Markets: Eerie calm

Markets: Eerie calm

it is not clear when market sentiment can change; as in the past, it can be quite sudden.
At a turn and yet not

At a turn and yet not

RBI could be tempted to cut policy rate to support growth at its bi-monthly review.

Affordable housing starts with faster approvals

Jun 28 2014, 15:59 IST
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Currently there are around 40-50 clearances needed for a residential building that can take anywhere between 2-3 years. Currently there are around 40-50 clearances needed for a residential building that can take anywhere between 2-3 years.
SummaryGovt's vision of ‘housing for all’ can be realised if policies ensure supply of homes at affordable price points.

Why is the common man being out-priced from the housing market? Why do developers prefer to build luxury homes over affordable housing units? These are questions uppermost for any aspiring home buyer who sees affordability going down in metros and whose choices are getting narrower by the day.

But these questions are not that of any home buyer. The same concern is shared by Deepak Parekh, chairman of HDFC, India’s largest home finance company, and figure in his remarks in the company’s annual report for 2013-14. With the NDA government’s emphasis on ‘housing for all’, a lot depends on how these two critical questions are answered.

“Developers are often criticised for not relenting on the exorbitant pricing of residential homes. Part of the problem lies in how developers fund the purchase of land. Regulators prohibit banks and housing finance companies from extending finance to private developers to acquire land. Developers have to then resort to high cost funds… often paying interest rates ranging from 18-22 per cent per annum,” Parekh wrote.

Analysts agree with Parekh’s observation but maintain that bank finance for land purchase since it has inherent difficulties.

“Bank lending for land parcels may be difficult, considering the current NPA levels of banks and their risk capital requirements,” says Anuj Puri, chairman and country head, JLL India, and calls on state governments to play a more pro-active role.

“They need to ensure that there is a clearly defined affordable housing policy, on lines similar to what already exists in Haryana. Ideally, through this policy, affordable housing projects should be allowed on smaller land parcels so that such land under private holding can be monetised effectively. Alternately, the government can release land currently being held by it for affordable housing projects, at nominal rates,” adds Puri.

While finance options for land purchase is a challenge, this can be addressed by suitable government intervention to ensure that land is available, says Anshuman Magazine, CMD, CBRE South Asia. “The government should earmark dedicated land parcels for affordable/mass housing projects, preferably along the suburban locations of emerging cities. With land costs typically forming a reasonable portion of the development cost of an average urban housing project, such a practice could easily take care of key land-related issues. The next step would be to proactively create infrastructure — physical as well as social — and work-to-home connectivity for the target population segment to make such locations habitable,” says Magazine, adding

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