Wednesday, April 22, 2009


IIPM set to beat economic slowdown

Love is strange. Time was when real estate biggies hated thinking ‘small’; now love for all things small is their only priority...

Dissuaded by the steep rise in home loan interest rates over the last one year, theatre actor Gauri Srivastava had been putting off the decision to buy her dream home for months. Complicating her decision were the bloated price tags that accompanied property prices in the National Capital Region and her fervent hope that prices will come down sooner than later. But, her home is not a distant dream anymore. Hoping to benefit from the government’s recent announcement of concessions for new home loans below Rs.20 lakh, a rash of private developers are busy launching new projects to cash in on the demand for ‘affordable housing’. Locations for these affordable homes may be a little far-flung (in places like Greater Noida, Faridabad, Karjat, Panvel, Indore, Raigarh and Sonepat), but like Gauri, thousands of consumers are finally heaving a sigh of relief; relishing the thought of soon moving into their own ‘small’ nest!

Asserts Jaipal Reddy, Union Minister for Urban Development, “There is immense demand in the small and mid- housing segment.” Omaxe, BPTP and DLF are a few among the big league of realty players who have set their sight on this new value-for-money game. If National Affordable Housing and Infrastructure (NAFIL)–Omaxe’s subsidiary company– has plans for properties in the sub-10 lakh range in Panvel, Indore, et al; Omaxe itself is finalising homes in the Rs.25 lakh bracket in locations like Greater Noida. BPTP, on its part, claims to be getting great responses for its affordable housing projects in Faridabad that again fall in the sub-20 lakh category. Even DLF is fine tuning ideas to launch housing for the masses believing that that indeed is the future to look forward to for Indian realty.

Affirms Rohtas Goel, CMD, Omaxe Developers, “Affordable housing is emerging as the best option for the developers in the present scenario,” obviously referring to the dying demand for luxury homes and penthouses, given the prevailing liquidity crunch in the economy. A big hurdle however is that in some cases realtors bought land at very steep prices when the sector was at its peak. Converting these into affordable housing projects may not be so easy. Sachin Sandhir, MD, RICS avers, “This would require a change in mindset for the developers. High land cost has been a major obstacle constituting up to 35% of project cost. Building affordable housing on these will reduce margins and affect viability of projects.” A reason perhaps that most of these new affordable projects are taking off in relatively less-prime locations. Also since large parcels of land (required for mass housing) are located mostly on city peripheries, connectivity and infrastructure support are a potential constraint.

Despite all hiccups however, industry insiders believe that the affordable housing segment is all set to grow phenomenally from hereon. “While housing sector leads the pack among all the realty segments, we have a strong belief that affordable housing will witness the highest interest among the investors,” explains Goel. So get set to see the roll-out of many more small and mid-segment homes soon. Hopefully, they will turn out to be the silver lining amidst the dark clouds hovering over Indian realty... For now, ‘small’ is in, at least for Gauri and her ilk!

Pawan Chabra

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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