Most of us consider human unhappiness a private matter — the result of such things as an unhappy marriage, ungrateful children, or losing a promotion — and we certainly don’t want the state to interfere in that. Yet, governments can play a big role in promoting human happiness. Knowing that I won’t be attacked as I step out of my house makes life predictable, and good law and order contributes to my happiness. Having a job and a home are two big sources of happiness that the state can further. The Vajpayee government made a simple policy change that ushered in home mortgages; it then gradually raised tax concessions tenfold for mortgages, and this led to a revolution in home ownership.
Today, the greatest source of misery is the lack of jobs. Eighteen lakh people from Bundelkhand recently migrated to Delhi in search of jobs. The largest creator of jobs, oddly enough, is house building. Road construction and manufacturing have become too mechanized. The Prime Minister’s vision of ‘Housing for All by 2022’ is a dream idea because it would create jobs and homes simultaneously and deliver two major sources of happiness. Plus, it doesn’t cost anything to the government since homes are privately built. In fact, homebuilding is a huge source of revenue as 51% of the value added is taxes (including input taxes).
The government’s recent Budget went some way in furthering this vision, but not far enough. It offered higher deduction on interest on loans for first-time home buyers; exempted real estate investment trusts from dividend distribution tax; and gave major tax incentives on development of affordable housing. Question: If there are such huge benefits to society from house building, why limit the benefits to ‘affordable housing’? Why not make interest for all home loans up to Rs 40 lakh tax-free?
Our high real estate prices reflect artificial scarcity caused by too many bad laws, cronyism, and unpredictable approval processes. A housing revolution will need bold reforms. First, digitize land records to make titles transparent and secure. Second, lower stamp duties on property transactions to world levels.
Third, streamline the approval process. The recent real estate law protects the home owner but not the builder whose project is delayed by official approvals. Fourth, government and PSUs should monetize huge surplus prime land on a revenue-sharing basis with a developer. Fifth, give housing the status of ‘infrastructure’. Sixth, welcome foreign investment as it will lead to global standards. Finally, let’s change our attitude to builders whom we consider a form of lowlife that wrecks our environment for quick profits. This attitude inhibits a robust real-estate market from developing.
If the housing revolution is to bring happiness, it will need good urban planning. Human beings have an innate desire to be seen, to see others and watch things happen. Unfortunately, India does not have a tradition of public squares. But they are essential to allow children to play and women to come out of the home safely to meet their friends. Walkable streets and sidewalks, bicycle paths, parks with benches, libraries — these enhance sociability and civilization. In a land-scarce country, conserve horizontal space for public life and use vertical space for housing. If we lived vertically, there would be plenty of space for public life.
The government of Madhya Pradesh has just announced a ministry of happiness. It is a worrisome thought, but not if the ministry pushes for a housing revolution. It should persuade the chief minister that housing is a small-scale activity that will ignite millions of labour-intensive startups. With it will come lakhs of retail jobs in new townships. And 51% of the house cost will come to the state in taxes. Finally, a housing revolution is a jobs revolution!