Posts Tagged ‘india affordable housing’

Mixed Response To Rate Hikes

September 19, 2010

The Reserve Bank of India, in its first Mid-quarter Monetary Policy Review, has hiked interest rates consecutively for the fifth time since mid-March 2010. The real estate industry has shown a mixed response to the hike. This has caused some concern among real estate developers who feel that this hike in rates is bound to result in home loans becoming costlier. But some believe that the present buoyant market conditions will help absorb a small hike, if any, but further hike in rates could be bad.

The repo rate (the rate at which it the RBI lends to banks) has been hiked by 25 basis points to 6 per cent and reverse repo (the rate it pays for the surplus liquidity it accepts from banks) by 50 basis points to 5 per cent. It has maintained the Cash Reserve Ratio (CRR) at 6 per cent. The objective has been to control the inflationary trends.

Reacting to the development, Mr Navin M Raheja, CMD, Raheja Developers, says in a press release that the RBI has taken a tougher than expected stand in its credit policy announcement. The hike in rates would lead to a rise in the cost of funds for banks and eventually would make loans more expensive. This would tighten liquidity and increase cost of loans.

Rate Sensitive

Real estate is an interest rate sensitive sector and repo and reverse repo rate increases will impact the growth of real estate and reduce the demand in the market. Projects will become more expensive and their viability will be impacted. In our opinion, frequent increases in the rates will affect the real estate industry badly as few capital intensive sectors in real estate have not yet recovered fully.

Mr Irfan Razack, Managing Director, Prestige Estates, is optimistic that the market is likely to absorb small changes given the growing salary levels and the buoyancy in the economy. “The best case scenario is to have a low interest regime,” but that is not always possible.

Major Impact Unlikely

Mr M. Murali, Managing Director, Shriram Properties, feels that the hike in rates so far and the possible impact on home loans are not likely to have a major impact on demand under the present conditions. But further hikes could be a dampener, he says. For now the demand in the residential segment is strong with the presence of end-users. Sales volumes have tripled in the last six months and prices that were hit in the slowdown of the last two years have recovered last ground.

The average home loan rates are around 9 per cent, but if the rates were to increase, the largest market segment, those looking for affordable homes, would be the worst hit. Ideally, the banks should support this segment with a special consideration in terms of rates if further hikes are envisaged. Even a half per cent change in home loan rates either way would make a significant difference to this segment in terms of change in EMI payout, he said.

In another press release, Mr Shobhit Agarwal, Joint Managing Director of Capital Markets at Jones Lang LaSalle India International Property Consultants, says borrowing rates will go up for consumers and developers. For the projects that are already priced high, the impact in terms of demand erosion will be higher. But low-ticket sizes in the Rs 25-50 lakh range are not likely to be affected, he says.

End-user demand will remain intact. Investors in residential and commercial premises will find lesser arbitrage opportunities as the cost of funding purchases becomes higher. Banks will revise housing loan rates upwards. As for funding to developers, this will not be seriously compromised apart from the cost of borrowing going up, he says.

Query Corner: India Real Estate

September 19, 2010

(Economic Times, 17 Sep 2010)

Subhankar Mitra, Associate Director – Strategic Consulting, Jones Lang LaSalle India guides you in matters relating to real estate.

How do we know the actual occupancy level of an under-construction building? I am asking this because mostly builders try to sell off the flats which are the worst-designed and face another building.

There is no straightforward way of establishing how many flats a developer has actually sold in an under-construction project. However, one can choose the tedious route of a secret due diligence with the local registrar and the banks financing the project. This is not an advisable path to follow for single-unit buyers. So, it is best to deal only with a reputed developer whose projects are well-located, of known quality construction and, therefore, in steady demand. Such developers have nothing to gain by making untrue claims about actual sales, since their projects will eventually sell out anyway.

How do we calculate the actual carpet area of the house and ensure that the builder is not cheating us? —Vinod Nair

Insist on a copy of the approved layout from the builder. It will have the project’s floor plans, with measurements for every unit.


