Context: Recently, the NITI Aayog released a report “S.A.F.E. Accommodation - Worker Housing for manufacturing growth” suggesting the Central Government to build mega housing projects near manufacturing plants where industrial workers could rent a room for as low as Rs 3000.

• It explores the role of secure and affordable accommodations for industrial workers in boosting India’s manufacturing sector.

• Further, the importance of executing it under Public-Private Partnership (PPP) model with Viability Gap Funding (VGF) was emphasized in the Union Budget 2024-25. 

India’s Manufacturing Aspirations

• India aims to increase the manufacturing sector’s contribution to GDP (from the current 17% to 25%) and become a global manufacturing hub, as part of its vision for ‘Viksit Bharat’ by 2047. 

• As per the Economic Survey 2023-24, India needs to add 7.85 million jobs every year until 2030 to sustain economic growth. A productive workforce is central to attain the vision. 

• India needs to create more jobs for women and increase Female Labour Force Participation Rate. In India, women contribute only 18% to the GDP. (In China, women’s contribution to GDP is around 41%)

Issues due to Inadequate Housing near Industrial hubs: 

• High Attrition rates and Increased workforce instability

• Reduced Labour productivity

• Limits Labour mobility (restricts migration of workers)

• Poor Female Labour Force Participation Rate (FLFP)

About SAFE

• Definition: It includes rented, long term dormitory-style accommodation, exclusively for workers in industries, strategically located near workplaces. 

• It includes essential amenities such as water, electricity, etc., and excludes family housing. 

• Ownership of these units cannot be transferred or sold to workers or employers.

Need for SAFE

• Enhancing Productivity and Retention: Reduces commute times, enhances overall productivity leading to lower attrition rates. 

• Attracting Global Investments: Worker welfare and operational efficiency are taken into consideration for making investment decisions by global investors. 

• Gender inclusivity: Enhance female labor force participation, which is currently half of countries like China. 

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.

• Regulatory Challenges: Restrictive Zoning Laws (prohibits residential housing in industrial zones unless explicitly permitted); Conservative Building Bye-Laws (like low Floor Area Ratios limit potential for high capacity housing), etc. 

Key Recommendations

• Reclassify Worker Accommodations: Designate S.A.F.E as a distinct category for GST exemptions, reduced taxes, etc. 

• Streamline Environmental Clearances and Flexible Zoning laws: Allowing mixed-use developments. 

• Financial Viability: Upto 30-40% of project costs (excluding land) to be provided through VGF, transparent bidding process, etc. 

Some Global Best Practices 

• China: Provides cheap housing for workers increasing their real wages.

• Singapore: Separate act for migrant housing and differential building regulations for workers’ dormitories. 

• Vietnam: Approved a plan to build housing units for workers in industrial parks.

Conclusion

• As India progresses towards becoming a $5 trillion economy, addressing workers accommodation challenges is a priority. By aligning the regulatory and financial frameworks, India can unlock the potential for sustainable worker housing solutions that would bolster the manufacturing ecosystem, enhance workforce productivity, and attract global investments.