Attibele, Karnataka: This quiet town, 35km from Bangalore on the border of Karnataka and Tamil Nadu, could well be the lab where India’s next big real estate revolution is being incubated.
Value and Budget Housing Development Corp., promoted by Citibanker-turned-IT-entrepreneur Jaithirth Rao, Bangalore’s CSC Constructions Pvt. Ltd and Tata Housing Development Co. Ltd are among the companies that have either announced projects at Attibele or are looking for land there. The common thread that runs through their plans: affordable housing.
Attibele would seem to have all that is needed to build affordable homes: land that isn’t priced out of the market and proximity to an industrial hub as well as to a big city.
Zoning in: Attibele, 30km from Bangalore, has attracted attention from big developers such as Tata Housing, which is keen to buy a 100-acre plot there. Prices range between Rs70 lakh and Rs1.5 crore an acre. Hemant Mishra / Mint
Ramesh Ramanathan, another former Citibanker who runs citizen’s movement Janaagraha, has identified Attibele for his low-cost housing initiative that will sell 1,500 homes, developed on a 12-acre piece of land, for Rs5 lakh or less. Ramanathan, who is also a Mint columnist, says he was agnostic about the location for the project, but admits that Attibele met all his requirements. It is close to Electronic City, where firms such as Infosys Technologies Ltd, Wipro Ltd and Hewlett-Packard Co. are located. The four-lane road that connects the town to Bangalore passes by factories of firms such as TVS Motor Co. Ltd and Hindustan Granites Inc. Then there’s the cost: analysts and executives in the real estate business say land can be bought in Attibele for between Rs70 lakh and Rs1.5 crore an acre. That compares with around Rs1.5-4 crore an acre in Delhi satellite town Noida or Rs2-3.5 crore an acre in Bangalore suburb Whitefield.
“We were looking at other industrial hubs before we selected this location because we got a decent price,” says Pramod Kumar, executive director (operations) at Value and Budget Housing.
The company will spend Rs100 crore developing around 300-400 houses on 16.5 acres and will sell them at a sub-Rs7 lakh price tag. It hopes to see demand from people working in factories along Hosur Road or in firms in the Electronic City.
To be sure, the concept of affordable housing isn’t a new one. It is at least a few decades old, with the local development agencies of big cities being the original pioneers with their LIG (lower income group) flats. While a market for affordable homes never went away, large real estate firms started focusing almost exclusively on premium and luxury developments between 2004 and 2008 as the economy expanded rapidly and banks loosened their purse strings and issued loans to almost all loan seekers.
Since 2008, however, the bottom has all but fallen out of the real estate market and companies, even large ones, have turned to low-cost housing projects with a vengeance. In June, Unitech Ltd, India’s second largest real estate firm, launched its first Unihomes project in Chennai with flats on offer for between Rs10 lakh and Rs30 lakh.
“Affordable housing projects that have been launched in the last few months clearly brought back homebuyers and boosted sales. Not just price correction, developers launched projects at reduced price points,” says Shailesh Kanani, senior research analyst at Angel Broking Ltd.
Still, even these affordable housing projects are out of reach of most people. The existence of a market for extremely low-cost housing was proved by Tata Housing, among the first large real estate developer to enter the space. In May, the firm announced it would build and sell 1,500 houses at Boisar, near Mumbai, for between Rs3.8 lakh and Rs6.7 lakh.
There’s no telling whether such prices would be economically viable at Attibele. Ramanathan says that his low-cost housing initiative is a not-for-profit venture. The project also received a grant of $2 million (Rs9.3 crore) from the Michael and Susan Dell Foundation.
Typically, land accounts for around 30% of the cost of a housing project in a city like Bangalore, according to Praveen Kumar, chief executive (CEO) of One Third Earth, a Bangalore-based property advisory. However, in some premium areas in Mumbai, land costs sometimes touch a high of 40-50%, he says.
The boom-in-the-making in Attibele hasn’t escaped the attention of Tata Housing, which, according to two real estate consultants who didn’t want to be identified, is looking to buy a 100-acre plot there for its second low-cost project after the one at Boisar.
In an email response to Mint’s query, Brotin Banerjee, CEO and managing director (MD) of Tata Housing, says the company is in talks with a few landowners nationally. “We will announce our next project at an appropriate time.”
One low-cost project begets another, says a developer.
“The real estate has a herd mentality. If one developer shows a positive sign, then others follow too,” says P.C. Sukanand, MD of CSC Constructions. The company has several projects in Attibele and recently sold a chunk of a total 500 units, that were 250 sq. ft studio apartments for Rs5 lakh each. It is also developing around 4,000 homes on a 40-acre plot and plans to sell them for less than Rs10 lakh each.
That mentality is beginning to make itself evident in Attibele. Much of the area looks undeveloped, but some parts sport empty sites with billboards hawking projects in the making.
Attractive it may be to developers of low-cost housing projects, but Attibele isn’t the easiest place in which to acquire land.
It took Ramanathan almost two years to sew up a deal for his 12-acre plot. “Much of Attibele’s land is agricultural and needs to be converted to either residential or commercial for development and (this) is time-consuming,”?says One Third Earth’s Kumar. The two consultants mentioned in the first instance say the Tata Housing deal is stuck because of similar issues. Tata Housing didn’t respond to a separate email sent by Mint on zoning issues.
Such zoning issues that require conversion of land use mean that only large developers operate here because only they can afford to do this, says a senior executive at Vakil Housing Development Corp. Pvt. Ltd, which has sold around 100 acres around Attibele.
Interestingly, Boisar, despite being the location of Tata’s Housing project, hasn’t seen any other low-cost housing activity. Housing Development and Infrastructure Ltd does have 100 acres in the area, acquired over a period of time, but it is yet to announce any project in the area.