Every time I plan to buy a house, I get the feedback that real estate prices will come down. But the prices have never reduced in Mumbai. Should I wait or invest right away? —Raghu R

If you need this property for your own personal use, the best time is always now since prices will always tend to rise in Mumbai. If it is for investment, you have to look for a good deal. Certain properties may be available at attractive prices. You cannot go by an anticipated correction.


I have sold my ancestral property in Mumbai for  Rs. 45 lakh. I want to buy another property, purely for investment reasons and not to stay. I am open to buying anywhere in India. Which is the best location? — Mihir Kothari

If you reside in Mumbai, you are advised to invest in a residential property in one of Navi Mumbai’s new growth nodes. Within your budget, you should be able to get a decent 2BHK flat at Ulwe, Kamothe or Panvel, or a 1BHK at Nerul. Both, the prospects for rental income and the capital value appreciation potential, are excellent in these areas.


I want to buy a house and I have been saving for it for a while. It is just for investment and I am open to buying it anywhere in Mumbai. Which location do you suggest and why? — Lokesh Mehta

You have not specified your budget. Mumbai represents a huge real estate market, with varying price slabs. Below a budget of Rs. 80 lakh, you would have to consider Andheri or the northward suburbs such as Goregaon, Malad, Borivali and Kandivali. If it is above Rs. 80 lakh, you can look at Santacruz, Bandra, etc. However, if your budget is below Rs. 50 lakh, you will need to buy your property in the Eastern suburbs of Navi Mumbai or Thane.


Is it worthwhile to buy a house in a redeveloped plot or is it wiser to move into a new planned suburb? —Ramakrishnan KS

In Mumbai, it all depends on the location, budget and project. If the project’s specifications are good, it is well-connected and suits all your overall expectations and you can afford to buy it you, then you should buy your home there regardless of other considerations.


Is it worthwhile investing in houses which are planning to go into redevelopment? —Rohan K

That depends on whether the housing society has already signed a redevelopment agreement with a developer, or not. If no agreement has been made, buying into the project is as valid as buying a resale home. If the agreement has been made, there are three parties — the seller, the buyer and the developer — involved, in which case the developer must be kept informed of the deal so that the rights of the present owner can be transferred to you.


Does additional floor space index (FSI) affect my investment in my second home in Navi Mumbai? —Shravan S

There is no additional FSI available in Navi Mumbai. If the authorities (Cidco or NMMC) grant additional FSI there in the future, existing property owners will definitely benefit from it.


Will the concept of service apartment work in Mumbai? They are very common in Chennai. — Shankar V

It already works very well in Mumbai, where starred hotels are notoriously overpriced. Serviced apartments offer business travellers facilities such as fully-equipped kitchens with self-catering facilities and various bedroom choices, and are far more cost-effective than hotels in the vicinity of workplace hubs. In fact, the potential for serviced apartments in the city is increasing manifold, since improving economic dynamics are once again leading to longer periods of business travel.

Buying A House: Is This The Right Time?

August 30, 2010

There is a significant amount of pent up demand for housing across India. But, a house seems like a luxury thanks to property rates that don’t seem to be cooling off at all. And on the other side, home loan rates are also rising making buying a house unaffordable. In fact, Pankaj Kapoor, Managing Director of the Real Estate Sensitivity Index (Ressex), says, “Every 0.5% hike in rates dampens demand by 7%.”

So is this the right time to buy a home?’s Chikita Kukreja spoke to experts and the general consensus appears to be that loan rates are going up just yet, and property prices, if they have to correct, will do so in the next two to three months. Here’s a complete lowdown.

Challenge A: Home loan rates

Most bankers including Keki Mistry Vice-Chairman and CEO of HDFC, MD Mallya CMD of Bank of Baroda and S Shridhar CMD of Central Bank of India believe that lending rates will not rise anytime soon. However Mistry adds, “The bank will increase lending rates if the cost of funds rises.”

