Bengaluru: Homes costing up to 45 lakh have emerged as the sweet spot for builders and buyers alike, helping partially offset a tough real estate environment in India, with rising demand in this price category aided by benefits under the goods and services tax (GST) and the government’s aim to provide housing for all.

An increasing number of property developers are looking to tap the so-called affordable housing segment because of high demand and decent profit margins.

The government has, of course, sought to make it easier to buy homes, particularly for first-time buyers, through steps such as reducing the concessional GST rate from 8% to 1% on under-construction affordable homes and offering interest rate deduction up to 3.5 lakh, compared with 2 lakh previously, for homes priced up to 45 lakh and having a carpet area up to of 60sq. m.

“Homes in this price category have huge potential not only for the tax benefits, but also for the sheer demand and affordability," said Pankaj Kapoor, CEO of Liases Foras Real Estate Rating and Research Pvt. Ltd. “In the past year, 20-30% of homes sales came from this price segment and this will grow, with increase in new supply in both tier I and II cities. Even in an expensive market like the Mumbai Metropolitan Region (MMR), 30,000 one BHKs were sold in the last financial year."

According to Anarock Property Consultants, between January and June, MMR topped the list of seven metros with the highest launches of 17,700 homes (priced below 45 lakh and 60sq. m). Pune came second and the National Capital Region (NCR) third, with 9,350 and 6,970 units launched, respectively, during the period.

(Photo: Ahmed Raza Khan/Mint)
(Photo: Ahmed Raza Khan/Mint)

Rohit Poddar, managing director of Poddar Housing and Development Ltd, which builds affordable housing projects in MMR and Pune, said the company’s strategy is to build 20-45 lakh homes. In Badlapur, a distant suburb of Mumbai, Poddar Housing launched 300 residential units of 350sq. ft at around 20 lakh each this year and sold all of them. It plans to start three-four projects in Pune and Mumbai in the months ahead.

“Demand is there if adequate infrastructure is present. The big challenge is to find the right cost structure because earning profits building 20 lakh homes is tough," said Poddar.

Many developers have burnt their fingers with luxury housing, and low-cost housing has been equally difficult, with high land costs, lack of infrastructure and execution challenges.

Despite the adversities, developers are pursuing a middle ground to bring back elusive homebuyers.

Ram Walase, managing director and CEO of VBHC Value Homes Ltd, said it is focusing on building homes costing 20-45 lakh. At least 75% of its new project at New Panvel in Navi Mumbai is in this category.

Alok Mehta, vice president of product strategy at Vatika Ltd, said that at the 225-acre Vatika India Next 2 township in Gurugram while the largest category of homes cost 40-80 lakh, it has earmarked a couple of land parcels where it plans to build 10-20 lakh homes.

In Bengaluru, that has been the best-performing market during the property slowdown, with developers trying to be practical and strategic about building.

Shriram Properties Ltd has decided to build sub- 45 lakh projects in Chennai, Bengaluru and Kolkata. It has around nine launches planned this year, a few of which are in the 30-40 lakh price bracket.

Ozone Group CEO Srinivasan Gopalan said all the company’s products in Bengaluru are priced at less than 45 lakh each. Ozone, which is also present in Mumbai and Chennai, has a new launch of homes costing 18-35 lakh in Bengaluru later this year, he added.

“Indexation of 45 lakh homes will help affordable housing," said Sriram Mahadevan, managing director of Joyville Shapoorji Housing Pvt. Ltd. “While the benefits of 45 lakh homes are good to bring down the cost for the buyer, even if we can build homes in the 30-60 lakh range in the metros, it’s good to ensure end user-driven sales."

Chennai-based Casagrand Builder Pvt. Ltd, which has 35-36 ongoing projects, is aiming to clock 2,500-2,700 crore in sales this year, with most of its home launches in the price range of 40-80 lakh.

C.G. Satish, director of the Bengaluru zone at Casagrand Builder, said the “sweet spot" in pricing has moved down to 3,000-6,000 per sq. ft now from 6,000-10,000 per sq. ft earlier in Chennai, because the latter isn’t selling that well.

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