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Though SBI’s recent announcement of cutting its base rate by 25 bps to 9.75 per cent is likely to positively impact the home loan segment, it will not prove to be a saviour for a majority of home owners.
As prominent developers continue to shy away from ‘affordable housing’, buying a dream home may continue to be a pipedream for a majority of the lower and middle classes.
Hiranandani Constructions has recently been directed by the High Court to build 3,100 affordable homes in Powai before it can proceed with further construction on the rest of the land. Niranjan Hiranandani, Managing Director of Hiranandani Constructions, has termed the lack of adequate enabling infrastructure in residential areas, as a major hurdle.
Basic infrastructure
Arguing that it was time the Government got around to providing basic infrastructure, he asked, “How can one be expected to build houses where there are no roads, metro, water, transport, school and other amenities? It becomes an unviable location for a builder to build there.”
Godrej Properties, which primarily caters to the premium housing segment, believes that lack of volumes in the present scenario is a stumbling block for realtors to get into affordable housing.
Pirojsha Godrej, Managing Director and CEO, Godrej Properties, said: “Presently, affordable housing is not our focus, but in three years it could be.’’ Stating that the Government “has a large role to play in terms of creating an enabling environment,” Godrej added, “Even after a builder launches such a project today, after constructing at a low cost and keeping a small margin, one can only succeed in this business if there are huge volumes involved. However, given today’s uncertain market conditions and the time taken in getting approvals and land, a developer’s ability to bring large volumes online in a time-bound manner is quite restricted.”
Hiranandani insists affordable housing is a misnomer.
“According to Deepak Parekh of HDFC, the new definition of affordable homes is one which is priced at five years’ gross income of a person. So, it is a moving target, depending on whether the person’s income goes up or down. Unlike aviation and the telecom sector, where lower costs to consumers enabled profitability, we in real estate can’t bring the affordability character in. No matter what we do, 30 per cent of the population will not be able to afford it,’’ he said.
Stating that the realty sector was in dire need of cross subsidies, Hiranandani said, “Though the middle class segment doesn’t need subsidy, they too find housing unaffordable. Land prices going up, low FSI and inadequate infrastructure development by the Government are cited as causes.”
Commenting on the cost factor acting as a deterrent, he added: “Today, 30 per cent of the total price of affordable housing for the middle segment is the cost of taxes, such as development charges, service tax, stamp duty and registration duty. So, where is the question of affordable housing?”
Adds Godrej, “Though there are companies that have started looking at that space, my sense is we will not have a truly huge affordable housing company in India in the next two to three years. The opportunity is there, but it needs to be fine-tuned on the policy side.”
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