While the state housing authority, which is supposed to build affordable houses, is facing criticism in Mumbai for the narrowing gap between the cost of its houses and market prices, the cost of its houses in certain schemes has even surpassed market rates in some other parts of Maharashtra.
As per the Maharashtra Housing and Area Development Authority’s (MHADA’s) pricing policy, the cost of about 1,000 houses in Nashik and another 500 in Aurangabad was coming to nearly 15-30 per cent more than the prevalent market rates, with officials fearing a dismal response.
To bring the cost closer to market rates, the authority has now decided to lower the profit it charges from the original 15 per cent to 10 per cent for most of these houses, which are meant for the middle-income group.
MHADA officials attribute the high cost of these houses compared to the commercial sector to a slump in the realty market.
Satish Gavai, vice-chairman and chief executive officer at MHADA, said, “There is a slack in the real estate market, due to which builders are pushing rates down. We have already taken a decision of giving these regional boards a relaxation by lowering prices. If the houses still remain unsold, we will sell them on a first-come basis, irrespective of the income category.”
In Aurangabad, MHADA’s local board had tried to advertise and sell 256 houses in its scheme at Walunj, spread over an area of about 5.5 acres and located on the outskirts of Aurangabad city, on three different occasions. However, despite all-out marketing, it received only 87 applications. Even of these, some backed out later.
An internal note presented to MHADA by its Aurangabad board said that as per the authority’s pricing policy, the houses were to cost Rs 26.85 lakh per tenement, or Rs 2,934 per sq ft, including elevators, whereas the market rate was around Rs 2,200-2,400 per sq ft.
However, even after lowering the profit margin, the cost of Walunj houses is coming to Rs 2,689 per sq ft, which is still about 12-22 per cent higher than the market rate that the Aurangabad board has surveyed.
Varsha Thakur, chief officer of MHADA’s Aurangabad board, said, “A major reason for the lack of adequate response for the Walunj scheme, which is in an industrial belt, is also because many industries are on the verge of being declared as sick units. It is also outside the city limits. Hence, there is not much demand.”
In case of Aurangabad board’s 248 tenements in Tisgaon, the rate was working out to be Rs 25.9 lakh per house, or Rs 2,831 per sq ft. With a cut in MHADA’s profits, the cost has dipped to Rs 2,634 per sq ft, which is still higher than the market rates. The Aurangabad board is soon planning to advertise for the sale of houses in its Tisgaon scheme, built over a five-acre plot.
MHADA’s Nashik board is preparing to advertise for about 1,000 houses, mostly for the middle-income group, in about two or three months. However, there are concerns that the lack of affordability, as compared to the market rates, may lead to a poor response.
Sarita Narke, chief officer of MHADA’s Nashik board, said, “The real estate market is stagnant. I had studied the market scenario in March 2014, when the market rate was about Rs 3,200 per square feet. But now, many builders have dropped their rates to Rs 2,800 per square feet. MHADA rates are roughly Rs 500-1,000 more per square feet than the market rates. We are in the process of recalculating the rates now with the reduced profit margin.”