Amid the current slowdown in the real estate sector where developers are struggling to sell their inventory, the low-income segment of the residential market has shown steady growth, according to a report. During the period from June 2011 to January 2013, there were 132 projects launched across 22 cities that offered at least 30,500 units priced under Rs 10 lakh.
The absorption too, has been high, with an average of 70 per cent for projects launched between June 2011 to May 2012, and 45 per cent for the six-month period beginning May 2012. This comes at a time when the average absorption rate for mid- and high income group residential projects fell to below 15 per cent during the same period, according to real estate consultancy Jones Lang LaSalle.
Low income housing is no longer a subject confined to seminar rooms and academic studies — it is a viable business opportunity, says Monitor Deloitte, a unite of consulting firm Deloitte that has brought out the report ‘State of the low-income housing market’, after extensive surveys in tier I, II and III markets.
A key finding of the report is that the market is beginning to serve the low-income customer. “No longer is it a corporate social responsibility initiative on the part of large developers to venture into low income housing. There has been an emergence of developers who are catering exclusively to this segment,” says Vikram Jain, head-low income housing practice, Monitor Inclusive Markets, a unit of Deloitte India.
Among the cities surveyed, Ahmedabad, Mumbai suburbs and Indore have the maximum number of such projects.
Among the developers surveyed, over 90 per cent intend to continue developing houses for the low income segment, and with good reason. At least 80 per cent of the inventory is sold within 12 months.
There are, however, several challenges to unlocking this ‘fortune at the bottom of the pyramid’. The first is land prices. This is the reason why the number of units on offer has come down, an average of 500 units after 2010, even as the number of projects increased.
Developers are resorting to mixed developments where a