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Housing projects for govt staff to be opened for private players

Financial Express
 

The UPA government is mulling to open the construction of accommodation for government employees to private players, a move that would allow real estate biggies such as DLF, Unitech Ltd, Ansal Housing and Construction Ltd and Shaporji Pallonji Group to get an entry in to the sector, which so far has been reserved for government agencies.

Given the shortage in housing space for government employees and the resource crunch faced by the government, the idea is to put the construction of government houses under the public-private partnership route (PPP) so that the problem of housing is addressed at the earliest with minimum pressure on the exchequer.

The Planning Commission’s proposal, after intense debate within the the panel itself, has been sent to other ministries and departments for their feedback.

As per the Commission’s proposal, the government would start with PPP in housing for the para-military police force and then move on to attend to the housing and office needs of the department of posts and the defence ministry as well which requires a large number of housing units at family stations.

The scheme would be based on design-build-finance-operate (DBFO) model. The construction would be done on government land, as per government specifications and standards. The builders would maintain the housing complexes for a period of 20 years before handing it over to the government. It is likely to be done on annuity basis, a member of the Commission told FE.

Once the other ministries too feel that the scheme is worth pursuing and would help tackle the government’s needs, a Cabinet note would be prepared.

The government would then kick off the process for selection of a consultant and ask the concerned the department to carry out the feasibility study.

In Delhi alone, there is a dearth of over 34,000 residential units and a minimum of 25 lakh square feet office space. The Delhi police needs 20,000 houses to lodge its personnel.

The private service provider (PSP) would be selected through a transparent bidding process and the PSP would have to bear the risks of finance, construction and maintenance. A model concession agreement (MCA) to look into the issues of limited recourse financing, risk allocation, identification and enforcement of performance standards and safeguarding public coffer and user interests would be worked out along with a manual of standards and specifications.

The Commission thought of taking the PPP mode to increase accommodation “significantly in a short period of time” because projects under PPP usually have little time and cost over-runs, reduces costs, saves manpower and improves efficiency in services, the member said.

The UPA government has already placed major infrastructure projects under PPP and is working on opening up the education and health sectors for private participation as well.

However, officials within the Commission feel that the idea has a long way to go and is unlikely to attract too many private players, particularly the big ones.

“The entire plan is at a very initial stage. We have discussed the proposal within the Commission and it has been sent to the other ministries for their response. It has been worked out given the limited construction capacity of government entities like CPWD,” an official said.

Expressing apprehensions about the plan, he said that most of the real estate players are used to very big profit margins, “why would they like to take up government contracts to earn a profit of just about say 5%,” he said.

Source: Financial Express