Many established real estate developers may shy away from affordable housing segment due to the low margin. But, this space is receiving a lot of interest from new developers who wish to cash in the rising requirement for housing in urban areas.
Interestingly, these new developers also believe that decent margin is achievable through the use of latest technology with reduction of timing of construction.
“Our business model is about value housing at affordable rate and we plan to build one million houses in next 10 years,” Jaithirth Rao, chairman of Value and Budget Housing Corporation (VBHC), said. VBHC is a new corporate entity floated by Jaithirth Rao, former chairman of Mphasis and P S Jaykumar, former head of consumer banking of Citibank, among others .
The new company, recently, launched its first project ‘Vaibhav’ in this segment
that is spread across 16.1 acres with close to 1,900 apartments in the outskirt of Bangalore. While the cost of the apartments in this project varies from Rs 4.5 lakh to Rs 12 lakh, there will be facilities like schools, water harvesting structures inside the premises. Further, holding of around 10 per cent stake by Housing Development Finance Corporation (HDFC) in VBHC shows the trust of bankers in these kind of models.
Referring to the average margin in this project, P S Jaykumar, another promoter of VBHC said they were looking at an average margin of 25-30 per cent from their projects. The company, which is looking at metros like Chennai and Hyderabad for setting up such projects, will enter tier-II cities like Nashik and Baroda in the second phase.
Similarly, another project promoted by Bangalore-based ‘Janaadhar Constructions’ is also coming up with its affordable housing project ‘Janaadhar Subha’ on the outskirts of Bangalore. The project, ‘Janaadhar Subha’, comprises of 1,140 flats with a saleable area of 0.7 million sq ft. The first phase of the project comprises of 528 flats of 400 sq ft each and will cost around Rs 4 lakh excluding property registration and other charges.
“We will focus on people with an earning of Rs 15,000 per month, mostly comprising of people like security guards, household help, shop floor worker in factories and such others,” Ramesh Ramanathan, chairman and director, Janaadhar Constructions Pvt Ltd.
There is a requirement of around 25 million houses by the middle and lower-middle class people in urban India. However, there are very few real estate companies having projects to cater to this segment. In a bid to fill this demand-supply gap, even companies with future plans to enter into real estate industry are planning to establish such projects. Rajesh Exports, India’s largest jewelery exporter, is one such company with plans in affordable segment.
“We plan to enter into affordable housing space in near future as there is huge demand for these houses,” Rajesh Mehta, chairman and managing director of Rajesh Exports said.
The company has a land bank worth Rs 1,200 crore as of now and will rope in a strategic investor to enter into this space, he added.