he government’s policy push seeks attention of private developers and investors, entering the segment in a big way, offering a whole new range of options to end-users
India’s 2030 vision of turning into one of the largest economy in the world has taken yet another responsibility. The government of India is doing everything it can, with a strong push and emphasis to affordable housing segment, now seeping in to the non-commercial sites too, including Tier 2 cities, and metros of the country. With this sector active, India is sure to become the world’s third largest economy by 2030.
The government’s policy push seeks attention of private developers and investors, entering the segment in a big way, offering a whole new range of options to end-users. Members of the Confederation of Real Estate Developers’ Association of India or CREDAI – the builder’s body, have an investment commitment of Rs 70,000 crore across the country on 375 affordable housing projects.
A proper structure with infrastructure management with affordable housing segment getting a recognized status, builders and developers are now trying to convert their existing projects into affordable housing projects. Lot of insecurity such as low marginal profits, and hassle surrounding it, no longer seems to be a matter of botheration as the housing sector under the government’s leadership is expected to drive volumes in the future. Affordable housing comes with houses being sold at prices ranging from Rs 50 lakh to Rs 2 crore. The residential units in 1 Tier cities cost the same; But cost thresholds are significantly smaller in the smaller towns and rural part of India. The market has to evolve before it can create a huge impact says a second generation builder.
“Backed by policies and sops to achieve the government’s coveted goal of ‘Housing for All’ by 2022, affordable housing has shifted the developers’ focus from luxury projects. Low-cost housing projects have faster sales velocity since the demand is high. This helps in better cash management. Hence, we are witnessing an increasing interest from even frontline developers who stayed away from this segment due to perceived low margins,” says Rajesh Krishnan, founder and CEO, Brick Eagle Group, a managing firm in affordable housing projects with over 1,000 acres across Maharashtra, Tamil Nadu, Gujarat, Rajasthan and Karnataka.
Xrbia Developers have ventured in by launching the ‘No-Income Proof Home Loan Scheme’, which enables applicants to apply for finance without submitting income proof documents. This developer group, supported by 20 housing finance companies under the leadership of Mr Rahul Nahar, Founder & MD, Xrbia Developers says, “This scheme is a breakthrough for those employed in the informal sector, and are denied the rights to access the housing finance despite a stable income.” The company, which claims to have maintained a sale rate of 2,000 houses every month in 2017 approximately, has supplied 3,776 houses under Rs 20 lakh in 2016 last year in the Mumbai Metropolitan Region (MMR) and Pune areas.
As the government brought the new Goods and Services Tax (GST) implementation into force from July 2017, the differencing factor of property distribution seems to be diminishing. An integrated national market is set to ideally bring about a proper structure in the real estate market.
“The recent implementation of GST has lowered the cost of construction materials throughout the nation. This is eliminating the uneven distribution of cost in the property sector in the real estate. This will likely bring about proper structure throughout the nation. There is no set factor as to how much cheaper these affordable residential units will be. With land being a major cost factor and a subject matter of many states, the price margins are set to vary,” says Deepak Kapoor, President, CREDAI-Western UP & Director, Gulshan Homes.
With the Real Estate (Regulation & Development) Act (RERA) coming into force from May 1 this year which was proposed a couple of years ago, a buyer’s claim and confidence along with a trust is expected to grow, boosting purchases at the lower end of the market. Private builders are turning into building on such markets as they get a proper dividend with ample space for proper cash management.
“A fully operational RERA will result in no project delays, promoting the market for investments in the industry. Infrastructure status to affordable housing will mean REITs playing a big role moving forward with this segment, and with over 30 allied industries closely related to this industry, will be effected parallelly. The change introduced in one area, will cumulatively spark change elsewhere creating a chain reaction, progressing the overall economy,” says Rajesh Goyal, Vice-President, CREDAI-NCR & MD, RG Group.
The government’s policy push to affordable housing along with falling interest rates are expected to create an enabling environment for the housing sector to reach affordable housing for all vision by the said date.
“Affordable loan rates, EMI calculations, subject locality, occupancy norms are among the many factors driving the home buying decision of the first-time buyers. In the context of affordable housing, home loan interest rates are particularly important for buyers who set aside a budget since even marginal reduction or escalation in EMI calculations can be a burden, propelling their decisions to halt or consider otherwise. Needless to add, the customer base from the mid-income and lower mid-income is a very important one for the Indian property market as the demand stems from here,” says Anuj Puri, Chairman, Anarock Property Consultants. “
Krishnan of Brick Eagle identifies Rajasthan, Gujarat, Uttar Pradesh and Andhra Pradesh as some of the states that have favorable housing area. “Rajasthan has an ideal framework which should be replicated across the country. Other states seem to follow and progress rather slow and safely; Land is a complex subject with extremely cumbersome project policies. For instance, transforming an agricultural plot into a non-agricultural plot is a tedious process; to add on the registrations and stamp duty matters takes a long time and are rather expensive, further escalating housing prices.”
Tax breaks, infrastructure status and easier access to bank loans with good service and interest rates are likely to increase large scale demand for affordable housing further. With private developers stepping in to join hands with the government’s “Housing for All” policy objective, a common man’s dream of owning a house will soon become a reality.