With apartment sales falling by over 20 per cent due to high property prices and
Reserve Bank of India's (RBI) anti-inflationary measures, developers have again started focusing on affordable housing to tide over the current crisis.
They had done this in 2008 when recession in the West and slowdown in the domestic economy had squeezed demand forcing them to lobby for a bailout.
Having received a breather they and their investors quickly resorted to jacking up prices by switching over to luxury homes. Now that a 2007-08-like situation is apprehended, affordable homes have again come into focus. Most developers are highly leveraged and drop in sales has caused a liquidity crunch.
"Sales have dropped, prices are stagnating. The prices should go down. If the supply of houses does not gain momentum, prices would go up in six months," said Niranjan Hiranandani, managing director (MD), Hiranandani Constructions, and chairman, Ficci Real Estate Committee.
"Rising home loan interest rates and RBI's moves to stop lending to developers has created a problem. RBI must relook its policy. How can rise in the equated monthly installments (EMI) of a housing borrower help tackle inflation?" Hiranandani asked at the sidelines of a Federation of Indian Chambers of Commerce and Industry (Ficci) real estate summit.
He added that the government, having said in the last budget that it would give a boost to low income housing, has done nothing on this front. Developers are now banking on affordable housing that could bring buyers back. Many have postponed buying decisions due to the prohibitive prices and this waiting could prolong. "Affordable homes are the in thing and are in demand. If we don't build them, people will build on their own," Shailesh Puranik, MD, Puranik Builders, said.
His firm is planning to develop 20,000 affordable homes in the price range of Rs 5 lakh to Rs 15 lakh in a 300-acre township planned at Neral, 91 km from Mumbai. Joe Silva, who had pioneered the low-cost homes concept in India even before Tata Housing, is back in action. His Tanaji Malusare City (TMC) at Karjat, which ran into problems three years ago due to infighting among partners, is set to churn out ultra low-cost homes. The company is selling at Rs 1,500 per sq ft. "Having sorted out the problem, we are back. We will produce 500 homes every month from now onwards. Going ahead, we will go for outright sales rather than accepting bookings," Joe Silva, chairman, of TMC, said.
A peculiar thing is being observed in Chennai. "People who missed out in their mid-30s to buy a house are now fuelling demand for affordable homes. They are feeling bad at not having a house of their own and are scrambling to buy one. Eighty per cent of the demand is from this segment," Chennai-based developer Padam Dugar, MD of Dugar Homes, said.
Developers said affordable housing cannot be possible without government support. They are asking for exemption from service tax and a sharp cut in plan sanction fee to be able to build affordable homes.
Courtesy: Mail Today
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