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2019 OECD Economic Surveys: India 2019

image of OECD Economic Surveys: India 2019

India has been a growth champion in recent years and has succeeded in taming inflation, the current account deficit and non-performing loans. India's participation in the global economy has risen, with outstanding performances in some services, while the largest diaspora in the world is an asset in developing new markets. India has also lifted many millions of people out of poverty and has made access to housing for all a priority. Ambitious structural reforms – including better targeted household support, financial inclusion initiatives, the implementation of the Goods and Services Tax, the Insolvency and Bankruptcy Code, the new approach to federalism and the corporate income tax reform – have played a key role. The recent economic slowdown and still large number of poor and under-employed people call for a renewed impetus on structural reform. Priorities include: creating fiscal space to finance more and better physical and social infrastructure (in particular health and education), modernising labour laws to remove disincentives for firms to create jobs and employ women, continuing to improve financial sector’s health, further reducing restrictions to trade, and improving property rights and rent regulations to achieve better housing for all.

SPECIAL FEATURES: INDIA'S PARTICIPATION IN THE GLOBAL ECONOMY; HOUSING FOR ALL

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Housing for all

Housing is a key part of well-being and contributes to spatial and social mobility. In India, the housing market is characterised by excess demand for affordable dwellings, a small rental market and an oversupply of high-end housing, especially in urban areas. The housing shortage among low-income groups is large, despite increases in the stock of quality housing in recent years, as house prices are high relative to incomes and access to credit is often difficult. Prices are high because of structural rigidities in the market, stemming from stringent zoning and land regulations, restrictive floor indices and high transaction costs, in the context of high population density. Ongoing urbanisation, and particularly rural-urban migration, will intensify demand for affordable housing, especially at the low end of the market. Improving the functioning of the market calls for clarifying property rights and easing rent control and zoning rules. Lowering transaction taxes, especially stamp duties, would support mobility. Simplifying land use regulations and enhancing contract enforcement would also boost housing supply. The Real Estate (Regulation and Development) Act of 2016, which aims at bringing transparency, protecting the interests of homebuyers and boosting investment in the real estate sector, helped improve the market situation. By improving the collateral security, the law can also facilitate access to housing finance. The Housing for All programme that aims to provide a home for every Indian by 2022 is a good way forward in reducing the shortage. As with many past government programs, it promotes ownership. More is needed to develop rental housing and to address the needs of vulnerable groups. The 2019 Model Tenancy Act is a step in the right direction.

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