An affordable housing hub in the making

Vinod Behl

Being a corporate hub and a home to the largest number of Fortune 500 companies, Gurugram has been a hub for premium office real estate,which, in turn, triggered a demand for high- end housing, making the city emerge as a prominent destination of premium and luxury housing. But over the past 2-3 years, due to the slowdown effect, developers have been shifting focus to affordable housing, especially due to slowdown in the luxury segment. This has led to huge unsold inventory in not just luxury and premium housing but also in mid-segment.

It’s not just that Gurugram’s real estate market is seeing change from a luxury to affordable housing market, it has also transformed from an investor market to end-user market.

Santhosh Kumar, CEO, Operations & International Director, JLL India, describes the evolving residential real estate market of Gurugram as, “Gurugram being the preferred office destination, there was substantial investment activity in its housing projects., spurring prices at rapid pace.And as developers found better returns and quick inventory sales from mid- segment housing, the market moved up the value chain in the premium and luxury end of the spectrum. But the change has been in the making for the last couple of years as the rising prices, priced out mid- segment and affordable segment end user, even in the emerging corridors of New Gurgaon & Dwarka Expressway. And finally when the Haryana government launched its Affordable Housing Policy in August, 2013, a number of developers took to it and home buyers lapped up cheaper apartments ".

Policy boost

Indeed, it was the Haryana government’s affordable housing policy  that has contributed significantly to change the housing landscape of Gurgaon. This landmark policy is aimed at providing apartments of pre-defined size (about 300- 650 sft) at a pre- defined rate ( Rs 4000 psf), within a targeted time frame of 4 years.  The policy provides incentives to developers for delivering projects over 5-10 acres,in the form of licence fee and IDC waiver, in addition to hike in FAR and liberalised density norms in order to ensure the viability of projects, offering dwelling units from Rs 10-25 lakh. Because of these incentives, many developers opted to develop projects under this policy. 

According to Sushil Mittal, Head, North, National Association of Realtors (India), this policy proved to be a game changer for Gurugram that has better business and industrial environment to  successfully grow as an affordable housing destination. And with higher FSI & higher density, it was possible for builders to construct small, compact homes with affordable price tag. Adds Navin Raheja, CMD, Raheja Group that has been developing Krishna Housing project in Sohna, Gurgaon , besides a new project under Deen Dayal Jan Awas Yojana of Haryana government's Affordable Housing Scheme, “Delhi-NCR always had the highest demand for affordable housing but customers, especially in Gurugram opted for rental accommodation, with most homes costing over Rs 50 lakh. But Haryana government's affordable housing policy has changed all that, with developers going in for constructing affordable homes and homes buyers lapping them up". 

Buoyant sales

Noida-based leading real estate marketing company, Investor Clinic, according to its CEO, Honey Katyal, managed to sell about 700 properties in Gurgaon in the price range of 20-25 lakh  over the past  two years. “Besides affordability, what has contributed to the high sales, is buyers faith due to transparency and stringent norms and regulations of the Haryana Affordable Housing Policy. Moreover, the significant price difference under this scheme (4000 psf) and the standard market price of 5500-6000 psf, also helped push up sales”.

Emerging locaations

It all started with South of Gurgaon (Sohna Road/Sohna) emerging as the major destination for affordable housing as builders had tracts of land there. Moreover, it has potential for investment because of its excellent connectivity with NH-8 and upcoming commercial hub of Golf Road Extension. The flagship Southern & Northern Peripheral Road projects will further improve its connectivity with New Gurgaon. 

Manoj Gaur, President CREDAI- NCR, is quite upbeat about Sohna showing its promise as a hot location for both end users and investors. Even Cushman & Wakefield report projects Sohna as a destination with a good liveability index over the next 5 years. Encdouraged by the response in Sohna, developers are now turning to other hot locations like New Gurgaon & Dwarka Expressway. Delhi- based Signature Global has recently launched two affordable housing projects on Dwarka Expressway.Says Pradeep Aggarwal, MD, Signature Global, " We launched over 2400 units on Dwarka Expressway and our previous 5 projects have been completely allotted, which goes to show the high demand for affordable housing".

PMAY—Icing on the cake

It's not just Haryana government's affordable housing scheme, even the Pradhan Mantri Awas Yojana (PMAY), is now luring developers to come up with affordable housing projects under it. 

Global Signature is the first developer to launch projects under this scheme that offers interest subvention to homebuyers . Earlier only interest subsidy of 6.5 per cent was available on loan amount of 6 lakh for income eligibility of 6 lakh a year. But now two more slabs of Rs 9 lakh loan and Rs 12 lakh loan with interest subsidy of 4 percent and 3 percent on income eligibility of 12 lakh and 18 lakh a year,  have been added. On the remainder home loan, standard interest rate will be charged. 

The new liberalised policy is aimed at expanding the beneficiaries under PMAY.  To bring further relief to homebuyers, the loan tenure has been increased from 15 to 20 years. This interest subvention benefit under PMAY, is in addition to prevailing income tax benefits on home loan. The slight shift in the income tax slab, however, may not have much effect this time. 

Pankaj Kapoor, MD & Founder, Liases Foras, expects many new affordable housing projects to be launched in the times to come, due to developers getting greater access to cheaper finance, following the granting of infra status to affordable housing in the Budget.  However, Gurugram is not likely to shed its premium housing tag sometime soon as Santhosh Kumar of JLL says, “It’s likely that the share of affordable housing units in Gurugram may rise with the launch of units priced under Rs 50 lakh, but it’s Noida and Ghaziabad which will continue to occupy top position as affordable housing hubs in the NCR”.