Developers should focus on evolving affordable housing

Developers should focus on evolving affordable housing
The Financial Express, December 26, 2009, Page 1

Niranjan Hiranandani

Over the last 60 years, a lot of development in India has taken place to meet the essential needs of people such as roti, kapada and makaan . Even during the British regime, India did not have slums. Rich people were able to live lavishly and poor people were at least able to own their homes, although small ones, at cheap rates. However, now the paradigm has changed. The rich are getting richer and the middle-class finds it difficult to buy apartments. A classic example of this: 60% of the poor in Mumbai live in slums.

Amidst this scenario, public-private partnerships are happening in urban development, including large infrastructure projects where there is a huge allocation of funds by the government of India to the tune of Rs 3 lakh crore. The government is also developing metro projects such as the Andheri-Ghatkopar line, apart from the sea-link project connecting Haji Ali with south Mumbai.

The Mumbai Metropolitan Region Development Authority has come up with schemes for rental housing, creating small tenements of 160 sq ft each. It thus becomes imperative for the government to focus on providing affordable housing.

The slowdown of 2008-09 impacted the Indian economy in terms of a liquidity squeeze and business losses to real estate and infrastructure companies. As for the key lessons in terms of costs and resources, I feel real estate companies should not leverage over-debt positions. If they do, they will not be able to face recession.

Company debt has to be in proportion to the business. One should learn to manage a business within one’s means. What we at Hiranandani Constructions have done is to understand customers’ needs and fill gaps by making money available through the banking system. Even foreign investors are looking at India with great interest.

Real estate companies can build on their strengths during the revival by being conservative in borrowing and spending funds only on projects that are saleable even in a recession. This is in terms of selling it completely or being leased out. By doing this, developers will be able to make equity suitable for the customer.

The stock market is always full of surprises and the extent of a cyclical expectation is not known to anybody. Rather than being dependent on stock market sentiment, developers should be ready to focus on evolving affordable housing concepts.