Is affordable housing a distant dream?

Geetu Vaid

While the government, through its action and intent, has made it clear that affordable housing is the major thrust area for it as it is a means to achieving the ‘Housing for All’ goal by 2022, some questions regarding the practical angle remain unanswered for the moment. The sweet manna of  the grant of infrastructure status to affordable housing, access to cheaper funds for developers, credit incentives,  softer area norms, lower interest rates for those looking for loans of Rs 9 and Rs 12 lakh all vapourise into thin air after hitting the scorching reality on ground. 

Worried over lacklustre response

Well, to begin with the expectation of an enthusiastic scramble for affordable projects by developers has fallen flat. While the politically correct developer lobby was forthcoming in extolling the “favourable” moves in post Budget comments, it is extra cautious when it comes to committing to projects in the ‘privileged’ affordable segment.   

And this cold shoulder to the government’s move to provide cheap houses for those who can’t afford to have roof over their heads, has not gone unnoticed. Expressing dismay and disappointment over not even a single proposal coming from private builders for low-cost homes, the Housing and Urban Poverty Alleviation (HUPA) Minister M Venkaiah Naidu said earlier this week, “I am rather disappointed that not a single proposal has come from private builders so far even though PMAY (Urban) has been designed envisaging a big role for private sector. ”   While addressing a conference ‘Real Estate Sector Post Remonetisation and RERA’, organised by PHD Chamber of Commerce and Industry earlier this week,  Naidu asked realty firms to promote affordable housing that has been given infra status recently rather than making excuses. “For a long time, you have been demanding infrastructure status for housing sector... Now, developers have no more excuses to keep on dithering about promoting affordable housing in a big way,” Naidu said. He even directed HUPA Secretary Nandita Chatterjee to soon hold a meeting with all stakeholders, including developers’ bodies, banks and housing finance companies, to find out the reasons for the lacklustre response of the private sector to Pradhan Mantri Awas Yojana (Urban) (PMAY-U) scheme.

Missing clarity plays spoilsport

However, the reasons for this sort of reaction from the developers are not hard to find. First of all there is no clarity on who is going to provide land for these projects and where will this be located. The backbone of the whole “affordable housing initiative” is the availability of land and more so the availability of land at cheaper cost to the developers. 

“The cost of housing depends directly on the cost of land as the cost of land constitutes 40 to 60 per cent of the cost of a project on which depends the price of individual units. To make houses in the range of Rs 12 lakh land  a developer has to have access to land at cheaper rates”, says Amit Modi, Director ABA Corp. The harsh reality, however, is that the availability of land at the required cost is severely limited, especially in and around bigger cities.  Price points in projects generally are planned on the basis of cost at which land has been acquired by the private player. In case the cost of land is Rs 100 crore, the project itself will be of not less than Rs 700 to 800 crore that would take the prices of individual units much beyond the Rs 12 lakh range as the developer adds various amenities like swimming pool, club house, parking etc. “Just granting infrastructure status is not enough. As long as land availablity is not taken care of the affordable dream is going to remain just that as it not financially viable for private players to provide housing at that cost whatever the housing minister may say”, shares a builder on the condition of anonymity adding that no developer is going to take the infrastructure status bait as this segment is not gonig to be financially viable for them. The government’s complete silence on this aspect has made developers wary of the “huge opportunity of affordable segment” . “Affordable segment is not an easy segment to step into for private players at the moment. There is no clarity on land availability as well as on the issue of density norms and these will be the biggest challenges in the affordable housing mission”, says Samir Jasuja, Founder and CEO of PropEquity. 

The cost of construction material as well as the absence of single-window clearance for project approvals are some of the other pain points that are going to hurt the cause of affordable housing. There are also apprehensions over the complete sidelining of the issue of quality of life that these habitations will offer to the buyers. Just having land on the outskirts of cities to make affordable projects is not going to serve the purpose as without a proper civic infrastructure there these high density zones will be just like slums. “The government has to take the responsibility of making land available and government bodies like DDA, HUDA, PUDA etc should open their land banks and developers can build thereon under some kind of a partnership arrangement to make this mission a success”, adds Modi. 

No rationalisation of Circle Rates is another factor that will make affordable projects unviable for private players. “By not taking the cost of registry in account, does the government expect me to sell for less than the Circle Rate that it has fixed?”, asks a developer having stakes in the NCR.   

Thus, in spite of  its good intent the government may fail to ensure a boost in affordable housing till these issues are addressed. And ironically, the segment which according to industry mavens is gonig to thrive in near future is the mid-segment.

Mid-segment status

Coming to the question of housing prices falling sometime soon and what is in store for the buyers in the mid segment bracket, the recent policy measures are not going to have a substantial effect on prices. 

Actually, contrary to all the hype, prices are not going to slide anymore in the next few months. The sale volumes may remain low but these will not hit prices in the primary market, opine experts. Thus, for those looking for houses in the Rs 40 to 80 lakh mid -segment bracket, time is right to finalise deals. Firstly, because this segment has a lot of choice at present with a large number of ready properties being available. Secondly with a significant drop in the number of new launches in the past 12 months the developers are offloading current inventory and even investors are liquidating their investment in such projects.

According to a report by PropEquity while the housing sales fell by 31 per cent,  launches dipped 40 per cent in eight major cities during the December quarter, over previous three months, due to market uncertainty. The launches of new homes dropped to 16,636 units from 27,696 units in the last quarter.

“This is an ideal time for mid-segment buyers due to stagnation in prices and no dearth of choice all across the country.