Housing Allowances – 7th Pay Commission Recommendation

Housing Allowances – 7th Pay Commission Recommendation

Allowances Covered

Alphabetical list of Allowances covered here is as under:

1. Compensation in Lieu of Quarters (CILQ)
2. Family Accommodation Allowance
3. Family HRA Allowance
4. House Rent Allowance (HRA)
5. Hutting Allowance
6. Rent Free Accommodation
7. Single in Lieu of Quarters (SNLQ)

Introduction:

Provision of affordable and comfortable housing is a source of concern for most Central Government employees. It needs to be addressed in the changing social scenario where nuclear families are on the rise, more women are joining the work force and there is growing urbanization. The various components involved are examined below in detail.

House Rent Allowance (HRA)

Presently, HRA is payable at the following rates:

Population of Cities/Towns	Class of Cities/Towns	HRA rates as % of Basic Pay (including MSP and NPA)
50 lakh and above	X	30
50–5 lakh	Y	20
Below 5 lakh	Z	10

There are a large number of demands for paying HRA as a percentage of (Basic Pay +DA), instead of as a percentage of Basic Pay alone, as at present. Representations have also been received regarding enhancement of percentage rates and having only two classifications of Metros and Non-metros (instead of the present classification of X, Y and Z cities).

PBORs of uniformed forces have vehemently argued for doing away with the concept of Authorized Married Establishment and the requirement of a minimum age of 25 years for grant of Compensation in Lieu of Quarters (CILQ).

Analysis and Recommendations:

Compensation towards the housing needs of Central Government employees is covered in three ways:

1. As a component of Basic Pay when it is initially fixed (based upon the Aykroyd formula)

2. As a constituent of Dearness Allowance [the AICPI(IW), on which the DA is currently based includes a weight of 15.27% towards housing], and

3. In the form of House Rent Allowance

1. In view of the fact that the DA calculation methodology that is being followed does

include a certain weightage for housing, the demand to pay HRA as a percentage of Basic Pay + DA is not justified.

To arrive at the appropriate rates of HRA, the Commission used a two-fold approach: (i) It compared the rise in housing compensation with the cost of housing in major X, Y and Z category cities over the period 2006 to 2013, and (ii) It compared, de novo, the HRA after the rise in Basic Pay proposed with representative house rents in major X, Y and Z category cities.

2. During the same period, the weighted (by population of cities) average rise31 in housing index for Class X cities was 1.69 times, for thirty most populated Class Y cities it was 2.10 times, and for twenty-five most populated Class Z cities it was also 2.10 times.

3. Thus, it can be safely concluded that the rise in housing compensation has largely kept pace with the rise in rental values in all categories of cities.

4. However, if a zero-based comparison of HRA with house rents is carried out the Commission observed that today there are websites that give a good idea of the prevalent house rents in various cities. From the information available on the websites, it was observed that with the increase in Basic Pay proposed (and consequent rise in HRA with the rationalized

1. The Commission also took note of the link between increase in HRA and increase in house rent. There was a sharp rise in the index from the first half of 2009, immediately following VI CPC recommendations. The All India House Rent Index chart given below demonstrates this:
2. Considering all these factors, and in line with our general policy of rationalizing the percentage based allowances by a factor of 0.8, the Commission recommends that HRA should be rationalized to 24 percent, 16 percent and 8 percent of the Basic Pay for Class X, Y and Z cities respectively. However, the Commission also recognizes that with the current formulation, once the new pay levels are implemented, the compensation towards HRA will remain unchanged until such time as the pay and allowances are next revised. Going by the historical trend this event is likely to be a decade away. Some representations have been received stating that towards the later part of the ten year period the HRA compensation falls considerably short of the requirement. Having regard to this, the Commission also recommends that the rate of HRA will be revised to 27 percent, 18 percent and 9 percent when DA crosses 50 percent, and further revised to 30 percent, 20 percent and 10 percent when DA crosses 100 percent.
3. Currently, in the case of those drawing either NPA or MSP or both, HRA is being paid as a percentage of Basic Pay+NPA or Basic Pay+MSP or Basic Pay+NPA+MSP respectively.

HRA is a compensation for expenses in connection with the rent of the residential accommodation to be hired/leased by the employee and is graded based on the level of the employee, and therefore should be calculated as a percentage of Basic Pay only. Add-ons like NPA, MSP, etc. should not be included while working out HRA.

Housing for PBORs in Defence, CAPFs and Indian Coast Guard

1. For a certain number of PBORs, there is an option to choose between HRA and Compensation in lieu of Quarters (CILQ). For the remaining, compensation for housing is provided through Family Accommodation Allowance (FAA), and for certain ranks, through

Single in Lieu of Quarters (SNLQ).