Challenge B: Property prices

Says Abhishek Kiran Gupta, Head – Research & REIS, Jones Lang LaSalle, “Home loan rates are indeed predicted to rise but we don’t necessarily see that translating into a fall in property rates. Rather it will most likely result in the growth of property rates slowing.” Kapoor however posts a different picture. “We are back to 2008 levels where the prices were high and there was no demand. The future is bleak as I see 10-15% immediate impact of rate hike on housing demand.”

In fact, according to a recent Ressex study, sales are continuously declining and with every new launch inventory is increasing. The prices are at the peak and retarding sales are an indication that market is not absorbing this price rise. Service tax and costlier home loans have also added to the customers woes.

Price can only go up to the extent a buyer can afford. The gap between buyer’s affordability and realty cost needs to be narrowed. Price correction to the extent of 30% within two to three months seems to be imminent to bring the market to an efficient level. Right now it is a kind of another asset bubble in making.

The study also points out that a correction seems must in almost all the markets, but the degree of the correction required may vary.

City                       Expected correction in %
Mumbai              30
NCR                      15-20
Bangalore          15-20
Chennai              10-15
Pune                     10-15
Hyderabad        15-20

According to Kapoor, two tier cities may undergo correction of around 20-25%. There may also be a time correction, which means property prices may not appreciate for four to five years. Real estate grows in the cities which have land scarcity.

“The propaganda about II tier city was spread by the developers and fraudulent advisers to procure cheaper land and speculate on their valuation. They all were a part of speculation, almost all of the projects in these cities are facing problems because there is not demand for apartments whether it is Nagpur, Nasik, Bhopal or Lucknow or Panvel,” he says.

But Gupta adds that if a correction does indeed occur in the residential market, the impact will most likely be the greatest in the Tier II cities across India where recent property rate appreciation was the most irrational.

Samantak Das, Head of Research India, Knight Frank, says that interest rate hikes could dampen property price rise. “This (rate hike) would adversely impact the home borrowers. Their cost of borrowing will go up. So, I feel that there would be a ‘wait-and-watch’ policy adopted by most of the home borrowers which will eventually lead to a downward pressure on property prices.”

Solution: Buy or not to buy?

Harsh Roongta, CEO, says that if one has already made up his mind to buy a house, then it is better to do it right now, instead of doing it three months later. According to him, asset prices are also expected to rise as loan rates are definitely going to be steep.

Buy to occupy?

Abhishek Kiran Gupta says, “When to buy residential property is dependent on a variety of factors—notably investment horizon and risk appetite. Timing the real estate market, like the stock market, is a difficult thing to do. Those who intend to self occupy a residential property within three to four years should consider purchasing soon before prices appreciate too much further. A medium term horizon gives them an opportunity to recover their investment should prices fall in the near term as some are speculating. If a correction does occur in the residential market, the impact will most likely be the greatest in micro-markets across India where recent property rate appreciation was the most irrational.”

Buy to invest?

Das has a word of caution for residential buyers and investors. “As an investor I would not buy right now. I am expecting some price corrections in the short term as a result of monetary tightening in the economy.” Kapoor advises, “It’s time to sell not buy as the market is non-conducive for any kind of purchase as of now; the prices are not fair too. Buyers need to wait for two to three months, look around for a discount and then buy.”

“Only price correction can help—if prices drop, the inflationary pressure will reduce thus leading to a fall in interest rates which will once again boost demand,” he adds. In the next quarter, experts foresee inflation to come in control from today’s level, thus helping the interest rate to become better! And if price correction happens by then consumers may find some good properties to choose from.


India Real Estate: Skyrocketing prices divide Realty Inc

June 29, 2010

Even as realtors remain upbeat about the growing demand in their sector, the industry stands divided over a possible correction in the skyrocketing prices of residential properties in major Indian metros.

Over the last few years, property prices in most Indian cities appreciated by over 250 per cent while the economy grew at 8 per cent annually.

