LURE OF LOW COST HOMES

While lux­ury homes take a hit from the eco­nomic down­turn, af­ford­able homes are thriv­ing THE SEG­MENT IS SEE­ING A SURGE NEAR COMMERCIAL HUBS, IN­DUS­TRIAL TOWNS OR IT PARKS, WHERE BUY­ERS OF­TEN LOOK FOR A HOME CLOSER TO WORK.

India Today - - FRONT PAGE - By M.G. Arun with Malini Ban­er­jee Fol­low the writer on Twit­ter @MGArun1

Anita Mukher­jee, 63, a re­tired cen­tral govern­ment em­ployee, re­cently de­cided to move into a new home in Ra­jarhat, Greater Kolkata. The 1,000 sq ft, two-bed­room flat came with bet­ter se­cu­rity and recre­ational fa­cil­i­ties such as a club house, com­pared to her older home in Jodh­pur Park. “In Jodh­pur Park, a new flat would be small for our fam­ily of four, and would have cost me at least twice as much,” she says.

At a time when In­dia’s real es­tate sec­tor is pass­ing through a tough phase marked by slow­ing de­mand and ex­cess sup­ply in the lux­ury seg­ments, one seg­ment is thriv­ing—af­ford­able hous­ing— ben­e­fit­ing people like Mukher­jee. Ac­cord­ing to a study pub­lished by As­socham in De­cem­ber 2013, the real es­tate sec­tor suf­fered last year due to global and do­mes­tic eco­nomic slow­down, liq­uid­ity crunch, un­sta­ble cur- rency, high in­put costs, labour short­age, high in­ter­est rates and grow­ing in­fla­tion. In­vest­ments in In­dia’s real es­tate sec­tor were six per cent lower in Septem­ber 2013 at Rs 14.51 lakh crore, against the same month in 2012. But the af­ford­able seg­ment, where aver­age prices range be­tween Rs 2,500 and Rs 3,500 per sq ft, is see­ing a surge, spe­cially in ar­eas near commercial hubs, in­dus­trial towns or IT parks, where a po­ten­tial buyer can get a home closer to work. The seg­ment has been grow­ing at around 15 per cent, and is fore­cast to grow 1.5 times, from around 25 mil­lion house­holds in 2010 to 38 mil­lion in 2030.

Driv­ing this de­mand are af­ford­able home projects across the coun­try—be it in Greater Noida, Noida Ex­ten­sion or Greater Noida (West), Farid­abad and Ghazi­abad in the Na­tional Cap­i­tal Re­gion ( NCR), Ra­jarhat, Mad­hyam­gram, Be­hala and Barasat in Kolkata or Sripe­rum­budur, Ora­gadam, Chem­baram­bakkam and Siruseri in Chen­nai. Sev­eral builders have tapped into this op­por­tu­nity. Some of them, like South­fo­cused de­vel­oper Pu­ra­vankara, of­fer what they call “pre­mium af­ford­able” hous­ing, through a range of ex­tra life­style ben­e­fits such as swim­ming pools, gar­dens, elec­tronic se­cu­rity, am­ple park­ing space and play ar­eas. “With a short­age of around 24.7 mil­lion units, 70 per cent of it in the af­ford­able hous­ing seg­ment, we see it grow­ing at healthy rates in the next three to five years,” says Brotin Ban­er­jee, CEO and MD of Tata Hous­ing, which plans to launch 3-4 more projects in 2013-14 and ex­pand across Bhubaneswar, NCR, Chen­nai, Hi­machal Pradesh, Ma­ha­rash­tra and Kolkata.

Ac­cord­ing to a re­port by RICS (Royal In­sti­tu­tion of Char­tered Sur­vey­ors, UK) on ‘Mak­ing Ur­ban Hous­ing Work in In­dia’, af­ford­abil­ity in ur­ban hous­ing means pro­vi­sions of ‘ad­e­quate shel­ter’ on a sus­tained ba­sis. KPMG de­fines af­ford­able hous­ing on three pa­ram­e­ters —in­come level, size of dwelling unit

and af­ford­abil­ity. Al­though prices of af­ford­able homes will vary vastly across the coun­try, the com­mon fac­tor is that they are lo­cated within rea­son­able dis­tances from work­places and con­nected ad­e­quately by pub­lic trans­port.

“To­day’s eco­nomic un­cer­tainty is hit­ting the high-net-worth in­di­vid­u­als ( HNIS) more, as jobs in this seg­ment have not grown,” says Gu­lam M. Zia, ex­ec­u­tive di­rec­tor of real es­tate con­sul­tancy firm Knight Frank. In the last two years, sev­eral lux­ury projects came up, cre­at­ing a glut, while in com­par­i­son, af­ford­able hous­ing is al­ways an un­der­sup­plied mar­ket, he adds.

The seg­ment has turned at­trac­tive for fi­nan­cial in­vestors too. In 2011, pri­vate eq­uity ( PE) firm Car­lyle Group in­vested $26 mil­lion in Ban­ga­lore-based IT pro­fes­sional-turned-real es­tate pro­moter Jerry Rao’s Value & Budget Hous­ing Cor­po­ra­tion. An ap­pre­ci­a­tion in property prices with the af­ford­abil­ity tag makes good in­vest­ment sense too.

Some global ex­per­i­ments in af­ford- able hous­ing have been suc­cess­ful too. “It has worked well in the Lon­don mar­ket,” says Lord Andrew Hay, who heads the global res­i­den­tial di­vi­sion at Knight Frank. How­ever, get­ting the con­cept and pric­ing right are the key chal­lenges, he adds.

But the sec­tor is not with­out its eco­nomic, reg­u­la­tory and ur­ban chal­lenges. Scarcity of land, ris­ing costs and reg­u­la­tory is­sues such as lengthy ap­proval pro­cesses and ar­chaic laws like the Rent Con­trol Act are sup­ply-side con­straints. “The Govern­ment is not pro­vid­ing a level play­ing field. It is ac­tively against af­ford­able hous­ing,” says Rao. “Its laws and reg­u­la­tions are de­signed against af­ford­able hous­ing and en­cour­age lux­ury hous­ing.” One in­stance is that de­vel­op­ers have to pro­vide for free car park­ing space in most states, a cost that gets added up to the over­all project cost. An­other is the de­lay in get­ting land clear­ances to set up af­ford­able hous­ing projects. “What hap­pens, there­fore, is that you end up build­ing 3,000 houses while the po­ten­tial is for 100 mil­lion,” he adds.

On the de­mand side, ac­cess to home fi­nance and ris­ing in­ter­est costs on home loans are draw­backs. How­ever, for buy­ers, af­ford­able hous­ing still re­mains a sil­ver lin­ing in an other­wise gloomy mar­ket.

Pho­to­graph by CHAN­DRADEEP KU­MAR

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