The Hindu Business Line : Bearish realty market shifts focus to affordable housing

Developers need to shift focus to building affordable housing in a bearish market where demand has slowed down and project funding is a major concern for a majority in a cash-strapped realty segment.

The nimble-footed ones among the developers are already off the blocks, said Mr Deepak Parekh, Chairman, HDFC, adding that the time when almost everything and anything sold irrespective of the pricing were bygone. Margins may be lower, but assured sales and upfront payment are certain, and more importantly, speculators would be kept out, he said.

Transition an issue

It is definitely the way forward for developers but one should also realise that not all those focussed on the high-end niche development can make the transition, said Mr Ganesh Raj, Partner and Leader, Real Estate Practice, Ernst and Young

Mr Raj said the price band should be in the range of Rs 15 lakh in the south and in about Rs 25 lakh in the north and west regions.

Agreeing that margins would be lower in the affordable housing category, he said higher volumes should make up for lower margins.

Asked whether such a proposition would work in the case of land banks accumulated at high cost, he said the economics could be worked out and technology advancement could help scale down cost.

An Ernst and Young report said companies such as Sharpoorji Pallonji, Matheran Realty and Marathon Developers have aggressive plans for affordable housing. Omaxe had set up a subsidiary, National Affordable Housing Infrastructure Ltd, to develop such housing units.

Similarly, Bangalore Puravankara Projects has formed Provident Housing and Infrastructure to build affordable homes across the country.

One million homes

Omaxe has plans for 100 locations in 21 States and union territories to build one million homes in the price band of Rs 2.99 lakh to Rs 9.99 lakh.

The townships, in the range of 100-1,000 acres, will also have 1,040 schools and 410 hospitals, the company said.

Puravankara Projects intends to build 64,500 such affordable homes in the price band of Rs 10-20 lakh, across five cities in five years. The units of one, two and three bedrooms will be available for Rs 10 lakh, Rs 15 lakh and Rs 20 lakh. The projects will be executed by its subsidiary Provident Housing and Infrastructure Ltd.

The projects will come up in Bangalore, Chennai, Hyderabad, Coimbatore and Mysore. Over 59.80 million sq ft will be constructed at a cost of Rs 8,000 crore.

In the next phase Provident Housing plans to Delhi, Kolkata, Kochi, Jaipur, Pune and Nagpur.

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