Madhya Pradesh Housing & Infrastructure Development Board: affordable housing via public–private partnership mode

Abstract

The Madhya Pradesh Housing & Infrastructure Development Board (MPHIDB) is a state-owned entity in Madhya Pradesh State of India with the mandate of providing housing for citizens, particularly for those in the low-income segment. MPHIDB has been constructing houses on its own using the traditional engineering and procurement contract (EPC) model. In July 2015, it was exploring the possibility of creating affordable housing units via public-private partnership (PPP). The advantage of involving private sector is that MPHIDB can tap into creative energy and construction efficiency of the private sector and deliver the best results within the given set of time and resource constraints. The proposed structure of PPP is that the private partner will be given a portion of land in lieu of the affordable housing units that it will build and transfer to MPHIDB. However, there are trade-offs involved in doing the project in PPP mode instead of EPC mode. The main advantages of a government body like MPHDIB doing the project on its own are as follows: (a) It is able to better manage regulatory risks in terms of getting clearances, land acquisition, and so forth; (b) it can raise finances at lower interest rates than what is charged for private sector entities; and (c) the entire land parcel is available to construct houses, and hence it can get more housing units per unit of land. The Commissioner (CEO) of MPHIDB had to decide whether to go for PPP or EPC model, and if he opted for PPP, how should the PPP be structured?