NITI Aayog Releases Report on “S.A.F.E. Accommodation: Worker Housing for Manufacturing Growth”

Syllabus: GS3/Economy

Context

• NITI Aayog released a report on “S.A.F.E. Accommodation – Worker Housing for manufacturing growth”.

About

• The report explores the crucial role of secure, affordable, flexible, and efficient (S.A.F.E.) accommodations for industrial workers in boosting India’s manufacturing sector. 
• It identifies key challenges, offers actionable solutions, and highlights the pivotal interventions required to scale up such housing facilities across the country.
• Background:
  • In the Union Budget 2024-25, the Finance Minister emphasized the importance of rental housing for industrial workers. 
  • This initiative, to be executed under a Public-Private Partnership (PPP) model with Viability Gap Funding (VGF).

India’s Manufacturing Sector

• India is poised to elevate its manufacturing sector’s contribution to GDP from the current 17% to 25% as part of achieving Viksit Bharat by 2047. 
  • This goal is aligned with the country’s objectives of becoming a global manufacturing hub. 
• Future Outlook:
  • According to the Economic Survey 2023-24, India needs to generate 7.85 million jobs annually until 2030 to sustain its economic growth trajectory.
  • This also requires a robust workforce strategy, including sufficient, proximate, and affordable housing for industrial workers.

SAFE

• The S.A.F.E. accommodation initiative offers a comprehensive framework by aligning regulatory and financial frameworks.
• The report identifies several benefits of S.A.F.E.:
  • Enhancing Workforce Productivity and Retention: Proximate and well-designed housing improves workers’ quality of life, reduces commute times, and enhances overall productivity.
  • Attracting Global Investments: High-quality accommodations demonstrate India’s commitment to international standards, thereby making the country a preferred destination for manufacturing investments.
  • Aligning with Global Labour Standards: Adherence to international labour standards enhances India’s reputation and competitiveness in the global market.

Challenges in Scaling Up Worker Accommodation

• Restrictive Zoning Laws: Residential developments are often prohibited in industrial zones, forcing workers to live far from their workplaces.
• Conservative Building Bye-Laws: Low Floor Area Ratios (FAR) and other inefficient land-use regulations limit the potential for high-capacity housing on available land.
• High Operating Costs: Hostel accommodations in industrial zones are classified as commercial establishments, leading to higher property taxes and utility rates. Financial Viability: High capital costs and low returns make large-scale worker accommodation projects unattractive to private developers.

Proposed Solutions: 

• Reclassify Worker Accommodations: Designate S.A.F.E. accommodations as a distinct category of residential housing to ensure:
  • Residential property tax, electricity, and water tariffs apply.
  • GST exemptions for accommodations meeting specified criteria.
• Streamline Environmental Clearances: Include S.A.F.E. accommodations under the exemptions provided for industrial sheds, schools, colleges, and hostels.
• Flexible Zoning Laws: Amend zoning regulations to allow mixed-use developments near industrial hubs, facilitating worker housing close to workplaces.

• Viability Gap Funding (VGF):
  • Provide up to 30%-40% of project costs (excluding land) through VGF support.
  • Amend Annexure 3 of the VGF scheme to include affordable rental housing as an eligible sector.
• Competitive Bidding: Implement transparent bidding processes to determine VGF support, ensuring efficiency and cost-effectiveness.

Conclusion

• The provision of S.A.F.E. accommodation is not merely a welfare initiative but a strategic imperative for India’s economic growth. 
• It addresses critical challenges in workforce retention, productivity, and global competitiveness, while fostering sustainable urban development.

Source: PIB