Market watchers, however, feel that prospective buyers are still locked in the wait-and-watch mode, nullifying the efforts of the developers to hard-sell affordable housing projects. On the other hand, buyers-in-the-waiting refuse to buy the theory of affordability, stating that it could not be a one-way bridge.
The global property consultancy firm, Knight Frank has estimated that affordable housing requirement would be in excess of 2 million units across key cities in India and 80% of demand is expected to emanate from the Rs 3-5 lakh income group. Significantly, over 32% of the potential buyers are looking at making a purchase in the next 6-12 months. In a recently released a first-of-its-kind research paper on affordable housing, Knight Frank said the real estate sector is realigning its focus towards affordable housing and projected a whopping market size of over Rs 3 lakh crore by 2011.
Meanwhile, in its latest overview on Mumbai residential market, Cushman & Wakefield said improvement in overall economic sentiments and increasing liquidity due to recent upward swing in the stock markets have marginally renewed confidence of both investors and end users in residential market. As a result, after witnessing a slump over the last six to nine months, Mumbai witnessed some increment in demand in the residential sector. Additionally, increasing focus on affordable housing for low and middle income groups resulted in the launch of several affordable housing projects in 2Q 2009, most of which are concentrated in far peripheral locations of Mumbai.
Commenting on the emerging scenario, Chennai & Hyderabad managing director Ramesh Nair, a global real estate intelligence service provider Jones Lang Lasalle Meghraj (JLLM) told FE that in order to realise affordable housing, both the government and developers have to initiate certain bold measures. The government has to provide approvals and other pre-requisite clearances without much hindrance besides strengthening public-private sector partnership in housing projects. Also, extra attention needs to be paid to cost-subsidy aspect, he added.
As for developers, the optimum and proper utilisation of technology in the projects is likely to effectively curb wasteful expenditure. Another key point is the incorporation of the value-engineering products and effective scheduling and executing of the projects. Inordinate delays are likely to spark cost-escalation which is likely to hamper the whole concept of affordable housing, Ramesh said.
According to Knight Frank, the mammoth scope of the realty sector is expected to arise from housing requirement of over 2 million units by 2011. While the Rs 3-10 lakh income group would drive this demand, the research findings further indicate that the largest contributor to this market size is expected to be the group earning Rs 3-6 lakh annually. Buyers in the Rs 8-10 lakh income group quoted a more conservative budget than those in the Rs 3-6 lakh group, which reflects the extremes on which higher income group consumers operate during boom and recession periods. The study also revealed that the household purchase of these potential buyers are over 32% between 6-12months and about 7% within the next 6 months.
According to the report, though a number of affordable projects have been announced, the locations do not have adequate social infrastructure which was of utmost importance for the proper development and successful implementation of the project. The report revealed that good connectivity to work places is the most important factor influencing a buyers decision in selecting the location of their residence. This is followed by good infrastructure and good potential for future development. And while choosing a project, uninterrupted water supply, power backup and high-level security systems are the basic amenities preferred over gymnasium, swimming pool, modular kitchen and interior fixtures.
Cushman & Wakefield said that while softening of home loan interest rates and correction in capital values many developers are anticipating an increase in demand from both end users as well as investors in near future. Mumbai is likely to witness restricted supply in short term due to slowdown in construction activity and phase wise development by most developers. This is likely to result in stabilisation of capital values for both mid and high end housing. Additionally, many developers are focusing on the compact and efficient apartments aimed at middle income group. Some peripheral locations in Mumbai could emerge as hot spots in near future due to increasing focus on affordable housing projects.