Affordable homes are back

Developers are working around the Rs 20-lakh (Rs 2-million) figure. Winds of change are sweeping across the real estate sector. After creaming the top end of the market for some years, reality has finally sunk in and builders are now flooding the market with affordable homes.

Ever since the government announced that state-owned banks will provide home loans up to Rs 20 lakhs (Rs 2 million) at not more than 9.25 per cent for the first five years, real estate developers have started working their prices around the Rs 20-lakhz (Rs 2-million) figure.

Dozens of real estate developers have announced homes at below Rs 25 lakhs (Rs 2.5 million) in the National Capital Region of Delhi.

Till some months ago, such prices were totally out of fashion. Developers blamed high prices on the astronomical cost of land and the ever-rising prices of steel and cement.

The correction started happening around Diwali in October when developers, faced with large unsold inventories, started throwing in hefty discounts and freebies like cars.

Prices have now fallen back to their 2004-05 levels.

Huge auction of government-built flats in Delhi and Mumbai too has played a role in this. While the Delhi Development Authority has built some 5,000 flats, the Maharashtra Housing and Area Development Authority earlier this week threw open booking for 3,865 flats.

The response was tremendous -- people queued up in front of bank branches at 4:00 am!

Non-metro cities across the country too have on offer ready-to-possess flats well below Rs 20 lakhs (Rs 2 million). For instance, a recent scheme launched by Ansal in Lucknow is learnt to have been hugely oversubscribed.

At a property exhibition in Delhi last week, city based real estate players like SG.

Estates, Assotech, KDP Infrastructure, Shreya Developwell and others displayed over a dozen ongoing and future housing projects in the Rs 20-lakh range.

IDBI Bank officials, who organised the exhibition, said the customer interest in the projects was encouraging against the general slump and over 300 potential customers registered for loan queries.

99acres.com, a leading online portal says that over the last two months, it has seen a growing interest among visitors to search for houses in the mid-price range (Rs 15  lakhs-Rs 25 lakhs or Rs 1.5 million to Rs 2.5 million).

"Almost 50 per cent of enquiries that reach the portal are for this segment," Vineet Singh, business head, 99acres.com says.

"The government's initiative will definitely encourage more affordable housing projects, though it will mostly be in the non-metro cities of the country," Rohtas Goel, chairman and managing director of Omaxe, says.

A Mumbai-based official with the State Bank of India's personal loan section says the excitement of the offer is already visible among the customers and real estate players: "We need to wait till the end of the offer period (June 2009) to quantify the number of home loans that are sanctioned under the concessional scheme, but there is tremendous interest. The customers are in the process of enquiring before they can approach the banks for home loans."

While the real estate players in the metros are restructuring their new projects to accommodate the interests of the sub-Rs 20 lakh housing customers, other cities are finding sudden demand for their existing properties.

"Even before the stimulus package, we had several projects that came within the parameters of affordable housing. The demand for such homes has increased since then," C Shekhar Reddy, the president of Andhra Pradesh Builders Forum, says.

Prakash Chella, chief of the Tamil Nadu chapter of the Confederation of Real Estate Developers Association, adds: "Real estate prices had not appreciated in smaller cities as it had in metros. In southern states, flats within Rs 20 lakhs (Rs 2 million)  are available."

Terming it as the birth of affordable housing, real estate consultancy JLL Meghraj anticipates more national players to launch affordable housing projects in 2009.

"However, since different cities will have different costs for land and construction of such homes, developers will have to define 'affordable housing' on a city level," a JLLM report says.

This augurs well for the economy. The task force on affordable housing headed by HDFC chairman Deepak Parekh had in its report noted that alleviating the urban housing shortage could potentially raise the rate of growth of GDP by at least 1-1.5 per cent and have a decisive impact on improving the quality of life.

The 11th Five Year Plan estimates the urban housing shortage at the commencement of Plan period at 24.7 million units, with 99 per cent of this shortage pertaining to the economically weaker sections of the society.