“The spiralling prices in real estate, especially the residential segment, is a big concern today. Such a sudden rise in property prices is not sustainable and there is an immediate need for correction,” Mahindra Lifespaces vice-chairman Arun Nanda said.

Some correction in property prices is expected over the next few months, he added.

“A few builders have become greedy and are running a cartel. Those who have increased prices are not doing any business. There has to be a correction somewhere,” Nanda said.

The government should come out with special schemes for affordable housing so that builders can get land at reasonable rates, the Mahindra official said.

However, Niranjan Hiranandani, chairman of Hiranandani Developers, said that a correction in prices is unlikely in the near future.

Nevertheless, there should be housing schemes for all segments, he added.

“The government should come out with schemes for every segment. Let’s create houses for all and this is not difficult…we have done this in telecom and other sectors and were successful,” Hiranandani said.

“Huge investments have been made in the sector and the bubble is going to burst. However, (this will) not (happen) in the near future,” he added.

There should be more development in the infrastructure segment to support realty, he said.

Advisory and research firm Jones Lang Lasalle Meghraj‘s country head, Anuj Puri, also said there were no signs of an immediate correction in residential prices.

The outlook on residential segment was positive as many expected 2010 to be the year of affordable housing.

Affordable housing projects hasten recovery in realty

June 9, 2010

The rise of a number of small developers offering cheap houses and easy loans aid the realty recovery

New Delhi: The flexibility shown by developers in converting luxurious residential projects into smaller, inexpensive ones has helped the realty sector in many parts of India recover fast from last year’s slump.

The rise of a number of small developers offering cheap houses, and the easy availability of bank funding for both builders and buyers has also aided the recovery, real estate analysts say.

Downturns in real estate usually last for three-five years. India saw a similar dip from 1996-2000, when there was limited activity in the sector.

“This time, residential real estate demand did not let the global slump affect the Indian market (for too long),” said Anshuman Magazine, chairman and managing director, CB Richard Ellis South Asia Pvt. Ltd, a property consultancy.

A slump in the US market hit real estate worldwide in early 2006. But the Indian market was only marginally affected.

However, it changed in late 2008, when the global economic slowdown started creating uncertainty over jobs in India as well.

People became cautious about spending, and were reluctant to invest large sums in buying homes.

The situation was exacerbated by falling investor confidence, and from their peak levels in 2007, real estate prices came crashing down by 30-40% during 2009.

Today, however, the cycle has turned once again, at least in some parts of the country.

“Recovery has been relatively faster in pockets such as south Delhi and south Mumbai, parts of Gurgaon, central Delhi and Bangalore,” said Magazine. “But one has to look at other regions such as Kolkata, Pune, Chennai and Hyderabad. These markets are still lagging behind active markets of Delhi-NCR (National Capital Region) and Mumbai. However, markets are more realistic now.”

Ashutosh Limaye, associate director of strategic consulting at property consultants Jones Lang LaSalle Meghraj, said this happened because developers decided to reformat their large, luxurious projects to build smaller apartments at reduced prices.

For instance, Grande, which had been launched as an ultra-luxury residential project in Noida, was relaunched by its developer Unitech Ltd—now with a major portion converted into smaller flats available at discounted rates.

Similarly, Gaursons India Ltd reformatted luxury apartments at a project in Indirapuram in Ghaziabad, on the outskirts of New Delhi, reducing their sizes and selling them at lower prices. And developers Vipul Group relaunched Vipul Gardens at Dharuhera, near Gurgaon, with smaller, cheaper apartments.

Experts said most of the launches in the latter half of 2009 were in the affordable housing segment.

The trend has been encouraged by the emergence of smaller developers, which control a major portion of the market, particularly in Bangalore, Pune and New Delhi’s suburbs such as Noida and Ghaziabad.

“A key reason for their emergence is the fact that there are no entry barriers for these developers,” said Anand Narayanan, national director, residential agency at Knight Frank India Pvt. Ltd, a property research firm. “And in a corrected market, several smaller developers started offering apartments at discounted rates.”

