Low-cost homes still out of buyers’ reach

Low-cost homes still out of buyers’ reach
Business Standard, February 09, 2009, Page 5

RAGHAVENDRA KAMATH & NEERAJ THAKUR
Mumbai/New Delhi, 8 February

When Maharashtra Housing and Area Development Authority (Mhada) started selling the application forms for its 3,863 affordable houses in Mumbai on January 12, nearly 1.89 lakh forms were picked up from HDFC branches within next two days.

The state housing authority had priced its low-income group flats at about Rs 330,000 and that’s the segment where it witnessed the highest demand; in the first five hours, 88,222 forms — priced Rs 100 each — were sold.

The mid-income group (MIG) flats were priced between Rs 12 lakh and Rs 17 lakh. Several of these housing projects were being offered at prime locations of Mumbai suburbs, including Andheri, Goregaon and Chembur.

In contrast, private developers continue to price their affordable housing projects at much above the low-income housing category launched by Mhada. Most of the affordable projects launched by developers are priced between Rs 12 lakh and Rs 60 lakh, which is still beyond the reach of potential home buyers, say property consultants and experts tracking the sector.

Last week, New Delhibased Omaxe launched three projects under the brand ‘Omaxe Panache Homes’ in Greater Noida, Faridabad and Ludhiana, in the affordable segment. The price range: Rs 12 lakh-Rs 22 lakh.

After a lull of three-four months, DLF, the country’s largest property developer, plans to launch a few mid-income projects, in the price range of Rs 20 lakh-Rs 60 lakh across the country. Parsvnath, another New Delhi-based developer also has plans to launch projects in low and mid segments in Noida, Sonepat, Indore among other cities in the next couple of weeks, according to sources in the company.

“Old product is not selling in today’s market. They have to change the price and product to suit a buyer’s pocket. If they sell 50 to 60 per cent of their earlier projects, then they will launch new ones, otherwise they will not,’’ said Akshaya Kumar, managing director of Park Lane Property Advisors.

Analysts point to the fact that both investors as well lenders have pressurised the developers to get more into affordable housing segment as they see more demand there. But developers are reluctant to launch products on land parcels acquired at high prices. Land cost makes up for about 50-70 per cent of the project cost. Builders selling affordable projects are also announcing projects far away from cities such as New Delhi. Developers are apologetic on the stance. “It is not as if we don’t want to come out with affordable projects in New Delhi, but land prices are so high that it makes practically impossible for a developer to come out with homes in the range of Rs 6-15 lakh,” said Rohtash Goyal, chairman and managing director, Omaxe.

New Delhi and NCR witnessed some of the highest land deals in the past few years before the market crashed. Developers have bought land at auctions at exorbitant prices in the hope of making huge profits through luxury projects.

“The demand in the luxury segment has dried up. However, due to investors’ pressure the developers have to change their portfolio and come up with projects that promises returns even at a lower rate,” Aditi Vijyakar, executive director of global property consultancy Cushman &Wakefield, said.

Property sales in major metros have fallen up to 70 per cent from the beginning of 2008 as interest rates shot up, leading to increase in the home loan payouts. A crash in property markets and an economic slowdown have put further pressure on the finances of developers.