1. CILQ: The service conditions of the Defence Forces personnel demand that personnel reside in cantonments close to their Units. The entitlement of accommodation, therefore, forms a part of service conditions. Keeping in view functional requirements, an authorization of married establishment (by way of a specified percentage of the total establishment) has been decided by the government. PBORs who fall within this authorization percentage and cannot be provided married accommodation are entitled to Compensation in lieu of quarters (CILQ). CILQ is a composite allowance, meant to compensate for hiring of house, furniture, electricity and water etc. It is payable to PBORs who are married and are >=25 years of age. PBORs have the option to choose CILQ or HRA, whichever is more beneficial. This allowance is also applicable to similarly placed personnel of CAPFs and Indian Coast Guard. CILQ is payable at the following rates:

1. For the balance, compensation is through the FAA, which was introduced by the VI CPC. It is payable at the lowest rate of HRA to all PBORs of Defence services, CAPFs and India Coast Guard who do not qualify for benefit of HRA or CILQ. In Ministry of Defence, it is granted at the rate of 10 percent of Basic Pay, while in Ministry of Home, it is granted at aflat rate of Rs 1,050 pm.

1. SNLQ is applicable to JCOs and equivalent personnel of Defence Forces only. When not provided with any type of accommodation at the Duty Station, they are entitled to SNLQ which is equal to 2/3rd the rate of CILQ at that station, for their personal requirement, plus CILQ for their families at the rate of a Class ‘Z’ city.

1. The present provisions can be understood with a simple example. Suppose for a particular rank, the provision of Authorized Married Establishment (AME) is 50 percent and

there are, say, 100 such personnel at that place. Then first 50 personnel can choose whether to

opt for HRA or take CILQ. The remaining 50 personnel are entitled only to FAA. When posted

in Field areas, PBORs of Defence forces are entitled to HRA for their families at Selected

Place of Residence (SPR). However, no such provision is available in CAPFs or Coast Guard.

1. There is a strong demand from PBORs of CAPFs and Coast Guard for being extended

a similar benefit.

Analysis and Recommendations

1. There is no doubt that personnel of uniformed services are unique in several ways. They are required to stay in the field for long periods of time, away from families. Even in non-field stations (peace stations), a minimum strength is required to be maintained in the barracks forquick deployment at short notice.

2. It is noted by the Commission that there was a time when these personnel could leave their families behind in villages and go for field postings. However, times have changed. Many of these PBORs have working spouses and harbor legitimate expectations of raising theirchildren in urban areas.

3. With the AME percentage being limited, personnel take turns to fit into the AME percentage. An employee who is married but is less than 25 years of age is not entitled for AME at all, and therefore cannot avail CILQ. In the current context the provisions of AME as well as the stipulation of minimum 25 years of age to occupy these establishments are outdated and need revisiting.

4. It is felt that the service rendered by PBORs of uniformed services needs to be

recognized and their housing provisions simplified. The Commission, in the interactions it has

had with the men on the ground at all field locations it has visited, has seen firsthand that the

lack of proper housing compensation is a source of discontentment among these employees.

Hence, the following structure is recommended:

An employee with dependents, during field posting or staying in Barracks as functional

requirement will be eligible for accommodation for his dependents anywhere in the country.

* Provided government accommodation is not available for the dependents at Selected Place

of Residence. If government accommodation is available, no HRA is payable.

** Reduced HRA means rate of HRA applicable reduced by 5 percent. However, the reduced

amount cannot be less than the lowest rate of HRA applicable to Class Z cities/towns.

Allowance is available provided employee is required to stay in barracks as a functional

requirement and government accommodation is not available for the dependents at Selected

Place of Residence. If employee is staying in barracks by choice or government

accommodation is available at Selected Place of Residence, no HRA is payable.

@ Reduced HRA means rate of HRA applicable reduced by 5%. However, the reduced amount

cannot be less than the lowest rate of HRA applicable to Class Z cities/towns. Allowance is

available provided employee is required to stay in Barracks as a functional requirement. If

employee is staying in Barracks by choice, no HRA is payable.

# Provided government accommodation is not available, else no HRA is payable.

5. Staying in barracks cannot be equated with provision of adequate housing. Hence, some

compensation is provided for those personnel who are required to stay in barracks as a

functional requirement in the form of Reduced HRA. The restrictions related to Authorized

Married Establishment, 25 years of age as well as the concept of Separated Family

Accommodation should be done away with. CILQ, FAA and SNLQ should also be abolished.

Hutting Allowance

1. This allowance is granted to Railway servants living outside Railway premises who, for

the outbreak of plague in epidemic forms, are compelled to vacate their houses and to erect

temporary huts on Railway land or elsewhere. The present rate of the allowance is ₹100 pm.

No demands have been received regarding this allowance.

Analysis and Recommendations

2. The allowance is outdated. It is recommended for deletion.

Family HRA Allowance

1. This allowance is granted to Central Government servants posted in NE region to

compensate for the cost of stay of their families if they are left behind at the last place of

posting before proceeding to NE region. In lieu of this allowance, employees are allowed to

retain their house at the last place of posting, if they are posted in NE region, and allowed to

draw HRA in NE region as well. No demands have been received regarding this allowance.

Analysis and Recommendations

This allowance is in the nature of an incentive for posting to North Eastern region. It is

recommended that this allowance should be extended to postings in the Island territories

of Andaman, Nicobar and Lakshadweep also.

Rent Free Accommodation

This allowance is granted to IB personnel on confrere (a fellow member of a profession,

fraternity, etc.) basis, if admissible to police personnel of equivalent rank at that station. No

demands have been received regarding this allowance.

Analysis and Recommendation

The Commission opines that the allowance is outdated. Hence, it is recommended for

deletion.