Narayanan also credited the easy availability of loans for the mushrooming of smaller builders.

“Like home buyers, smaller developers, too, have easy access to funds. Their risk appetite has increased. Their projects, being usually in the size range of 10-20 million sq. ft, easily got bank’s funding,” he said.

But challenges remain. Rising land prices, for instance, can put paid to the developers’ ability to build affordable houses in the coming days.

“Landowners have already increased rates. Even government controlled land is being sold at high rates. This would put pressure on developers to generate more liquidity,” said Niranjan Hiranandani, managing director, Hiranandani Constructions Pvt. Ltd.

He added that there is a huge gap between the demand and supply of houses in the metros.

“Smaller towns have been getting ample supply on the residential front,” Hiranandani said. “Metros, however, face a demand-suppply mismatch. But I am not confident whether developers will be able to deliver the required supply in the next two to three years.”

Indian house sector carried by lower end

May 24, 2010

For nearly a decade, the school teacher Prabhakar Shinde scrounged together money from his meagre earnings to make his dream come true.

That dream was to own a house in Mumbai, India’s crowded commercial capital, where property is sometimes more expensive than in mid-town Manhattan.

Last week, Mr Shinde finally realised it.

The Maharashtra Housing and Area Development Authority (MHADA), a government-run housing board, has offered him a home at a price he can afford – a 437 square foot flat priced at 330,000 rupees (Dh25,857) to be paid in easy instalments.

“This is a moment I have waited for a long time, to graduate from a tenant to an owner,” says Mr Shinde, 35, who lives with his wife and son in a shabby tenement block overlooking a slum.

The hugely oversubscribed scheme invited applications from about 400,000 people for 3,449 apartments. The lucky ones, including Mr Shinde, were picked through a computerised lottery.

Given this ravenous demand for affordable housing in India, it is not just the government but also private developers who are increasingly catering to the budding consumer base at the bottom of India’s economic pyramid that was bypassed by the previous housing boom.

The Tata group, which last year launched the world’s cheapest car – the bubble-shaped Nano – announced plans in May last year to build Nano Homes to cater to the low-income segment.

It is building 1,300 tiny one-room apartments on 27 hectares in Boisar, about 100km outside Mumbai, starting at 390,000 rupees. The company also plans to launch low-cost housing projects outside other major Indian cities.

In the past decade, India’s rapid economic growth gave birth to a housing boom built around the country’s emerging middle class of 300 million high-earning, high-spending urban people.

The country’s construction industry made its profits by building top-end apartment buildings and shiny high rises for this burgeoning section of Indian society. Housing prices rose 16 per cent a year for the past four years.

But the global economic downturn has knocked this once booming industry back on its heels. Property companies, which had a severe decline in sales, were compelled to cater to a long-ignored but thriving consumer base.

There are at least 23 million urban families from India’s middle and lower-middle income groups, whose earnings range between 60,000 and 130,000 rupees and who live in slums and low-income neighbourhoods, according to Monitor India, a Mumbai-based research firm.

They aspire to live in homes of between 250 and 600 sq ft in the suburbs. With rural households in that income bracket, that number swells to 180 million families. 

Despite years of economic growth, this country of 1.17 billion people faces an acute housing shortage.

India’s cities need at least 25 million more homes to satisfy current demand, according to a report from the consultancy McKinsey and the Federation of Indian Chambers of Commerce.

India’s planning commission estimates that between 80 million and 90 million new units will be needed over the next decade to meet this surging demand.

RNCOS, a market research company based in New Delhi, says affordable housing will be the main driver of growth of India’s construction industry in the next decade, and the segment is expected to grow to US$100 billion (Dh367.29bn) by 2013, accounting for 80 per cent of India’s total housing demand.

“Property developers have recognised that the real demand no longer lies in the premium segment and are, therefore, opting to build smaller, no-frills apartments,” Deepak Parekh, the chairman of the Housing Development Finance Corporation (HDFC), wrote to shareholders last year.

