Cashing on the affordability factor
The Financial Express, March 29, 2009, Page 6
Mona Mehta
Extending the affordable housing scheme till the year 2010 and further increasing the supply of property in the buyer-starved market, will help spur the growth of the Rs 10,000-crore Indian real estate sector. This desperation comes at a time when the Indian real estate sector has contributed only 1.6% to India’s GDP in Q4 2008-09 due to severe liquidity crunch from banks since the past three quarters, as compared to 30% contribution it registered during the financial year 2007-08, believe industry experts.
Lalit Kumar Jain, President, Promoters Builders Association of Pune, and Vice-President Confederation of Real Estate Developer’s Associations of India (CREDAI), says, “We strongly believe that Indian real estate industry is all set to grow to Rs 30,000-32,000 crore at a rate of 40% by April 2010. We feel that the ongoing affordable housing schemes in the metros will be sold out completely by April 2011. But, since many of these cities are facing infrastructure and service-tax issues, not all developers will be able to start with affordable home projects as the land prices will still continue to be high in various locations.”
Inevitable crunch
Industry experts feel that post April 2011, there will be a severe supply crunch and real estate prices will be rising again as developers will not be able start any new construction immediately. And those who even start development will not be able to complete projects for the next one-and-a-half years. Jain, also Chairman of Kumar Builders, stated that the company is currently talking to various private equity players in order to infuse funds to develop affordable real estate projects.
For instance, there is a requirement of 4-5 lakh affordable homes in Mumbai alone, whereas the supply is only 40,000 flats, 80%-90% of which will be sold out by April 2010. Apart from Mumbai, other cities such as Delhi, Bangalore, Pune, Chennai too would join the race in selling out most affordable flats by April 2011. Infrastructure and service-tax issues are forcing developers from launching attractive schemes for the end buyers. This is despite the fact that property rates across the metros have dipped by 25% to 40%.
During Q4 2008-09, property prices in Kurla, Mumbai have reduced from Rs 8,000 to Rs 3,500 per sqft in Kurla. Thane has witnessed a drop from Rs 5,000 to Rs 3,000 per sqft. Similarly, prices in Virar have nosedived from Rs 3,000 to Rs 1,800 per sqft. As compared to Q3 2008-09, inquiries for properties have started increasing since February-March 2009, which has led to a fair conversion of flats in Thane, Bhandup, Vasai, Virar, Dombivali as these localities have close railway connectivity. Similarly, other leading builders such as Akruti City, Mayfair Housing, Evershine Builders, Lokhandwala Builders have all set visions of bringing in rising demand that matches the supply of properties as was seen during the financial year 2006-07.
Corrective measures
Following the recent announcement of third stimulus package by the government, realty bigwigs in India, bitten by severe credit crunch (since the past three quarters of the financial year 2008-09) have started strongly focusing on the affordable housing development and converting affordable properties into actual sales. With no other option left, developers are taking a final chance by reducing property prices in certain metros by about 25% to 40%, which will be compounded with the benefits they will be able to derive through the stimulus package.
Recently, the special home-loan schemes, was launched by the State Bank of India at 8%. Dewan Housing Finance Corporation Limited (DHFL) has announced a reduction in interest rates for both its new and existing customers. In line with various fiscal and other measures announced by the government of India and National Housing Bank (NHB), DHFL will now offer home loans starting at 9.75% variable interest rate for loans below Rs 20 lakh and at 11.25% variable interest rate for loans above Rs 20 lakh with immediate effect. With this, DHFL intends to provide more affordable home loans to lower and middle income group customers. For the existing customers, the rates will be reduced by 25 bps, according to company officials.
Rising demand?
Finally, with home loans getting cheaper, demand for residential properties in tier II and tier III cities is expected to pick up by 25% by the first half of 2009, from the current rate of 5%, feel industry experts. According to Rohit Rana, Head, Marketing and Communications, Sankalpan Group, the external periphery of Mangalore, Chandigarh, Dehradun, Nagpur, Kolhapur and Jaipur will start witnessing immediate emergence of demand due to the recent cheaper home loans announcement. Delhi-based Parsvanath Developers has already started constructing affordable homes in some of these locations, which can suffice the Rs 20 lakh limit of home loan borrowers.
According to Anand Gupta, Chairman, Builders Association of India, “There would be some acceleration in sales to the tune of 10% to 12% on tier I city outskirts where affordable housing is coming up through the ‘Budget Home Schemes’ and townships with a cluster of 3,000 to 5,000 homes in each township. Besides, demand for properties will emerge at Pen, Karjat and Lonavala as rates are between Rs 3 lakh and Rs 7-8 lakhs similar to that of Virar in far suburbs.”
However, despite the special home- loan schemes launched recently by the State Bank of India at 8%, the new applications still remain dull in various urban areas as the end-buyers are expecting further dip in real-estate prices and interest rates, said a senior SBI official from Mumbai. The moot point here is how will cheaper loans bridge the gap between demand and supply of residential properties in Tier II, III cities including metros? Anuj Puri, Chairman and Country Head, Jones Lang LaSalle Meghraj explained, “There will be increased absorption of existing supply in tier II, tier III cities and next to none in the metros. Affordable housing projects that are coming up on tier I city outskirts or in the far suburbs will also see increased sales. While such projects are not coming up in prime locations, reputable builders who concentrated largely on mid-to-upper-end homes are launching budget home schemes in far suburbs.” Affordable housing is the flavour of the future.
