A home inside the bubble

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With the indices in a freefall and the real estate market set to redraw the parameters, the time is just right for builders to explore newer avenues to generate housing projects that are easy on the pocket. This, many developers feel, make both social and business sense.

According to Anuj Puri, country head and chairman, Jones Lang LaSalle Meghraj, “It’s the business sense in terms of volumes that the market is offering to which developers can cater to, and social sense because it provides buyers of economical housing more options to choose from. The demand in terms of units is phenomenal and developers getting into this segment can build for years to come. With this, mid-income housing is once again a star in the real estate investment route lineup.”

There are various factors aiding the mid-income housing segment. Owing to higher incomes and the availability of housing loans, buyers are no longer as price-sensitive as they were in the past. The present generation is not conservative about home loans, and is also less averse to risk. Moreover, there is now a decided shift from the joint family to the nuclear family. While the past generations did give importance to planning for the future, they lacked the tools that are at the current generation’s disposal.

Most developers have identified these factors and zeroed in on them by making affordable housing available to these buyers. The buyers get what they want, and the developers benefit by the sheer economy of scale. In this win-win situation, some of the biggest names in the Indian real estate industry have begun responding to the clarion call for affordable housing, and foreign funds are pouring in via joint ventures. Most big players are getting into the middle-segment housing either by building clusters of middle-income homes or by redeveloping dilapidated buildings. These developers are exploring a business avenue that has stood the test of time in terms of overall sustainability.

Says Vikas Oberoi, managing director, Oberoi Constructions, “We have started getting actively involved in certain locations in Mumbai to redevelop the dilapidated buildings, thereby targeting the mid-income home buyers.”

Lodha Group, too, is all set to join the middle-income housing bandwagon. Group director Abhinandan Lodha says, “We are planning to set up clusters of middle-income housing projects in Hyderabad , Bangalore and Pune. They will include additional facilities such as a retail mall, commercial buildings and IT parks.

Also warming up to the idea is the Ajmera group of companies, which is planning to develop middle-income homes in Wadala, Ghatkopar, Borivali and Kanjurmarg. Group director Dhaval Ajmera say, “We have started getting actively involved in the business of redeveloping dilapidated buildings in 10 locations in Mumbai, which will cater to the needs of middle-income housing and attract buyers.”

Looking at the scenario, international property consultants have started giving clear indications that the year could see a drop in the ‘high-value’ properties in the real estate market, since retail customers are looking for buying homes that cost less than Rs 50 lakh.

Aditya Verma, business head, Makaan.com, which gets on an average 7 lakh visitors a month, says, “Most visitors access Makaan.com primarily to look for properties meeting their requirements. Based on this vast user base, we can confidently say that 70% visitors are interested in properties below Rs 50 lakh. The trend in this data suggests that there will be a drop in high-value properties. So, 2008 will see more upcoming projects in less than Rs 50 lakh bracket.”

Agrees Puri. “Most major Indian developers are now actively getting into affordable homes to meet the existing shortage of 25 million residential units in the country. This is also a means for them to hedge the downside of a drop in the demand for luxury homes. There is a huge demand for residential units in the Rs 30-Rs 50 lakh range, but the metros have next to nothing to offer.”

This, he says, makes the demand for middle-income homes much higher than that for luxury homes, presenting a lucrative and ongoing option for such developers to play the volume game in middle-income housing. However, most of these developers continue to develop high-end homes to meet the demand that exists. Hemant Shah, chairman, Akruti City, says, “We are seriously thinking of providing affordable housing to the masses.”