Column : Building for the real market

Written by Mona Mehta | Updated: May 14 2009, 05:06am hrs
Even as recently as a year ago, the real estate market was considered a sellers market. Now, with the economic downturn, the tables have turned as the market for high end real estate has begun to dry up. Builders are now, for the first time, foraying into selling affordable housing built mostly in the distant suburbs of metros, and allocated through a lottery system. For instance, Tata Housing has recently announced a move into low-cost housing by launching Shubh Griha as its first value homes concept in Boisar near Mumbai. The project will be spread across 67 acres of land where the company will sell about 1,200 apartments in Phase I. These will be priced between Rs 3.9 lakh and Rs 6.7 lakh and will be built in three sizes280 sq ft, 380 sq ft and 465 sq ft. A Tata housing survey showed that 45% of the low-income and migrant population live in rented accommodation. Project like these aim to convert many into homeowners.

However, the moot point here is that Tata Housing alone will not be able to meet the evolving needs of all homebuyers. Under the Shubha Griha project, only 1,200 of all applicants will get possession and that too only after two years. The government needs to free a lot more land for builders to construct affordable housing on the scale that is necessary to satisfy the huge demand.

The government also needs to consider creating a regulator for real estate to ensure that affordable housing remains affordable. Certain builders still demand a premium for affordable 2 and 3 BHK apartments in faraway suburbs despite advertising them as affordable property. Moreover, some buyers complain that certain builders even refrain from meeting them when they want to negotiate. A regulatory body which can register end-buyers complaints and enforce standards on builders is necessary.

Builders have their own reasons to be cautious about affordable housing. The repeated rise in cement prices, for example, threatens to raise construction costs and reduce margins.Still, the logic of the market demands that the next wave of construction takes place in the affordable segment.