India’s developers turning to affordable housing

MUMBAI:  Developers in India who have been offering mid to high-end residential real estate are turning to mass affordable housing in the aftermath of the economic slowdown.

“Most large developers have now woken up to the fact that affordable housing projects have the fastest absorption rates and are focusing on this hitherto neglected sector,” said Anuj Puri, chairman & country head of Jones Lang LaSalle Meghraj to the theedgeproperty.com.

Since the economic slowdown, enquiries for fancier homes have slowed down immensely. Increased job insecurity and decreased buying power have reduced buyers' willingness to take the plunge in mid-income and luxury residential real estate.

“Developers who were catering solely to these classes have now turned to mass housing. This is a high-volume / low-margins segment, but it is defined by limitless endless demand. Therefore, developers see this as a suitable segment to cater to for the tide-over period until demand for larger formats revives,” said Anuj.

Developers including Unitech, Rustomjee, Omaxe and Lodha have announced intentions to launch affordable housing projects.

“The fact that these major names are getting involved in this segment is extremely significant. By how much the segment will grow depends on how many of these projects actually see the light of day,” said Anuj.

There is a ready private equity funding available for affordable housing projects, since the demand for such projects is assured. Generally, projects by established brand names that show sufficient potential for fast completion and absorption have access to this funding.

Affordable housing projects in most cities are usually seen only in fringe areas of large cities.

“Admittedly, it is difficult for developers to develop affordable housing in affordable price ranges within the city due to high land prices. The Government must either promote re-development of old buildings or provide better infrastructure to distant suburban locations where the population could reside while continuing to work within the city. This would ease the commuting time, allow access to vast land parcels outside the city and help decongest our overcrowded city,” said Anuj.

Anuj added that there is a demand for 2-bedroom hall kitchen (2BHK) format homes  within a budget of Rs 6-12 lakh. The highest demand for such units comes from Delhi, Mumbai, Chennai, Bangalore, Hyderabad and Kolkata among the large cities, and Ludhiana and Nasik among the smaller cities.