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Business News/ Companies / Affordable housing may gather steam this year
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Affordable housing may gather steam this year

Shapoorji Pallonji Real Estate lines up two projects at the start of a big push for low-cost developments

Photo: Ramesh Pathania/MintPremium
Photo: Ramesh Pathania/Mint

Bengaluru: Affordable housing in India may get a leg-up this year with Shapoorji Pallonji Real Estate lining up two projects at the start of a big push for low-cost developments across the country.

The real estate firm, part of the Shapoorji Pallonji Group, plans to build homes priced at 20 lakh and above, a top company executive said. The company expects to build such homes across 18-20 million sq. ft in six-seven years through a separate platform.

“This is a separate business line for the group and we will create a separate team to focus on this. We are buying clean land for our projects as it gives us more control and will selectively do some projects on the joint development agreement model," said Venkatesh Gopalkrishnan, president (business development) and chief investment officer of Shapoorji Pallonji Real Estate.

The first two projects will be in eastern and western India, said Gopalkrishnan, without giving details.

The company will focus on building projects on the outskirts of the top cities—Mumbai, Pune, the National Capital Region (NCR) centred around Delhi, Chennai, Hyderabad, Ahmedabad, Bengaluru and Kolkata.

The per-square foot price will be in the range of 3,000-3,500, with homes near Mumbai priced at 30-65 lakh and in other cities at 20-50 lakh.

Shapoorji Pallonji Real Estate is already developing a large mass housing project, Shukhobrishti, in New Town, Kolkata, that it started a few years ago. But this is the company’s first effort to build low-cost or affordable homes on a pan-Indian scale.

The first wave of affordable housing in 2009-10 witnessed a slew of mostly non-mainstream developers, such as Value and Budget Housing Corp. Pvt. Ltd (VBHC) and Ramesh Ramanathan’s Janaadhar (India) Pvt. Ltd, venturing into the space. Tata Housing Development Co. Ltd went on to build 1,500 homes in the affordable category.

In the years that followed, critical issues such as land acquisition and project approvals crippled the pace of affordable housing projects, forcing many of these developers to move up the price ladder.

“Price points have changed in five years, no one can sell at 1500 a square foot anymore. The average price of our homes is 3,000 a square foot, which is sad because our target homebuyers’ annual incomes haven’t gone up 20%," said Jaithirth Rao, who co-founded VBHC with P.S Jayakumar.

A 600 sq. ft VBHC home would cost around 15-24 lakh.

Shapoorji’s Gopalkrishnan agreed that project viability improves in the 20-50 lakh price segment.

“The sub- 20 lakh is a very difficult segment and tough to sustain viability," he said.

“The key challenges in the affordable housing space in India today for developers are development of infrastructure, which includes civic and social amenities, and management of costs, which includes adaptation of technology to keep construction costs low and approval timelines in check."

India faces a housing shortage of around 18.4 million units, most of which is in the so-called economically weaker section category, according to government estimates.

“While the government does seem interested in providing housing for all, housing in the sub- 15 lakh category, which has the highest demand, isn’t really going anywhere," said Ashish Karamchandani, managing director, FSG Inclusive Markets.

A number of corporate entities have ventured into the affordable housing space in recent years to tap the sheer demand for such homes, and due to the fact that this segment remains
relatively untouched by the impact of an overall real estate slowdown.

In August 2014, real estate firm Mahindra Lifespace Developers Ltd launched its first ‘Happinest’ project in Avadi, Chennai. Later, in October, it launched its second such project at Boisar, near Mumbai.

The homes hit the pricing sweet spot that buyers had been waiting for—between 9 lakh and 18 lakh.

Managing director Anita Arjundas said the response to both the projects was good, with sales in Boisar even better than in Chennai owing to high demand in and around Mumbai.

“This year, we are looking for additional parcels of land in Maharashtra, now that we have a sense of timelines and approvals with our first two projects," she said.

Under a newly formed entity called Playtor Childspaces Pvt. Ltd, around 2,500 homes of around 300 sq. ft each will be built in three locations in Pune, targeting young families with children, said Rajesh Krishnan, chief executive of Brick Eagle, which has partnered Playtor as a financial specialist.

“We look at social housing that will target actual consumers and will be sold at market-driven prices," said Krishnan. “In 2015, under Brick Eagle, we want to invest in buying land for more projects."

Tata Housing, which is in the process of raising 500 crore of debt for new projects, will launch around 6-7 projects this year, said Rajeeb Dash, head, marketing, Tata Housing.

Under its subsidiary Tata Value Homes, it builds homes priced at between 10 lakh and 50 lakh.

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Published: 07 Jan 2015, 12:13 AM IST
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