inability of the agencies concerned to facilitate adequate supply of affordable, formal housing stock for its residents. As a result, informal housing has crept up across large parts of the national Capital. Unauthorised Colonies (UACs) are one form of such informal housing categories and have grown at an unprecedented rate — from 110 in 1961, to nearly 1,800 colonies today. These UACs cater largely to the Economically Weaker Sections (EWS) and Low Income Groups (LIG) that reside in the city.

While numerous efforts have been made to regularise these colonies to address problems emanating from their informality, the situation has barely improved. This has been a result of institutional multiplicity coupled with the political motives of elected representatives at various levels.

Political establishments target the UAC population for garnering votes and make promises about regularisation and development. However, once elected, they fail to deliver on them.

In 2008, just before the 2009 Lok Sabha elections, the then Central Government issued a notification to regularise UACs and invited applications from these colonies. However, the process went nowhere post applications.

This time, the Narendra Modi-led BJP Government at the Centre, close to the Delhi Assembly elections in February 8, has passed a Bill in the Parliament to confer ownership rights on 40 lakh people living in unauthorised colonies. In this regard, Prime Minister Modi addressed a rally in New Delhi and said, “We took the initiative to do the work which many previous Governments did not do.”

As per the Bill, these rights will be conferred for built-up plots as well as vacant plots on payment of nominal charges.

 Subsequently, any owner of a 100 sq mt residential plot in an unauthorised colony will have to pay at least `19,980 (depending on the zone in which the colony falls) to acquire the ownership certificate. This addresses the affordability concern in case of the UAC population while attempting to recover the land cost from the residents of these colonies.

This measure can have positive benefits for the city’s economy. Implementing this notification can provide an entry point for the residents into the formal financial markets. This affirmed ownership can enable property owners to seek collateral against their houses. Such a move is expected to add around 800,000 potential customers to the housing loans market, providing the necessary push to the national Capital’s economy.

With the registration of UAC households, the decision is likely to boost further formal transactions, hence adding to the Government’s stamp duty revenue.

However, the Bill does not offer any clarity on the status of transaction of a plot/house/property in the existing colony. This clarity is important to solve the issue of creating a formal and affordable housing market in these colonies. In the absence of clear information, it may be assumed that with the conferment of the ownership rights to a UAC plot owner, the subsequent registration of sale deed will take place at the conventional circle rates of the colony.

In this case, the resident living in an UAC household acquires the ownership rights of a 100 sq mt plot for at least `19,980; however he/she would be selling the same property for `1.6 crore, based on conventional circle rates.

This begs the question — do properties in these localities really merit this price, given the inadequate infrastructure? In this regard, to maintain a balanced buyer-seller dynamics, policymakers should reconsider the transaction prices for these households. Without this necessary revision, it is possible that these prices create an excess supply condition and consequently distort the market.  

Another route through which this Bill is likely to inflate the Government’s revenue is through Property Tax obligation for the registered UAC households. Although the notification is silent on the issue of Property Tax collection from these colonies, the forthcoming Bill is likely to offer clarity in this regard. With legal ownership, the UAC residents will be obliged to pay the annual property tax, which will be a significant contributor to its maintenance services.

To reap these possible economic gains from the Bill, it is vital that the implementation of the entire process is not complex. From the perspective of the applicants, the suggested process involves certain tools and techniques that are likely to be beyond their understanding, given their socio-economic profile. Thus, training and awareness would be required to make the programme successful and the Delhi Government must take the lead on it by substantiating the need for institutional coordination.

Discussions with a few residents of UACs in Delhi have brought out that given their past experience, residents are still apprehensive about the actual implementation of the Bill and have not gone ahead with the application process on the online portal. In some cases, people are not even aware of the procedural requirement.

This is reflected by the fact that there are only a handful of applications on the DDA’s portal —166 out of around 800,000 households in the city. Against this pessimistic situation, it is imperative that for the desired success rate of this policy, volunteers are appointed to assist the UAC residents in the process. As of now, there are only 25 help desks and they are very unlikely to serve the purpose of efficiently facilitating the process.

Effective implementation of this proposed policy can unlock the substantial economic potential of the city’s land and housing markets.

The issue of UACs in Delhi has gone on for far too long and it is high time that it gets resolved for better economic outcomes. Whether the vicious circle around policy implementation for unauthorised colonies — with vote bank politics being the central point — will be broken this time around is likely to get clear after the Delhi Assembly elections.

(The writer is an Associate Fellow at the National Council of Applied Economic Research. The views expressed in this article are personal)

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