Another nano from Tatas

Another nano from Tatas
The Economic Times, May 12, 2009, Page 12

A Big Boost For Affordable Housing

TATA’S Nano experiment could become a movement in reaching affordable products to the bottom of the consumer pyramid. It is indeed heartening that the Tatas are extending the concept of Nano to housing. Tata Housing, a subsidiary of Tata Sons, has announced a project near Mumbai that would build homes costing Rs 3.9 lakh and Rs 6.7 lakh. Tata’s foray into housing at the lower end underlines the increasing realisation that demand is a lot more stable in the lower income groups. These groups have their own income-expenditure dynamics that is not fully exposed to the vagaries of the increasingly globalised Indian economy. Telecom, though not in the same category as housing, is a good example of the robust demand at the lower end. As telecom operators have moved away from the saturated urban markets to small towns and rural areas, growth has accelerated — subscriber additions crossed 15 million in March. True, every additional subscriber lowers their average realisation per subscriber, but there is addition to the bottom line too. Similarly, houses in sub-Rs 10 lakh category may not carry big margins, but the demand is bound to be massive. Even the government estimates the bulk of the 25 million housing unit shortage to be in the lower income category.

The entry of a large and credible corporate such as the Tatas at the lower end of the market can crystallise this potential demand. More importantly, it could galvanise other serious developers to come into this segment and drop prices to gain market share. Though companies like DLF and Unitech are going into more affordable housing, they are nowhere near testing the market for under Rs 10-lakh housing unit. For this to happen policy must also create an enabling framework. Clear property titles and relationships with financiers would enable a big developer to arrange funds for their buyers. The government will have to free up land for creating more towns. Availability of more land would bring down prices. Tatas’ housing project, for instance, is about 100 km away from Mumbai. An efficient mass rapid transport system can make such projects more attractive to those who cannot afford housing within the city limits.