More than half a dozen builders, including Ahmedabad-based Bakeri Group, Evershine Builders, Kalpataru Group, Lodha Developers and Indiabulls Real Estate, have either pulled out of the affordable-housing segment or have changed their offering. Realtors take is that people belonging to the informal sectors are not coming out to buy homes; the buyers are from higher socio-economic background than originally anticipated. Affordable housing that seemed to be the survival mantra during recent market slowdown seems to be fizzing out now.
Homes for the low-income group have run aground with buyers in that category , mostly from the unorganised sectors , unable to get home loans even as builders grapple rising costs of debt, land, labour and construction. Plans of several builders to launch affordable housing projects are increasingly getting re-engineered and replaced by mid-to-high end projects, which yield more returns. ”It is a challenge to offer products at this price point unless low-income housing gets recognition from all stakeholders namely banks, builders and suppliers,” said Sunil Dahiya, Managing Director, Vigneshwara Developers.
According to PropEquity, a property research firm, between 2009 and 2011, costs of construction material have grown nearly 25%. Steel, cement, bricks and labour constitute nearly 73% of the overall cost of an apartment. Daily wages of labour have gone up from Rs.250 a day in 2009 to Rs.325 a day in 2011. Value & Budget has sold some 1,000 units of their Vaibhava project in Bangalore in Phase-I, but has slowed down the roll-out of Phase-II as it is redesigning the project. Some builders like Bakeri Engineering and Infrastructure shelved their low-income housing project Shreeram Nagar as they aren’t finding buyers for these homes. ”It is very difficult to get buyers for such projects as there are no formal income and ID proofs, such as pan card, to avail loans,” said Anil Bakeri of Bakeri Engineering. In the Eleventh Five-Year Plan, housing shortage in urban India is expected to be 26.53 million units. The total home loan disbursed in the last fiscal was around Rs.1,70,000 crore, affordable made a mere 0.1% of the total loan given out by banks.
Bakeri has now moved out of this segment and is focusing on houses in the range of Rs.35 lakh and Rs.3 crore due to better margin. Others like Bangalore-based Janaadhar Constructions’ low-income project Janaadhar Shubha are getting delayed due to payment irregularity by buyers. Builders such as Indiabulls, Keystone Rustomjee and Lodha increased the prices of their affordable ventures by 15-30 % due to huge overhead costs and lower margin.
Indiabulls Greens project in Mumbai initially sold flats at Rs.2,200 per sq ft in 2009 and subsequently in other phases at Rs.4,500 per sq ft in 2011. Keystone Rustomjee’s Urbania at Thane was launched in 2009 at Rs.3,000-4, 000 per sq ft and in subsequent phases at Rs.5,000-6,000 per sq ft. “Many luxury builders who entered this segment did not do well. They walked into affordable housing segment more out of compulsion than strategy,” said Gulam Zia, national director, research & advisory services at property consultancy Knight Frank (India).
A Knight Frank research on affordable housing states that the middle-income population in Bangalore will require approximately 3.27 lakh housing units by 2011, which assuming an average unit size of 800 sq ft translates to approximately 262 million sq ft of residential space. Long clearance and high land cost for setting up low-cost housing projects are forcing developers to revisit their projects.
