Bangalore: Low-cost housing is set to witness a second phase of growth as entrepreneurs and private developers who ventured into this segment during the economic slowdown plan fresh projects.
Traditionally a government-led domain, budget housing saw the entry of firms such as Tata Housing Development Co. Ltd, Janaadhar Constructions Pvt. Ltd, Value and Budget Housing Corp. Pvt. Ltd (VBHC) and Usha Breco Realty Pvt. Ltd in 2009-10.
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Now, despite facing inconsistent sales and land acquisition problems, they are keen to launch new ventures.
Demand for such projects is huge in India. The country faces a shortage of 24.7 million dwelling units, of which 88.14% pertains to the poor, according to government data.
Janaadhar Constructions launched 540 homes in Bangalore in April, each costing less than Rs 5 lakh, in its first budget housing project. After selling around one-third of this stock, it plans to launch three similar projects at an average cost of Rs 25-30 crore each.
“We are happy with the sales (in the first project) because we didn’t encourage bulk investors or speculators, and focused on end-users, and that will continue,” said Ramesh Ramanathan, a promoter in the firm and who runs the non-profit body Janaagraha.
VBHC, promoted by entrepreneur Jaithirth Rao and P.S. Jayakumar, launched its maiden project Vaibhava this year in Bangalore, with homes priced up to Rs 10 lakh.
It now plans to launch 8-10 projects in Nashik, Mumbai, the Delhi-National Capital Region (NCR), Chennai and Hyderabad by the end of next year.
Rao said VBHC will sell stake in private placements to raise up to Rs 100 crore. It raised Rs 17.3 crore in September from India Financial Inclusion Fund (IFIF), an India-focused fund.
Low-cost builders hope the Union and state governments will support this growth process. Talks are on for incentives such as speedy land approvals and single-window clearance. Currently, it could take up to 200 days to get all permissions for one project.
“We are asking for an infrastructure status for our projects to avail tax benefits,” said Rajeeb Dash, head, marketing, Tata Housing.
“We are addressing the issue of high land transaction costs and the lengthy process of approvals so that a single window clearance can be provided, and asking states to lower stamp duty and registration fee,” said Kiran Dhingra, secretary, Union ministry of housing and urban poverty alleviation.
Pankaj Kapoor, chief executive of research firm Liases Foras, said, “There should be a holistic approach towards offering such housing products at genuine price points even within large property markets.”
Developers, having gained experience from their first projects, said they won’t commit the same mistakes again.
Usha Breco’s second project at Boisar, near Mumbai, will have fewer single-bedroom flats, said Pranav Desai, chief investment officer. “It’s been a learning curve for us in buying patterns, like people don’t mind (spending) a little more but they want two bedrooms.”