The Hindu Business Line : Knocking at ‘affordable’ doors

Like any major global occurrence that reshapes the world order, the current recession has changed the way people do business. In real-estate, developers are finally shifting focus from the saturated upper-middle class segment to lower- and middle-income groups.

And with government thrust to develop housing for them, developers too are finding it lucrative to address this section of the populace, says Mr Kamlesh C. Gandhi, Managing Director, Mas Rural Housing and Mortgage Finance Ltd.

According to a recent property survey, there is a requirement of seven crore houses in rural and urban India.

“Of the 2.4 crore houses required in urban areas, majority of the demand is from the middle-income group who have an annual income of Rs 75,000 to Rs 3 lakh,” he says. Houses in the range of Rs 2.5 to Rs 10 lakh would have to be developed to address the needs of this category of people. Though the demand for houses in this price range has always been there, adequate supply has been absent. This is now being addressed.

Santosh Associates, Tata Housing Development Company, Dewan Housing Finance Corporation Ltd and Purvankara are amongst developers who have announced affordable and low-cost housing schemes.

Focus on rural areas

With the shine on the glass facades of luxury houses dimming a bit, people in the rural areas will finally receive attention from the organised builders. Rural housing conditions have been bad despite the villagers having disposable income, says Mr Gandhi. There was no planned ventilation, sanitation or any other provision to make their homes better in an organised manner. This was primarily because they lacked access to formal finance, he says.

Mas has identified 120 villages in Gujarat, such as Dingucha near Kalol, Satoda near Halol and Bhadi near Bhavnagar, where the company is carrying out an educational drive, telling villagers to take loansand build houses. Mas is a subsidiary of Mas Financial Services Ltd and provides finance and other links between developers and customers in developing areas.

In the second year of operations, it has a turnover of Rs 30-40 crore from rural areas. The 120 villages were identified on the basis of an average population density (6,500), average landholding patterns, income levels and ability to repay loans and overall profiles, says Mr Gandhi. The company has long-term plans for rural development and feels that going forward, the real growth would come from the villages where 70 per cent of India’s population lives.

Mas operates in Gujarat, Maharashtra and Rajasthan with a database of 45,000 dwelling units in the Rs 2-25 lakh range. “Gujarat has a very prosperous rural population compared to the other States. Dairy farming and well-irrigated lands give them dual incomes and investing in rural housing can be very profitable here. We will pilot our project here and then take it to other States,” he says.

This is a model the company intends to follow as a commercially viable solution for financial inclusion of the rural populace, he adds. Mas caters to the informal sector where people do not have documented income proofs, such as a kirana store owner or a small-scale businessman. Of the total demand of 2.4 crore houses in urban areas, 50-60 per cent is from this informal sector and that is the sector Mas hopes to fund. Mas Financial used to provide short-term loans for 12-15 months of Rs 25,000- 50,000, but through Mas Rural Housing, it now offers loans for a period of 15 years.

The company has special models to assess the creditability of the customers based on which it provides housing loans, says Mr Gandhi. House mortgage and third party guarantee is mandatory for providing such loans. The company has disbursed housing loans worth Rs 7 crore till date.

Training for staff

Mr Gandhi says the company is working with International Finance Corporation for training staff to judge customer creditability. Around 100 relationship officers will be hired in the three States by the end of this year. National Housing Bank’s training programmes are tracked by the company to gain information on the appraisal techniques, housing finance activities and focus of government in the sector.

It is also working with the Monitor Group that promotes affordable housing in India. The company targets a turnover of Rs 300 crore covering 5-6 lakh customers and has tied up with affordable housing projects such as TMC Karjat near Mumbai, Neptune Swarajya Ambiwali Mumbai and Om Shantinagar-2 Ahmedabad.

It is also active in the outskirts of cities, in fast developing areas such as Kathwada, Saraspur, Ranip and Vejalpur in Ahmedabad.

Mr Gandhi says the rural and semi-urban sectors are going to be the real growth drivers of the economy. Developers who have good land banks in the outskirts of cities can successfully implement affordable housing schemes.

“These ignored classes of people will now be catered to in an organised and planned manner,” Mr Gandhi says.