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Indian Real Estate News : Mumbai
A boost for affordable housing
Source: mydigitalfc.com Mar 09, 2011
Finance minister Pranab Mukherjee, in the Union budget 2011-12, had announced a one per cent interest rate subvention on housing loans up to Rs 15 lakh from the earlier Rs 10 lakh, and increasing the priority lending limit to Rs 25 lakh from the prevailing Rs 20 lakh. In addition, he also increased the allocation for rural housing to Rs 3,000 crore this year against Rs 2,000 crore earlier.

"Definitely developers will consider focussing on the affordable segment and many of the developers are expected to enter this segment in the near future," Dharmesh Jain, chairman and managing director of Nirmal Lifestyle, said.

Jain plans to construct an affordable residential township in Thane, Kalyan, and other suburbs of Mumbai.

Jain added that some more clarity is awaited on affordable housing announcements and it will be clear by the month-end.

Anuj Puri, chairman and country head of international real estate consultancy Jones Lang LaSalle, said more developers will definitely focus on constructing affordable housing, but it was too early to comment how many new entrants there will be in this space. Puri added that not only developers but also investors would find the affordable segment lucrative.

"The affordable segment usually has a high turnover and strong demand, so it will be easier to sell the flats. Moreover, investors can de-risk by investing in several projectsrather than investing around Rs 10-12 crore in a single luxury project," he said.

Measures such as expanding the coverage of interest subvention to a loan of Rs 15 lakh for a house costing Rs 25 lakh, and providing 100 per cent deduction in respect of capital expenditure incurred on development of affordable housing will certainly help boost the demand and development of affordable housing in the coming months, observed Sanjay Chandra, managing director of Unitech.

In 2009, Unitech recalibrated its strategy in order to attain leadership in the residential housing segment by introducing affordable housing as a product offering under the 'Unihomes' brand, Chandra said.

"Our recent launches of Unihomes in places like Rewari, Mohali, Chennai, Noida and Bhopal have met with an encouraging response from genuine buyers. With the new measures announced in the budget, we believe that the pace of demand will be robust and we are well poised to respond to this demand," Chandra said.

Agreeing to this overall viewpoint of real estate developers, Jackbastian Nazareth, CEO of Purvankara Projects, "Developers will have a renewed interest in the affordable housing segment. Earlier, they were ignoring it as there were no periodic sops for construction of affordable housing,"

According to Pranab Datta, vice-chairman & managing director of Knight Frank India, during the past year prices of residential properties have increased by 10-20 per cent across several cities. But the enhanced interest subvention will ensure continued benefit to homebuyers in this particular segment.

Raising the priority home loan limit from Rs 20 lakh to Rs 25 lakh is good news for the middle and lower-middle income group for homebuyers in non-metro cities and towns, it is unlikely to ease the difficulties of homebuyers in metropolitan cities where real estate prices are ruling high. Some developers and analysts feel that the budget did not bring enough relief for the segment.

"Increase in the loan limit to Rs 15 lakh for the 1 per cent subvention and increasing the property cost limit to Rs 25 lakh for priority lending are welcome. However, much more could be done to accelerate supply of affordable housing stock," says Lalithkumar Jain, chairman & managing director of Kumar Urban Development.

JC Sharma, managing director of Sobha Developers, said, "We want to enter the affordable housing segment in the future. But to construct affordable housing, firstly, there must be enough availability of land at cheaper rates." Although the Union budget has provided some relief, that is not enough, he said.

Ravi Ahuja, executive director of Cushman & Wakefield, pointed out that although outside Mumbai a price of Rs 25 lakh for affordable housing is sufficient, in a city like Mumbai it is difficult to get a house for such a small amount.

"The affordable segment is very lucrative due to its huge demand but for developers to make money they will have to concentrate on volumes and cost-effectiveness. Moreover, land should be provided at cheaper rates," Ahuja said.

According to Puri of Jones Lang Lasalle, large developers like Unitech and Ansals, which are rolling out budget housing on a large scale, are likely to benefit most from volumes.

Ahuja said actual users will definitely benefit from the expected focus on affordable housing. However, investors may stay away from the segment as rates have already inflated and, going forward, rates will remain tight. He pointed out that even in Virar, a distant suburb in Mumbai, the rates are around Rs 3,500-3,800 per sq ft compared with Rs 2,000-2,500 a year ago.

Affordable housing is meant for lower middle-class and middle-class people, but with the present inflated rates it will be difficult for many aspiring homebuyers to afford the costs. The budget proposal on higher interest subvention (subsidy) and the higher qualifying loan amount are very positive steps, but these are just not enough for the metros considering the high cost of property in those places.

Additional benefits related to investments in the affordable housing segment would help the real estate sector, Manoj Paliwal, CFO of Omkar Realtors & Developers said.

Aspiring homebuyers say that even to buy a house in the far-off suburbs they will have to pay around Rs 25-30 lakh for a one-bedroom flat. Besides, all banks have increased interest rates to make things more difficult for such buyers.

"We have been planning to buy a house of our own for the last two years but even a one-bedroom-hall-kitchen costs around Rs 27-28 lakh in a place like Mira Road and Bhayander (distant Mumbai suburbs)," Rimi Dhar, 35, an HR professional, said.

Dhar stays with her widowed mother and earns around Rs 35,000 per month.

She adds, "We have been staying in a rented flat in Mira Road for the last three years but have not been able to buy a flat due to the high prices. Even to buy a 1BHK flat, we will have to take loan of around Rs 20-22 lakh for which the monthly EMI will be around Rs 20,000-21,000. To pay such high EMI is difficult."

Another aspiring homebuyer, Kiran Uchil, 33, working with a brokerage firm in Mumbai, said that he plans to get married and wants to buy a house but was not able to do so due to the exorbitant prices.

Uchil, who stays in Kalwa in Thane district, another distant suburb, said, "I stay with my parents and three siblings in a one bedroom house and am planning to get married in the next six months. I thought of buying a house but the prices are so high even in the suburbs that it is difficult to buy one."

Niranjan Hiranandani, managing director of Hiranandani Constructions, while praising the budget as being balanced one, lamented that some important issues affecting the real estate sector have been overlooked. Although the finance minister has proposed a scheme for affordable housing, it is not enough for the sector, he said. In the last year the government had introduced VAT for residential housing. Besides, various other taxes on materials and services pertaining to housing have been hugely taxed.

Today, 32 per cent of the total cost of construction is tax imposed by the central, state and local governments, which leads to an increase in cost of construction, thus making houses unaffordable for ordinary people, Hiranandani explained.

But at least a beginning has been made to give some boost to affordable housing projects by real etate players and some succour and hope to homebuyers.

Tag: Real estate in Mumbai, mumbai property, apartments in mumbai, mumbai properties
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