‘Affordable housing will only take off if transport is robust’

Long before affordable housing became government’s priority and it became the buzzword, VBHC Value Homes (VBHC) realised its importance. For almost a decade now, VBHC has been going beyond strict norms of affordable housing to budget housing with a value

Excerpts: What is the total potential demand for affordable housing? Can you segregate it?

Our estimate for affordable housing is that there is an unmet demand of 21-22 million units. Beyond that, it's still a grey area and estimates will vary depending on parameters applied. Within that 85 percent or say 17-18 million is in the low income group / economically weaker section (EWS) housing segments. A mere 15 percent would be the middle and high income category housing demand. In this context you may now appreciate that the major market category is still not being addressed.

Demand wise, there is a whole lot in the five metros and in Tier - II cities, but there is a whole lot of demand sitting in rural India. In rural India, there are many who dwell in hutments and badly constructed houses; and they would want to move to quality houses.

What are the legal steps/ amendments which could accelerate the sector growth?

The issue with the Government policy of 10 percent is that 500 EWS units in a 5,000 units’ project don't do much to fulfil the requirement, more so if it is in the heart of any city. As a concept, it is just equivalent to the old idea of servant quarters.

Ultimately there have to be other uplifting factors. Consider the Pradhan Mantri Awaas Yojana subsidised loan which is a good step on the demand side. On supply side, the big practical impediment is the approval and clearance time for a project which has to come down, preferably through a single window clearance and emphasis on self declaration. If clearance time does not come down substantially for an affordable housing project, the developer then is forced to think about focussing on luxury housing project wherein the project value is much higher for the same process time and largely the same execution time.

What exactly have been the actions from the authorities?

Lots of state governments like Maharashtra, Gujarat and Karnataka, are looking at policy resolution for this situation. Here, any new housing projects have to generate EWS housing in 10 percent of area and hand over the same to the government authorities. These will then fix a sale price based on a ready reckoner calculation, invite bids and allot on type of lottery system.

Typical calculation for builder remuneration would be a unit size between 260-350 sq. ft and a rate of Rs 1,500-2,000, which would come to Rs 6-7 lakh per unit. Another innovation in policy is where a state government freezes on land parcels in different parts of the state and dedicates them to such dwellings. Karnataka government has created a land bank of 700 acres, and proposed development of residential units by EPC contractors.

With proper FSI allocation, this policy can accommodate a lot of demand. However, ground reality shows a bank of unsold or unoccupied units which have already been delivered to the authorities. Lack of allocation may be a policy issue, and lack of occupancy would likely be due to lack of supporting infrastructure in that mini market. For example, public transport is a key factor or constraint which leads to mismatch of demand and supply.

What would be the key factors to consider at project level?

One big challenge in affordable housing, which can literally make or break projects, is the status of infrastructure. For any buyer, a key factor is infrastructure and level of activity. Even the developers have to go beyond getting land parcels, transport and high level of economic or industrial activity are vital considerations. Till transport is not robust, affordable housing cannot take off.

This is where the peri-urban areas become strongly attractive. But in such areas you have land cost at Rs 3-4 crore per acre, and a separate construction cost. For VBHC specifically, Boisar, on the outskirts of Mumbai was attractive for that reason, because there is an MIDC industrial estate where around 1, 00,000 people come in every day. That was a target market. Similarly in Virar we had seen connectivity improve massively over the past decade or so. Shahapur is a location we liked because not only is it centrally located, but its cross connectivity factor through road and rail is very high.

Regarding affordable housing in rural areas, the equations can be redrawn effectively. Overall, affordable housing costs has been defined at Rs 6 lakh but with proper innovation at village economy level this could be maybe just Rs 2 lakh. Think of local level costs and aggregation of demand, which would make low-cost offerings viable. A single site of 30-50 dwellings in a village is definitely worth considering. Now in this scenario, if one were to add some incentive, such as subsidy or a soft loan, many families would either build better dwellings for themselves or shift to an affordable dwelling. This thinking has been a real success in Mexico. Villages anyway have a geographical ‘hub and spoke’ model. The hub could be local supply point for material and design and local talent would take over execution. Even the public distribution system could be used as a pipeline.

How do you profile yourself at this time?

VBHC in its operations history has delivered around 3,700 units to date. There is a bank of around 1,500 under construction, wherein half would be delivered in this financial year. We are currently active in Mumbai primarily in the MMR area, the NCR, Bangalore and Chennai markets and within that our short term focus is MMR and Bangalore.

Our median project size is 5-6 acres which generally gives around 350 units in MMR. In Bangalore we go for a project target of 2,000 units in 15 acres. While being in affordable housing, VBHC is not a pure EWS player. Our typical price range for a housing unit ranges from Rs 15-30 lakh. We would look to a revenue range of Rs 200 crore for the current fiscal. One key differential in our projects is internal amenities because within the budget housing segment we cater to high-end and demanding buyers. A swimming pool, a clubhouse, space for small commercial establishments - these are their demands. We typically aim to have a community setup at a site, where basic everyday needs like groceries, electrician and plumber services, doctor and chemist services, are all within the complex.