A recent report by real estate research firm, PropEquity, points out that many developers jumped on the Affordable Housing bandwagon to bail themselves out of the global economic crisis. This saw the launch of a slew of projects in this segment. The initial euphoria in the affordable housing resulted in this category witnessing a very healthy absorption. However, in Q3 of calendar year 2009 it can be seen that the velocity of absorption is on a decline, leading to an inventory pile-up, says Samir Jasuja, Founder and CEO, PropEquity.
According to the data stated in the report spanning from July 2008 to September 2009, the segment under Rs 15-30 lakh category witnessed the maximum number of sales, with the 2 BHK modules being the most sought after. Jasuja adds that developers are now resorting to the rate revision strategy and have begun increasing the prices riding on the expectation of continued healthy absorption. As a result, the affordable segment being highly price sensitive, has registered a decline in the sales velocity. Developers in the current situation are focusing more on marketing rather than actual on-ground execution of projects, he adds.
However, many disagree. Oversupply is true of certain micro markets only. In the larger scheme of things, the demand for affordable housing is touching 25 million, while the supply is only on the lines of a few million units as of now, suggests
GP Savlani, Resident Director, Confederation of Real Estate Developers Associations of India.
Abhishek Kiran Gupta, Head, Research, Jones Lang LaSalle Meghraj points out that the demand for affordable housing is extremely high, especially, in and around the metros. However, supply is lamentably low in comparison. A large number of the slew of so-called affordable housing projects are being seen in the larger cities today, he adds. Sachin Sandhir, MD & Country Head, RICS India corroborates that lack of a right product mix has led to a widening demand-supply gap, resulting in a huge shortage of affordable houses. This is further substantiated by a McKinsey presentation to the 12th plan panel, headed by JNU Professor Amitabh Kundu, which outlines the housing shortfall for the MIG segment to be between 8.6 and 13.8 million housing units, adds Sandhir.
Despite all claims, affordable housing still seems to be the flavour of the day as more than 34% of the demand in the residential segment is in the price bracket of Rs5-15 lakh, according to a survey by FICCI.
However, the price points at which houses have been supplied have done little to bridge the shortfall. Although prices have been reported to have corrected as a result of the slowdown, recent research and market feedback has shown that most projects are still beyond the customers reach, says Sandhir. The price range and affordability depends on multiple factors such as city, location and product offering. An affordable housing/ mid-market budget in a tier-II city may vary largely from that of a tier-I or metro city. According to Ernst & Youngs Realty Pulse Survey 2008, 36% of the total developers interviewed were of the opinion that affordable housing should to be priced between Rs 1-1.5 million and another 34% believed the range to be between Rs 1.5-2.5 million, says Mona Chhabra, Associate Director, Real Estate Practice, Ernst & Young.
While location of these projects has been a crucial factor, high cost of land in prime locations in metros has made affordable housing a distant dream. It is the suburban cities and towns situated around these areas that are seeing a flurry of development. And to make the sector come out of its sluggish form, experts believe that focus on better infrastructure and connectivity in suburban locations within metropolitan areas can provide significant impetus to the segment. Developers would need to focus on timely execution of projects this is critical to improve buyer confidence as well as keep the affordability (including mortgage costs) in check, says Chhabra.
Developers have been generous in their expansion plans and hope to cash in on this demand generated by the affordable segment. Backed by the huge response and demand from potential home-owners, we have announced an expansion in the number of homes on offer by 300 units in the first phase of the Shubh Griha project in Boisar, Mumbai. We are also expanding our projects to other locations, says Brotin Banerjee, CEO and MD, Tata Housing Development Company. Industry players feel that it is going to be the budget buyers market from quite sometime to come. Ready to move in residential property in and around metros and their suburbs and low and middle income housing ranging from Rs 15 lakh to Rs 40 lakh are the primary types of value purchases, which generally drive in investments, says Bhim Yadav, CEO, Falcon Realty Services.
Pradeep Jain, Chairman, Parsvnath Developers has been encouraged by the buyers response to the affordable housing projects and have decided to make further expansions in this direction.
With activities on the anvil or growing consumer interest, the real estate sector is still pinning its hopes of attaining a full-ledged revival from the global slump on this ever-expanding segment of affordable housing.