NITI Aayog Releases Report on “S.A.F.E. Accommodation

New Delji, December 19, 2024 : NITI Aayog released a report on “S.A.F.E. Accommodation – Worker Housing for manufacturing growth”. This comprehensive 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.

In the Union Budget 2024-25, the Hon’ble Finance Minister emphasized the importance of rental housing with dormitory-style accommodations for industrial workers. This initiative, to be executed under a Public-Private Partnership (PPP) model with Viability Gap Funding (VGF) support and commitments from anchor industries, underscores the government’s commitment to addressing a critical component of India’s manufacturing ecosystem.

India’s Manufacturing Aspirations: A Vision for Viksit Bharat

India is poised to elevate its manufacturing sector’s contribution to GDP from the current 17% to 25% as part of its long-term vision of achieving Viksit Bharat by 2047. This ambitious goal is aligned with the country’s objectives of becoming a global manufacturing hub under flagship initiatives such as Make in India and Atmanirbhar Bharat. Realizing this vision demands a robust workforce strategy, including sufficient, proximate, and affordable housing for industrial workers.

According to the Economic Survey 2023-24, India needs to generate 7.85 million jobs annually until 2030 to sustain its economic growth trajectory. A significant portion of these jobs will come from the manufacturing sector, which is increasingly characterized by large-scale mega factories. These facilities require a centralized workforce, often composed of migrant workers, to maintain competitiveness and achieve economies of scale.

Inadequate housing near industrial hubs is a major bottleneck. Poor housing conditions lead to high attrition rates, reduced productivity, and workforce instability. Moreover, the lack of suitable accommodations restricts the migration of workers, particularly women, thereby limiting the sector’s growth potential.

India’s manufacturing sector is at a critical juncture. As the country progresses towards becoming a $5 trillion economy, addressing worker’s accommodation challenges is a priority. Inflexible regulations, financial constraints, and inadequate private sector participation have created significant gaps in the availability of quality housing.

The S.A.F.E. accommodation initiative offers a comprehensive framework to bridge these gaps. By aligning regulatory and financial frameworks, India can unlock the potential for sustainable worker housing solutions that bolster the manufacturing ecosystem, enhance workforce productivity, and attract global investments. 

Why S.A.F.E. Accommodation Matters

Providing S.A.F.E. accommodations for industrial workers is essential to addressing challenges associated with workforce housing. The report identifies several benefits:

1. Enhancing Workforce Productivity and Retention: Proximate and well-designed housing improves workers’ quality of life, reduces commute times, and enhances overall productivity. This leads to lower attrition rates and recruitment costs, ensuring a stable and skilled workforce for factories.
2. Attracting Global Investments: Multinational corporations and global investors increasingly evaluate worker welfare and operational efficiency when making investment decisions. High-quality accommodations demonstrate India’s commitment to international standards, thereby making the country a preferred destination for manufacturing investments.
3. Aligning with Global Labour Standards: Adherence to international labour standards that prioritize adequate and safe worker housing enhances India’s reputation and competitiveness in the global market. This alignment fosters stronger partnerships with international firms and opens new business opportunities.
4. Creating a Win-Win-Win Scenario:
   • Workers benefit from improved living conditions, leading to higher job satisfaction and reduced turnover rates.
   • Companies gain from a more stable, productive workforce and reduced labour costs.
   • The Government achieves sustainable urban development, increased foreign investment, and a globally competitive manufacturing sector.

Challenges in Scaling Up Worker Accommodation

The report highlights several challenges that hinder the development of worker accommodations:

1. Restrictive Zoning Laws: Residential developments are often prohibited in industrial zones unless explicitly permitted, forcing workers to live far from their workplaces. This increases commute times and costs, impacting productivity and retention.
2. 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.
3. High Operating Costs: Hostel accommodations in industrial zones are often classified as commercial establishments, leading to higher property taxes and utility rates. These increased costs discourage private sector participation.
4. Financial Viability: High capital costs and low returns make large-scale worker accommodation projects unattractive to private developers. Coordination challenges also arise, as industrial hubs require synchronized investments in housing, infrastructure, and industries to succeed.

Proposed Solutions: Regulatory Recommendations

To address regulatory challenges, the report recommends:

1. 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 (e.g., ₹20,000 per person per month for a continuous stay of 90 days).
2. Streamline Environmental Clearances: Include S.A.F.E. accommodations under the exemptions provided for industrial sheds, schools, colleges, and hostels in the draft notification issued by the Ministry of Environment, Forest, and Climate Change (MoEF&CC).
3. Promote Gender-Inclusive Policies: Encourage the development of accommodations suitable for workers, addressing their specific safety and welfare needs.
4. Flexible Zoning Laws: Amend zoning regulations to allow mixed-use developments near industrial hubs, facilitating worker housing close to workplaces.

Proposed Solutions: Financial Recommendations

To overcome financial barriers, the report suggests:

1. Viability Gap Funding (VGF):
   • Provide up to 30%-40% of project costs (excluding land) through VGF support. This includes 20% from the Department of Economic Affairs (DEA) and 10% from the sponsoring nodal ministry, with additional contributions from state governments.
   • Amend Annexure 3 of the VGF scheme to include affordable rental housing as an eligible sector.
2. Competitive Bidding: Implement transparent bidding processes to determine VGF support, ensuring efficiency and cost-effectiveness.
3. Retrofitting Existing Facilities: Leverage VGF to upgrade brownfield worker accommodations, enhancing their safety, capacity, and utility.