Building from the bottom

The shortfall of millions of houses in the country has been totally ignored by the margin-driven realtors. 8220;Where is an affordable house today?8221; says Aditi Sinha, a 46-year old, single,unemployed woman who has been living as a tenant. She was expecting to win a DDA house with the money her father left. But like lakhs others, she was not among those 5,000-odd lucky people. Last year, her father died after a prolonged illness and she, being unmarried, started receiving the pension as a single, unmarried, dependent daughter. 8220;The problem is,8221; Sinha says, 8220;it is difficult for me to look for even a janta flat beyond what the DDA offers. Now, I will wait for the next offer from the DDA.8221;

Demand iceberg

The crisis in real estate is not because of a demand deficit or a low consumer sentiment; it is because of an utter lack of affordable products. Huge unsold stocks lying with developers mostly in luxury and high-end homes are an ample proof. S Sridhar, chairman 038; MD, National Housing Bank, tells Express Estates that during the annual meeting of builders way back in July 2007, he had suggested that they needed to have products catering to the low- and middle-income segments. The developers had conceptually agreed, but it has not translated into action yet. Sridhar also says that developers shied away from affordable housing because of low margins and a limited paying capacity. 8220;There is no speculative demand in this segment. This is core demand that will not evaporate and is driven by need,8221; says Sridhar.

Realtors have their reasons for not getting into affordfable housing. 8220;Restrictive land policies of the past resulted in private developers not showing much interest, and affordable housing became a preserve of local development authorities or housing boards in most cities,8221; argues Anshul Jain, CEO of DTZ International Property Advisers. 8220;Moreover, rising prices in the last few years have made residential housing unaffordable.8221;

A recent study by DTZ highlights that there is no housing crisis, given the quantum of upcoming supply in India, but there surely is an affordable-housing crisis. A survey across 15 Indian cities reveals that the affordable housing gap based on the mean household income and cost of the upcoming unit is worse in Tier 1 cities than in Tier 2 and 3. In Mumbai, the mean monthly household income is about Rs 10,000 projected for 2010 translating into an affordability of Rs 5 lakh, while the lowest value of an upcoming residential unit is Rs 45 lakh which is affordable by less than 1 per cent of the population, highlighting a big mismatch. Similarly, in Kochi a Tier 3 city, the average monthly household income is approximately Rs 6,000 projected for 2010 translating into an affordability of Rs 3 lakh, while the lowest cost of an upcoming residential unit there is Rs 9.5 lakh which can be afforded by 11 per cent of the population. The survey clearly shows that the developers have touched only the tip of a huge demand iceberg.

Where was the government?

While margins drove private realtors away from affordable housing, the state agencies have inexplicably ignored this segment. Mahavir Naagar of Naagar Associates, a Delhi-based real-estate company, says even DDA hasn8217;t done much in the last 10 years.8221;Even the state agencies have fallen short of the expectations of the affordable segment. The prices of DDA8217;s LIG flats have crossed the budget of a low-income family as the agency has not been able to check the prices and dole out the right supply.8221; In the DDA draw, held this Tuesday, the lowest cost of a one-room flat was around Rs 7.20 lakh and only 128 such flats were offered. The DDA is now expected to announce several thousands more flats soon. 8220;Public agencies have to revive interest in affordable housing,8221; agrees Sridhar.

Kumari Selja, minister of state for housing 038; poverty alleviation, says the government is working on afforadble housing. 8220;We have some big plans for affordable houses in rural as well as urban areas, which we will announce shortly,8221; she says. 8220;We also have some innovative plans towards a major rental housing programme.8221; Selja says the private sector needs to work in partnership with the government towards the shared goal of providing housing for the low-income group.

Realtors8217; roadblocks

When realtors think of affordable housing, they see some roadblocks ahead. High land cost is one. M Murali, MD of Sriram Properties, explains, 8220;High land cost is one of the major deterrents in affordable housing as it constitutes 25-35 per cent of the total project cost, thus reducing potential margins in the business and affecting the viability of affordable housing in existing residential projects.8221; He says that most of the available land is on the urban fringes, making connectivity a big problem. 8220;It become burdensome to proceed as most of these lands need conversion from agricultural to residential segment.8221;

Change is in the air

Now that interest rates on home loans are also coming down, there is a rush for new affordable housing projects across the country. DLF has announced its plans to invest Rs 15,000 crore over the next three years to develop various residential projects across the country in the range of Rs 15-40 lakh. A Harikesh, vice-president, DLF Home Developers, says, 8220;We will invest Rs 5,000 crore a year, over the next three years on mid-income housing projects. We have launched mid-income housing projects in Bengaluru, Gurgaon, Hyderabad, Indore, Kochi, Kolkata and Pune. The company also plans to launch similar projects in Chandigarh, Jalandhar, Ambala, Goa and Lucknow in the next six months. DLF Homes plans to launch such projects in all 31 cities where the company will have a presence by 2009-10,8221; Harikesh said. Some of the other realty players such as Puravankara Projects and Omaxe have also ventured into low-cost housing through separate companies.