But affordable housing became prominent in the property market during the economic crisis, when developers struggled to find buyers in the mid-income category.

Now as India’s economy rebounds more swiftly than most developed economies, this segment is slowly losing its appeal, some analysts say.

“Post the initial euphoria during early 2009, the affordable segment has witnessed a gradual decline in absorption levels,” said a report released this month by PropEquity, a property consultancy in New Delhi.

The report points out that mid-segment housing, which ranges between 3 million and 7.5m rupees, drives the property market with rising sales.

“New launches in the coming months would be in the higher price range,” says Samir Jasuja, the managing director of PropEquity. “There is also a genuine demand for the mid-housing in the market.”

Sales of affordable housing units have steadily declined since India’s economy began recovering. Sales in Mumbai dipped to 2,474 in the first quarter this year from a high of 4,396 units in the final quarter of last year.

In Gurgaon, a town bustling with commercial property developments next to New Delhi, sales declined to 3,635 units in the previous quarter from 5,642 units in the final quarter of last year. 

There are also several concerns about their poor quality of construction. Most affordable housing projects promote tiny apartments with frugal designs, compromising on bathroom taps and kitchen fittings to save costs.

Tata’s Nano Homes, for instance, are available in three sizes, with the smallest being only 218 sq ft for 390,000 rupees. It comprises a single room that doubles as the living room and bedroom. It has a sink in one corner and a toilet built behind a partition.

Many buyers of MHADA’s low-cost houses complain of poorly built houses with paper-thin walls that compromise the privacy of residents in apartments tightly packed together.

These apartments are being built on the outskirts of big cities, where land is considerably cheaper. Homeowners may have to commute long distances to work in cities.

“Affordable housing is not about box-sized, budget homes in far-flung places where there is no connectivity to work places and little surrounding infrastructure,” Deepak Parekh said in the letter to shareholders.

“Affordable housing has to be able to cut across all income segments and has to make economic sense in terms of proximity to the work place.”

But the government is pinning its hopes on the affordable housing sector to put a roof over the heads of millions of the country’s urban Indians.

In his annual budget last year, Pranab Mukherjee, the country’s minister of finance, announced an interest subsidy of 1 per cent for a one-year housing loan of up to 1m rupees. 

In this year’s budget, Mr Mukherjee announced an extension of the scheme by one year.

By some estimates, India will house more than 40 per cent of its rapidly expanding population in urban areas by 2030.

In Mumbai, more than 8 million people live in shanty towns, often in sub-human conditions. Dharavi, a slum known as Asia’s largest, is home to more than 1 million people. Most of its residents are migrants.

Sanitation facilities in slums such as Dharavi are scarce, with one toilet for every 1,500 people, the World Bank says. Drinking water is in short supply as families of 15 share one water tap.

“State supply of housing for the poor is woefully inadequate in relation to the need,” says Sundar Burra, an adviser to the housing rights group Society for the Promotion of Area Resource Centre in Mumbai. 

“Slums proliferate as a solution to this state of affairs and slum dwellers live in conditions of deep privation. India’s housing crisis lies in the fact that the poor in the cities are priced out of the market.”

Q & A: Anuj Puri

Anuj Puri is the chairman and Indian head of the property services company Jones Lang LaSalle Meghraj.

India faces a chronic housing shortage. A large number of India’s urban poor aspire to own a house but are deterred by high property prices. Is affordable housing a likely saviour?
The definition of affordable would means different things for different people, depending on their income levels and socio-economic status. As of now, affordable housing projects are seen only on the outskirts of large cities. We do not see such efforts being launched in more central locations. In large cities like Delhi, Mumbai, Chennai, Bangalore, Hyderabad and Kolkata and smaller towns like Ludhiana and Nasik, there is a growing demand for two-bedroom format houses, which are scarcely available at affordable prices.

