Bangalore: Ramesh Ramanathan, who runs the non-profit organisation Janaagraha, on Thursday launched his maiden low-cost housing venture in the industrial town of Attibele, about 35km from Bangalore.

New venture: (from left) Naresh Narasimhan, architect-principal, Venkatraman Associates; Ramesh Ramanathan, chairman and director, Janaadhar Constructions; S. Shridhar, CMD, Central Bank of India and Ramani Sastri, CMD, Sterling Developers, at the launch. Hemant Mishra / Mint

His firm Janaadhar Constructions Pvt. Ltd will build more than 500 homes priced at less than Rs5 lakh in the first phase, targeting buyers with a monthly household income of Rs15,000.

Janaadhar is promoted by Ramanathan’s Janalakshmi Financial Services, the majority stakeholder and a microfinance institution for the urban poor, Bangalore-based Sterling Developers Pvt. Ltd and architect V. Naresh Narasimhan.

State governments have drawn up several schemes for low-income housing, but private initiatives have been limited.

In 2008-2009, as developers started focusing on so-called affordable homes as demand slowed during the downturn, Tata Housing Development Co. Ltd was one of the first to launch more than 1,000 low-cost homes near Mumbai, selling them all in a few months.

“It took us almost three years to get clear land and approvals in place before we launched the project," said Ramanathan, also a Mint columnist.

The 12-acre project, which will cost less than Rs100 crore, received a $2 million (Rs9.3 crore) grant from the Michael and Susan Dell Foundation in 2008 primarily to buy the land. Janaadhar also tied up with Central Bank of India for project construction finance.

Market research by Value and Budget Housing Corp. (VBHC), which will soon launch its low-cost housing project in Attibele, indicates there are about 55,000 potential customers in the industrial corridor, where home ownership is just 22%.

VBHC is promoted by entrepreneurs Jaithirth Rao and P. S. Jayakumar.

Ghulam Zia, national director, research and advisory services, Knight Frank India, a property advisory, says that with the real estate sector recovering, demand for low-priced homes will only go up as overall prices rise.

Ramanathan’s Janadhaar Shubha project will be built in phases, adding up to 1,140 flats.

“There is a shortage of around 24 million housing units in India and most of it is in the low-income group," said S. Shridhar, chairman and managing director (CMD), Central Bank of India.

Janaadhar is scouting for clear land parcels in Chennai and Pune, where it wants to launch similar projects.

Elsewhere, Usha Breco Realty Ltd, the realty arm of Usha Martin Group, did a soft launch for investors on Wednesday to sell its low-cost project in the industrial town of Boisar, 60km from Mumbai. Tata Housing’s low-cost project is also in Boisar.

Usha Breco, which will sell 300 apartments in the first phase, sold 40 apartments on the first day. The homes are priced at Rs9-20 lakh and about 30% of the bookings were made by investors, though they were refrained from making bulk bookings.