Af­ford­able hous­ing poised for high growth this year

Ur­ban mi­gra­tion, at­trac­tive in­vest­ment propo­si­tion, steady sup­ply driv­ing growth

Hindustan Times (Chandigarh) - Estates - - FRONT PAGE - Ash­winder Raj Singh feed­back@livemint.com Ash­winder Raj Singh is CEO, ANA ROCK Prop­erty Con­sul­tants

NEW DELHI: Af­ford­able hous­ing schemes for the mid­dle and lower in­come groups are fi­nally on a se­ri­ous growth curve in 2017, with huge de­mand in both seg­ments now also be­ing met with in­creas­ing sup­ply. It may seem strange that mas­sive de­mand and mas­sive un­sold res­i­den­tial in­ven­tory can co­ex­ist, but this is in fact the re­sult of pric­ing mis­match.

The max­i­mum de­mand for hous­ing in In­dia has al­ways been and con­tin­ues to be in the af­ford­able seg­ment where prop­erty prices range from ₹15 lakhs to ₹50-60 lakhs, while a huge num­ber of ready-to-move projects in cities like Mum­bai are priced up wards of ₹1 crore.

This is ev­i­dently a stale­mate sit­u­a­tion for the ex­ist­ing sup­ply-hav­ing in­vested heav­ily in lo­ca­tion and premium fea­tures and ameni­ties, the de­vel­op­ers of these projects can ob­vi­ously not bring the prices of their in­ven­tory down into the af­ford­able brack­ets. These are premium of­fer­ings and will re­tain premium prices, with only mar­ginal down­ward price re­vi­sions pos­si­ble in some projects if the de­vel­oper in ques­tion is able to ab­sorb a loss. Oth­ers will wait for mar­ket con­di­tions to im­prove, which they are al­ready show­ing signs of do­ing.

The good news for the af­ford­able hous­ing seg­ment lies in the In­dian Gov­ern­ment’ s de­ter­mined pol­icy di­rec­tive to pro­vide Hous­ing for All by 2022. While this ob­jec­tive seemed a lit­tle fab­u­lous to be­gin with, we are ac­tu­ally see­ing some se­ri­ous ac­tion on the ground as a re­sult of this pol­icy di­rec­tive.

The gov­ern­ment is now col­lab­o­rat­ing with pri­vate builders and de­vel­op­ers un­der a pub­lic-pri­vate part­ner­ship model (PPP) to make Hous­ing for All by 2022 a re­al­ity. Many de­vel­op­ers have re­sponded pos­i­tively, which is not­sur­pris­ing. It is no se­cret that af­ford­able hous­ing prom­ises a lot of growth for all con­cerned - the prob­lem lay in the fact that the profit mar­gins in this seg­ment are quite small, and the Gov­ern­ment had not pro­vided de­vel­op­ers with a good in­cen­tive ra­tio­nale to take the plunge.

To­day, they have this in­cen­tive. The Gov­ern­ment has pro­vided 39% higher al­lo­ca­tions for af­ford­able hous­ing devel­op­ment vis-a-vis FY 2016-17 un­der the Prad­han Mantri Awas Yo­jana (PMAY). It hasalso ex­tended the Credit Linked Sub­sidy scheme to loans of value up to ₹1.2 mil­lion. And, while the Gov­ern­ment has also made a num­ber of other moves to meet the de­mand with sup­ply and ad­dress the af­ford­abil­ity is­sues for the mid­dle and lower in­come groups, the most im­por­tant stim­u­lus by far has been the fact that af­ford­able hous­ing has now been granted in­fras­truc­ture sta­tus. This trans­lates into easy fi­nan­cial credit for builders and makes it a lu­cra­tive seg­ment for them to in­vest in.

The In­vest­ment In­for­ma­tion& Credit Rat­ing Agency (ICRA), con­sid­ered to be the most re­li­able do­mes­tic rat­ing agency, con­firmed in are­cent re­port that the af­ford­able hous­ing seg­ment in In­dia is set to grow at a faster pace than the rest of the real es­tate in­dus­try - at more than 30%over the medium term-and will be the key growth driver for the In­dian mort­gage fi­nance mar­ket.

There are sev­eral other fac­tors driv­ing af­ford­able hous­ing. Mas­sive ur­ban in­ward mi­gra­tion: While lux­ury hous- ing con­tin­ues to hold its own in terms of its niche de­mand, the fact is that de­vel­op­ers to­day are more in­clined to­wards cre­at­ing af­ford­able hous­ing projects. Not only is such hous­ing sell­ing like hot cakes, it is also the most in­cen­tivised seg­ment for both de­vel­op­ers and end-users.

A large per­cent­age of the pop­u­la­tion is mi­grat­ing to the tier -1 and tier-2 cities, at­tracted by the new job op­por­tu­ni­ties ush­ered in by the coun­try’s grow­ing econ­omy. As a re­sult, the de­mand for af­ford­able hous­ing has in­creased ex­po­nen­tially. Si­mul­ta­ne­ously, Gov­ern­ment poli­cies like RERA have in­fused fresh buyer con­fi­dence into the real es­tate sec­tor, bring­ing fence-sit­ting buy­ers onto the mar­ket with firm pur­chase de­ci­sions for homes that meet their bud­gets.

An in­creas­ingly at­trac­tive

in­vest­ment propo­si­tion: On the back of the new reg­u­la­tions which the Gov­ern­ment has de­ployed to make In­dian real es­tate a more cred­i­ble and log­ic­driven mar­ket, prop­erty in­vestors fo­cus­ing heav­ily on af­ford­able hous­ing for the mid­dle and lower in­come groups, as this is by far the most at­trac­tive in­vest­ment op­tion now. Af­ford­able hous­ing is now a highly prof­itable long-term propo­si­tion for real es­tate in­vestors, and de­vel­op­ers also stand to se­ri­ously profit from cre­at­ing it.

Af­ford­able hous­ing sup­ply

in the right cities: The trend of nu­clear fam­i­lies driven by young pro­fes­sion­als is in­creas­ing all over the coun­try, es­pe­cially the metropoli­tan cities where In­foTech and other ma­jor cor­po­rate sec­tors hold sway.

In cities like Bangalore, Pune, Hy­der­abad, Chen nai, Thiru­vanan­tha­pu­ram, Na vi Mum­bai, G ur­gaon, Noida and New Delhi, young pro­fes­sion­als are ea­ger to own homes and set­tled own with their new fam­i­lies, so af­ford­able hous­ing is a ma­jor hit in such cities.

In­deed, it has never been a bet­ter time for af­ford­able hous­ing in In­dia. The seg­ment has lost its ‘down mar­ket’ la­bel and be­come a se­ri­ous and re­spectable busi­ness sec­tor for real es­tate de­vel­op­ers.

It is a given that the de­mand­sup­ply gap is still huge, but the fact is that it is nar­row­ing vis­i­bly for the very first time in sev­eral decades. Over the next five years un­til 2022, we will see af­ford­able hous­ing ac­tion on the ground un­fold­ing at an in­creas­ingly rapid pace - and ev­ery­one, not least of all the coun­try’ s econ­omy and most im­por­tantly the longne­glected end-user of af­ford­able hous­ing, stands to ben­e­fit.

MINT/FILE

Prop­erty prices range from ₹15 lakh to ₹60 lakh in the af­ford­able seg­ment.

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