Will increased FSI hurt affordable housing?

[] Rapid relaxations in FSI norms, at a time when the government has also rolled out several regulations that impact the real estate sector, may hurt rather than help the cause of affordable housing. Read an expert opinion

Rapidly increasing urbanisation in India, is placing increasing pressure on the country’s housing stock. There is presently a shortage of 20 million homes across urban India and with 10 million more people choosing to move to cities each year, tackling the country’s affordable housing crisis has become a pressing concern for policy makers.

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Prime minister Narendra Modi’s mission, to achieve ‘Housing for All by 2022’, was a welcome acknowledgement of the scale and significance of the task at hand. Along with a range of measures to increase transparency in this sector, such as the Real Estate (Regulation and Development) Act (RERA) the Goods and Services Tax (GST), the government has also attempted to increase the supply of affordable land, by tweaking Floor Space Index (FSI) policy.

Intent of FSI norms

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Mumbai first introduced FSI limits in 1964. These regulations served to limit the amount of floor area that could be built in various zones of the city, with the hope of easing congestion. In recent years however, the government has decided to relax these regulations. By allowing the conversion of green and non-developed zones into space suitable for urbanisation and readily granting FSI extensions for townships and transport hubs, the availability of FSI has increased significantly.

The policy logic here was simple: The shortage of buildable land across Indian cities, has pushed up land prices and subsequently, house prices have also skyrocketed. By increasing urban land availability, the affordable housing demand could be met.

In reality, however, things have not been so straightforward. The government has eased FSI restrictions too quickly, to the extent that there is now an oversupply of land. The policy may have solved one problem, but it has created another.

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Builders unable to cope with greater FSI

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The oversupply exists because developers and consumers have been unable to keep up with the pace of change and simply cannot build quick enough, for the market to return to equilibrium. This has been exacerbated by the swathe of regulatory changes that have been brought into effect over the last year, which many smaller developers are still struggling to come to terms with.

Shaken by the changing regulatory landscape and now wary of falling land prices brought about by changes to FSI, the short-term reality is one of further reduction in the supply of affordable homes. Developers have now been forced to play catch up and are having to find ways to build on an unprecedented scale. Easing building density restrictions are a crucial part of the solution to India’s affordable housing challenge. However, as shown by the perverse impact of increased FSI, the real challenge is to achieve this, at a pace at which developers are able to keep up.

(The writer is founder, Xrbia Developers Ltd)

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Category: Lifestyle

Debora Berti

Università degli Studi di Firenze, IT

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