Bengaluru/Mumbai: The Shapoorji Pallonji Group on Wednesday launched its affordable housing venture that, in the first phase, aims to build 20,000 homes in seven years for about 5,500 crore.

The Mumbai-based construction and development firm said it will build projects in both bigger and smaller cities under the brand Joyville. In the first phase, it will develop 20 million sq ft of housing across eight projects in Mumbai, Pune, the national capital region (NCR), Chennai, Kolkata, Bengaluru and Ahmedabad.

Last year, the group joined hands with Standard Chartered Private Equity, International Finance Corporation (IFC)—an arm of the World Bank—and the Asian Development Bank (ADB) to form an investment partnership that would put in about $200 million to build 20,000 homes across the country. Standard Chartered, along with IFC and ADB, will invest 70% of the money.

“We have sought external funding from three global private equity firms. This will strengthen our position in acquiring land across the country for our affordable housing initiative," said Kekoo Colah, executive director, Shapoorji Pallonji and Co. Pvt Ltd.

The capital will be mainly used to buy land and meet project approval and initial infrastructure expenses. The company will raise loans for construction.

The first Joyville project will be launched this week in Howrah, near Kolkata. The development will have over 3,000 homes on 30 acres. The price of a 500 sq ft, single bedroom unit would be 20-22 lakh and a two-and-half or three bedroom unit would be priced at around 45 lakh.

Other such projects will be launched in Mumbai and Pune this year. In Mumbai, prices of homes may go up to 60 lakh due to the high cost of land.

Shapoorji Pallonji enters the affordable housing space at a time when the real estate sector is in the midst of a slowdown with realty firms desperately trying to woo buyers, who have stayed away for a variety of reasons, including high prices.

“We started looking into the affordable housing way back in 2005 when we had tied up with the West Bengal government to launch affordable houses in Kolkata. Over the last few years, we have realized that there is huge unmet demand for houses for the middle income and low income groups across the country. The shortfall is gigantic," Colah said.

In an attempt to tap this burgeoning demand, a clutch of non-mainstream developers such as VBHC Value Homes Pvt. Ltd and Janaadhar (India) Pvt. Ltd ventured into the affordable housing space around 2009-10. Tata Housing Development Co. Ltd started building low-cost houses and more recently, in 2014, Mahindra Lifespace Developers Ltd launched its affordable housing arm Happinest with projects in Avadi, Chennai and Boisar, near Mumbai.

“We have already procured around 9 million sq ft of land in Kolkata, Mumbai and Pune. We expect to complete land acquisition in the rest of the cities over the next one year," said Venkatesh Gopalkrishnan, business head, Joyville Shapoorji.

Gopalkrishnan said the key challenge would be to get approvals and launch the projects on schedule, which would help in managing the costs well.

Among the first entrants in affordable housing, firms such as VBHC have faced issues with lengthy approval processes and Tata Housing is focusing on the more profitable premium housing segment, even though it continues to build budget homes.

“Even in a slow market, there is huge demand for smaller ticket-sized homes. In recent years, affordable housing schemes in Haryana have met with a lot of success. But the real challenge for developers would be the ability to provide smaller homes at lower prices and make it profitable," said Mudassir Zaidi, national director, residential, Knight Frank India, a property consultancy.

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