PE-backed housing platforms bet big on mid-income housing projects

The reduction in GST rates for affordable housing, added with the credit-linked subsidy scheme of the central government, has pushed the demand for such houses

Private equity-backed housing platforms such as Mahindra Happinest Developers and Joyville by Shapoorji Pallonji have  ambitious plans for mid-income housing projects in the country.

Mahindra Happinest is the mid-income housing platform of Mahindra Lifespaces and HDFC Capital. It is aiming at annual revenue of Rs 2,000 crore in the next five years and plans to sell 10,000 units a year.

Its sales were Rs 100 crore in 2018-19, selling about 700 apartments, a tenth of parent Mahindra Lifespace Developers' sales of Rs 1,023 crore in the residential business, which was 67 per cent higher year-on-year.

Mahindra Happinest is looking to launch a housing project at Kalyan, near Mumbai, of 1,200 units over nine acres. It has launched and sold projects at Palghar and Bhoisar near Mumbai and at Chennai. 

The hope is to sign up two to three land parcels in Mumbai and Pune this year, said Arvind Subramanian, chief executive. In Mumbai, it intends to have projects across the western and central suburbs and at Navi Mumbai. 

“We see strong end-user demand in Mumbai and Pune for the right product in the affordable housing segment, viz apartments with value less than Rs 60 lakh.  Recent project launches in this price segment have been well received.  The Credit Linked Subsidy Scheme has provided a further fillip to affordability in this segment,” said Subramanian.

Joyville, a mid-income housing platform of Shapoorji, PE firm Actis and financial institutions ADB and IFC, is aiming to launch  four or five projects in the next two to three years. “We are planning to launch at least two new projects in Maharashtra, while continuing to launch new phases in our existing projects this financial year," said Sriram Mahadevan, managing director at Joyville Shapoorji Housing.

Under the Joyville brand, it has launched projects at Howrah (near Kolkata), Virar (Mumbai), Hinjewadi (Pune) and Gurugram (Gurgaon). The total development potential under the Joyville platform is around 16 million sq ft. It has launched 9.5 mn sq ft till date.  

Due to the Real Estate Regulatory Act's (Rera's) requirements and lower margins in the segment, say experts, PE-backed companies or those with stronger balance sheets are focusing on this segment. “After Rera, developers can take out a maximum of 30 per cent from the project till completion. Due to this, the space has become more capital-intensive and requires longer tenure investments in a project. 

In such a scenario, developers with PE money back-up or with stronger balance sheets get an advantage against others who are highly leveraged or working with tight balance sheets,” said Shobhit Agarwal, managing director at Anarock Capital.

The reduction in Goods and Services Tax rates for affordable housing, added with the credit-linked subsidy scheme of the central government, has pushed the demand for such houses. About 54 per cent of sales between the second quarter of 2017-18 and the fourth quarter of 2018-19 were of units priced less than Rs 50 lakh across eight tier-I cities in the country, ICICI Securities said in a recent report.  

THE DETAILS

| Mahindra Happinest is looking at a top line of Rs 2,000 crore in the next five years 

| It reported sales of Rs 100 crore in FY19 and sold about 700 apartments

| Mahindra Happinest has already launched and sold projects in Chennai, Palghar and Bhoisar near Mumbai 

| It is looking to sign two to three land parcels in Mumbai and Pune this year

| Joyville by Shapoorji is also looking to launch an additional four to five projects in the next two-three years 

| Under Joyville, it has already launched four projects in Howrah, Virar, Hinjawadi (Pune) and Gurugram

| The development potential under Joyville is 16 million sq ft; till now it has launched around 9.5 million sq ft