Affordable housing is the new flavour

Between 2003 and 2007, the real estate sector, both commercial and residential segments, had a boom, seeing a runaway rise in price, growth and profits. Realty companies were focussing more and more on luxury apartments. The base sizes of houses became larger. Small house segment was ignored completely.High consumer confidence, low interest rates and a belief that the prices will only one-way, led to this euphoria.

Several construction companies raised large sums of money through IPOs. After the January 2008 crash, the real estate stocks are among the worst affected. In the first six months, the ET real-estate index has gone down by over 60 % from its peak. Most real-estate stocks are traded today even below their IPO issue prices.

Whereas, the stocks were down, the prices of houses and real estate have not seen any appreciable corrections, although precise information is hard to come by on this sector. Business World reports that in Mumbai recently, Bandra Kurla complex, a piece of commercial estate got only Rs 15,000 per sqft against Rs 40,000 for a similar property in 2007.

One visible indication of the slowdown in the residential segment is the announcement of affordable housing projects by the big builders, who were hitherto only concentrating on the luxury segments. With rising prices and interest rates, the demand for luxury apartments ( Above Rs 50 lakh per apartment) has dramatically come down.  

Purvankara has announced a new company for affordable housing called ” Provident housing”.

In the first phase, the affordable housing project will cover Bangalore, Chennai, Hyderabad, Coimbatore, and Mysore where 64,500 homes with a total built-up area of 59.80 million square feet will be constructed over the next five years.

In the second phase, the company will cover cities like Delhi, Kolkata, Kochi, Jaipur, Pune and Nagpur.

The prices of Provident homes, which are to be developed in a phased manner, are currently priced at Rs.1 million, Rs.1.5 million and Rs.2 million and comprise of one, two and three bedrooms.

Omaxe a Delhi based developer has formed a subsidiary called ‘National Affordable Housing and Infrastructure Ltd’ and proposes to build ‘10 lakh’ affordable homes.

The company is planning to offer these housing units, to be developed in the next five years, in a price range of Rs 3-15 lakh per flat, sources said.

However, these units may not come up in metro cities like Delhi and Mumbai due to high land costs and the company is rather targeting tier-two and three cities such as Sonepat, Nimrana, Bhiwadi, they added.

With an estimated shortage of over 25 million homes in India, these projects should become successful. The space vacated by the State Housing Boards is now being taken up by the private realty companies. Is this only a short-term strategy to beat the downturn or these companies will remain in ‘affordable housing’ segment always, only time will tell.

There is definitely a space for doing a ” Nano” in housing. A 2BHK well-constructed flat with no frills, for a price of Rs 5 - 7 lakh in a Tier -II city or in metro suburbs. Any takers !