Affordable housing gains momentum

Affordable housing may be a reactionary trend emanated out of recession but it is here to stay. Most of the real estate developers are looking at affordable housing as the next growth area as India moves towards more urbanisation with higher number of young migrants joining urban workforce each day.

Further, the Central government’s commitment to provide ‘affordable housing for all’ and the provision for subsidised land and lower interest rate are expected to give the much needed impetus to this segment.

To tap the market from early stage, some of the players are even entering into technology collaboration with foreign companies for cost advantage.

Bangalore-based Puravankara Projects, recently, formed a joint venture company with Mexico’s Homex for catering to this segment. Homex is a home developer specialising in building communities for the affordable and entry level market.

Puravankara projects, which plans to invest around Rs 1,900 crore by 2010, will build 15,000 units in three of its affordable housing projects in Bangalore and Chennai.

Another Bangalore-based real estate company, Mantri Developers is also bullish on this segment. “We plan to invest around Rs 500 crore in 2010 in various projects in affordable segment,” Snehal Mantri, Director-Marketing, Mantri Developers said.

The company, which plans to build 150-1,500 units in this segment, however, is not looking at technological collaboration with any company, she said.

Many other developers like Sobha Developers are also looking at opportunities in this segment and may enter at a latter stage.

“There is a demand rationalisation during recession which prompted developers to enter into this segment. Big developers who can maintain economies of scale will take advantage of this vertical as this is a high volume, low margin business,” Karun Varma, Managing Director-Bangalore of Jones Lang La Salle, a real estate consultancy firm, said.

He also said that government’s push for affordable housing and cheaper lending rates would definitely provide boost to this segment.

Varma, however, said that distance from city-centre, communication facility, and provision of other amenities would determine the viability of these projects.

Referring to this matter, Raj Menda, president of Confederation of Real Estate Developers’ Association of India (CREDAI)- Karnataka said that developers were offering affordable houses starting from a range of Rs 9 lakh and above in Bangalore.