The Financial Express, March 29, 2009, Page 6
Mona Mehta
Extending the affordable housing scheme till the year 2010 and further increasing the supply of property in the buyer-starved market, will help spur the growth of the Rs 10,000-crore Indian real estate sector. This desperation comes at a time when the Indian real estate sector has contributed only 1.6% to India’s GDP in Q4 2008-09 due to severe liquidity crunch from banks since the past three quarters, as compared to 30% contribution it registered during the financial year 2007-08, believe industry experts.
Lalit Kumar Jain, President, Promoters Builders Association of Pune, and Vice-President Confederation of Real Estate Developer’s Associations of India (CREDAI), says, “We strongly believe that Indian real estate industry is all set to grow to Rs 30,000-32,000 crore at a rate of 40% by April 2010. We feel that the ongoing affordable housing schemes in the metros will be sold out completely by April 2011. But, since many of these cities are facing infrastructure and service-tax issues, not all developers will be able to start with affordable home projects as the land prices will still continue to be high in various locations.”
Inevitable crunch
Industry experts feel that post April 2011, there will be a severe supply crunch and real estate prices will be rising again as developers will not be able start any new construction immediately. And those who even start development will not be able to complete projects for the next one-and-a-half years. Jain, also Chairman of Kumar Builders, stated that the company is currently talking to various private equity players in order to infuse funds to develop affordable real estate projects.
For instance, there is a requirement of 4-5 lakh affordable homes in Mumbai alone, whereas the supply is only 40,000 flats, 80%-90% of which will be sold out by April 2010. Apart from Mumbai, other cities such as Delhi, Bangalore, Pune, Chennai too would join the race in selling out most affordable flats by April 2011. Infrastructure and service-tax issues are forcing developers from launching attractive schemes for the end buyers. This is despite the fact that property rates across the metros have dipped by 25% to 40%.
During Q4 2008-09, property prices in Kurla, Mumbai have reduced from Rs 8,000 to Rs 3,500 per sqft in Kurla. Thane has witnessed a drop from Rs 5,000 to Rs 3,000 per sqft. Similarly, prices in Virar have nosedived from Rs 3,000 to Rs 1,800 per sqft. As compared to Q3 2008-09, inquiries for properties have started increasing since February-March 2009, which has led to a fair conversion of flats in Thane, Bhandup, Vasai, Virar, Dombivali as these localities have close railway connectivity. Similarly, other leading builders such as Akruti City, Mayfair Housing, Evershine Builders, Lokhandwala Builders have all set visions of bringing in rising demand that matches the supply of properties as was seen during the financial year 2006-07.
Corrective measures
Following the recent announcement of third stimulus package by the government, realty bigwigs in India, bitten by severe credit crunch (since the past three quarters of the financial year 2008-09) have started strongly focusing on the affordable housing development and converting affordable properties into actual sales. With no other option left, developers are taking a final chance by reducing property prices in certain metros by about 25% to 40%, which will be compounded with the benefits they will be able to derive through the stimulus package.
Recently, the special home-loan schemes, was launched by the State Bank of India at 8%. Dewan Housing Finance Corporation Limited (DHFL) has announced a reduction in interest rates for both its new and existing customers. In line with various fiscal and other measures announced by the government of India and National Housing Bank (NHB), DHFL will now offer home loans starting at 9.75% variable interest rate for loans below Rs 20 lakh and at 11.25% variable interest rate for loans above Rs 20 lakh with immediate effect. With this, DHFL intends to provide more affordable home loans to lower and middle income group customers. For the existing customers, the rates will be reduced by 25 bps, according to company officials.
Rising demand?
Finally, with home loans getting cheaper, demand for residential properties in tier II and tier III cities is expected to pick up by 25% by the first half of 2009, from the current rate of 5%, feel industry experts. According to Rohit Rana, Head, Marketing and Communications, Sankalpan Group, the external periphery of Mangalore, Chandigarh, Dehradun, Nagpur, Kolhapur and Jaipur will start witnessing immediate emergence of demand due to the recent cheaper home loans announcement. Delhi-based Parsvanath Developers has already started constructing affordable homes in some of these locations, which can suffice the Rs 20 lakh limit of home loan borrowers.
According to Anand Gupta, Chairman, Builders Association of India, “There would be some acceleration in sales to the tune of 10% to 12% on tier I city outskirts where affordable housing is coming up through the ‘Budget Home Schemes’ and townships with a cluster of 3,000 to 5,000 homes in each township. Besides, demand for properties will emerge at Pen, Karjat and Lonavala as rates are between Rs 3 lakh and Rs 7-8 lakhs similar to that of Virar in far suburbs.”
However, despite the special home- loan schemes launched recently by the State Bank of India at 8%, the new applications still remain dull in various urban areas as the end-buyers are expecting further dip in real-estate prices and interest rates, said a senior SBI official from Mumbai. The moot point here is how will cheaper loans bridge the gap between demand and supply of residential properties in Tier II, III cities including metros? Anuj Puri, Chairman and Country Head, Jones Lang LaSalle Meghraj explained, “There will be increased absorption of existing supply in tier II, tier III cities and next to none in the metros. Affordable housing projects that are coming up on tier I city outskirts or in the far suburbs will also see increased sales. While such projects are not coming up in prime locations, reputable builders who concentrated largely on mid-to-upper-end homes are launching budget home schemes in far suburbs.” Affordable housing is the flavour of the future.
Posts
No comments:
Post a Comment