Even as unsold units pile up in the mid and luxury segment, developers are moving to affordable housing to tap the portion of the market that is witnessing the maximum demand and, at the same time, is under-served. The overwhelming public response to the Delhi Development Authority’s (DDA) housing scheme in 2014 has enthused several developers to participate in such schemes. With the Central government’s push to ‘Housing for all by 2022’ and state governments including Haryana and Maharashtra framing affordable housing policies, developers have already started launching their projects under the banner.
The prime example is the Haryana Urban Development Authority’s (HUDA) affordable housing policy which was launched last year. Delhi-based Raheja Developers launched ‘Krishna Housing Scheme’ in sector 14 at Sohna, Gurgaon, last month under the plan. The company claims that against 1,660 apartments that are on offer, it has already sold over 1,800 application forms while bookings received at the developers’ office and designated bank branches have already crossed 800. Similarly, Noida-based Supertech’s project ‘Basera’ has also generated huge interest among the public. The project, located in sectors 79 and 79B, Gurgaon, was launched last month, offering 1,976 units. The company has received 1,200 applications so far.
According to those tracking the sector, many small developers have also quietly launched their projects in the region under the ‘affordable’ banner and this trend, Sachin Sandhir, global managing director emerging business and MD-South Asia, RICS, said, is likely to pick up. The developers are coming up with “such mixed projects, where there is provision of economically weaker section (EWS) and lower income group (LIG) category.” While the consumer stands to gain due to government-controlled prices, developers say that the affordable housing is not-so-affordable for them. However, they have no option but to invest in it given the huge unsold inventory lying with them in other segments.
Navin Raheja, chairman and managing director, Raheja Developers Ltd, said that the segment will catch up “as other options are not working and this is the only option to go for”.
The market is really bad. There is no demand in the mid and luxury segment as the interest rates are very high. People will start buying only when the interest rates come down. Till then, the developers will have to focus on the segment as this is where the demand is coming from,” Raheja said. Around 70 per cent of demand for housing is coming for EWS and LIG category while 20-25 per cent comes from mid-segment and 5 per cent from the luxury segment category, he said.
Sandhir said that the segment will continue to be the most reliable bracket “in such a market when inventory of unsold flats across all segments of housing is high … developers are opting for the saleability of the segment.” According to a committee constituted by the housing ministry, the housing shortage is estimated at 18.78 million during the 12th five-year plan period, of which over 95 per cent is expected in the EWS and LIG categories. With the urban population expected to grow almost 600 million by 2030, the demand for affordable housing will only go up.
Sharp rise in demand notwithstanding, experts said, the segment does not have any clear policy. Om Ahuja, CEO, residential services at Jones Lang Lasalle, said with no clarity, the growth in the sector will remain “haphazard”. “Houses are being constructed in the outskirts, where land prices are already low, and are being called affordable. They are becoming investment targets for high-networth individuals… You can’t call it affordable housing,” he said.
Since housing is a state subject, Ahuja said, states need to focus on two things – rental or lease housing policy and affordable housing policy. While in most of the European countries including Denmark, there is a rental policy, India has no such provision, he said.
“With the government’s focus on Make in India, the country is likely to become a huge manufacturing hub. For the manufacturing sector, many of those working in shops don’t have that kind of financial strength to own a house. For them, it is important that a rental housing policy comes up, especially in states which are a hub for the manufacturing activities,” he said.
He also added that those cities which are creating jobs including Gurgaon, Bangalore, Pune, Ahmedabad, Chennai, Hyderabad, Mumbai, Kolkata, and Noida will be the driver for growth of affordable housing segment. Given the popularity, states should now focus on driving the policy for this segment so that the developers don’t have to undergo the lengthy processes as applicable in mid or luxury segment, developers say.
“Some relaxation should be given. There should be single-window clearance. Also the floor-area ratio (FAR) should be increased to make it viable and profitable. Some hand holding is required either by way of giving fiscal incentives or declaring it as an industry so that realtors are able to beat the current sluggishness,” a developer, who refused to be named, said. The housing ministry had constituted a task force for the purpose. It had suggested increasing the limit of annual income defining the EWS and LIG category, incentivising affordable housing schemes by states, increasing the limit of service tax exemption to such projects and giving income tax exemptions to developers. The industry still awaits a final decision by the Centre and hopes that the Budget 2015-16 may provide the “hand-holding” that is required.