Should you go for housing schemes?
Housing schemes, especially the one launched by government agencies, are popular among end users because of location as well as price advantages. Here is what some experts have to say about them
The Delhi Development Authority is expected to roll out its new housing scheme in 2017, offering a large number of residential units in various parts of the city. Other state governments, too, keep coming up with different housing schemes. But before you buy a house in such schemes, you should look at their pros and cons. Here’s what industry experts say:
ANKUR DHAWAN
chief business officer- Resale, PropTiger.com
Advantages
Lower than market price.
Government authorities typically have the land price advantage and they are focused on reasonable profitability only, thus they are able to offer houses at lower-than market price.
They have location advantage as well.
Many times, their land parcels are in places where there is no private developer participation, making them more attractive.
Timely delivery. There is greater assurance of timely delivery with government housing schemes.
Disadvantages
Lack of unit of choice. Most of the times, buyers do not get to choose the unit of their choice. This can lead to cancellations, as we saw in the recent DDA auction.
Poor amenities. Most houses in these schemes are in the affordable segment, hence they do not have many amenities, compared to private developers. This has become a major weakness of government housing schemes.
Construction quality of such government schemes has also been sub-par, which makes them poor investments for the long term.
Overall, government housing schemes have lost their attractiveness in the recent times, as end users prefer good-quality housing from private developers.
HITESH SINGLA
principal partner, SquareYards
Advantages
Increasingly, state governments in India are coming up with new housing schemes to bridge the housing gap.
Often priced between Rs6 lakh and Rs35 lakh, these houses are popular with many end users. There can be significant price differences between the primary launch from a grade-A developer and a government scheme, even in the same area.
Disadvantages
In line with the price difference, often such apartments lack many amenities and other facilities. Even many DDA flats have been returned in the past due to poor quality. Likewise, the size of these apartments is generally small, and they mostly consist of one or two bedrooms, a hall and a kitchen only.
There are procedural bottlenecks too, such as long waiting and lock-in periods. In most such projects, there is a lock-in period within which an allottee is not supposed to sell the property. Even with DDA apartments, there has been a lock-in period of 5 years in the past. However, it has been removed this time around. There are other restrictions too, such as: registration price refunded in case of cancellation and a single allottee cannot get more than one house in a scheme.
ANUJ PURI
chairman & country head, JLL India
Advantages
One of the biggest advantages of buying into a government housing scheme is that one is assured of the project being compliant of all legal requirements in all respects.
The housing projects in such schemes often offer prime and central locations, especially when they take place on redevelopment sites of government-held land.
The flat sizes tend to be compact and in line with the demand profile in such locations, and of course the fact that they tend to be highly cost-effective.
Disadvantages
The drawbacks would include the relatively low availability of lifestyle-oriented features, and the fact that these projects tend to be high-density mass housing, resulting in lack of privacy and overall comfort. That said, such housing projects are aimed at budget homebuyers who often cannot participate in the larger market, which is catered to by the private developers. For them, ticket size is of paramount importance—and government housing schemes definitely fit the bill for them in that critical respect. This may not be an asset class that is interesting for many investors, but it is certainly highly attractive to end users in most of the main cities of India.
SHVETA JAIN
MD, India residential, Cushman & Wakefield
Advantages
These schemes provide affordable housing with the aim that residents of the city have dwellings at an agreeable cost. Thus, buying properties registered under such schemes offer various benefits, including pricing, location and security of investments. Houses under such schemes are sold at a substantially lower capital price than the market value within the micro market, usually in conjunction with the circle rate of the location. The end-users’ investments in these are secured as there is a guarantee of project completion and property ownership in a stipulated time. Legal and judicial clearances are also ensured as the government ensures these things before putting the properties for sale.
Disadvantages
These schemes are able to cover limited number of people within the city as there are conditions under which these houses are allocated. They are allocated mostly on domicile basis while in key cities such as New Delhi and Mumbai, a large section of the population is migrant. The government ensures a lock–in period before these houses can be sold. A more specific challenge is that an end-user doesn’t have a choice on the actual unit as houses are allotted by lottery system.
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