Affordable housing became the mainstay of property developers during the economic crisis. Does the same hold true now that India’s economy is swiftly recovering? 
It seemed so two quarters ago, but the scenario has changed since then. Firstly, middle-income homes are selling again and developers are once again focusing on this segment, which offers higher profit margins. Secondly, it is difficult for builders to develop affordable housing within larger cities due to high land prices. Developers won’t build such projects compromising on profit margins.

This year’s national budget offered plenty of fiscal incentives to the developers to focus on building homes for low-income groups. Does the government’s thrust on affordable housing help developers?
The government must promote redevelopment of old buildings within cities or provide world-class infrastructure in suburban locations where people can reside and still commute to cities for work with ease. It can decongest large cities by developing large land parcels located outside them.

Affordable housing loses sheen as buyers move up

May 17, 2010

New Delhi: The euphoria over affordable housing, which became the mainstay of real estate developers during the economic crisis as they struggled to find buyers, may be over as there are few takers for houses in that segment, according to a report released by PropEquity, a real estate consultant.
“Post the initial euphoria during early 2009, affordable segment has witnessed a gradual decline in absorption levels. However, these levels stand closer to sustainable levels,” the report said, adding that the mid-segment—defined as houses in the price range of Rs30-75 lakh—is a major contributor to the increased sales, surpassing in certain cases the absorption in the affordable segment.
“New launches in the coming months would be in the higher price range. Apart from the affordable housing, there is also a genuine demand for the mid-housing in the market,” said Samir Jasuja, managing director, P E Analytics Pvt. Ltd.

The report takes into account prices, launches and absorption levels in the residential real estate segment over a period stretching from third quarter of 2008 to the first quarter of 2010, covering a total of 13 cities.

According to Shveta Jain, director, residential services, at international property consultant firm Cushman and Wakefield India, there is significant demand seen in the metros for mid-end housing vis-à-vis affordable housing. “Due to the aspirational values embedded in the working population of metros, it leads them to stretch their budget and seek better housing complexes,” she said.

The report added that cities such as Gurgaon, on the outskirts of New Delhi, and Mumbai witnessed a decline in unsold inventory, indicating a revival after the slump in the market. However, while there has been a regular supply of units in the affordable and mid-housing range between the last quarter of 2009 and first quarter of this year, absorption levels have been low in most cities.

For instance, Mumbai alone got a supply of 1,812 units across the affordable and mid-housing categories during the period between the fourth quarter of 2009 and the first quarter of 2010. But sales declined to 2,474 in the first quarter of this year from 4,396 units in the fourth quarter of the previous year. Gurgaon, too, saw a dip, despite a healthy supply of 4,892 residential units over the last two quarters. Sales declined to 3,635 units in the last quarter compared with 5,642 units in the fourth quarter of 2009.

The only exceptions to this trend were Noida and Greater Noida markets in the National Capital Region centred on New Delhi. The Noida market witnessed the highest supply by the end of the last quarter. The market received 20,693 units in the past two quarters alone, the report said. However, it witnessed a significant increase in the absorption, of 967 units.

Sanjay Dutt, chief executive officer, business, at global property consultant firm Jones Lang LaSalle Meghraj, added that people during the slump lost confidence on the job front and the real estate market. “But after a dormant phase, actual homebuyers are back in the market with more cash and spending capacity,” he said.

On the price movement, the report said the Mumbai Metropolitan Region witnessed an upward trend in the average transacted prices in the affordable segment while prices in the Delhi-National Capital Region market remained stable or witnessed a minor correction resulting in areas such as Noida seeing a higher absorption. On the other hand, cities such as Chennai and Bangalore have recorded minor upward pricing trends despite high levels of unsold inventory.

The reasons for the shift from affordable to mid-housing segment are reduced home loan rates and better incentives in terms of discounts, said the report.

Realty industry gets sops with strings attached

February 27, 2010

Says Mr Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj, “This is a positive, growth-oriented budget – and growth in the economy always equals growth for the real estate sector. The positive revision in personal income-tax rates will put more money in the pockets of the middle class. Coupled with the extension of the one per cent interest subvention for affordable housing, this clearly is a sign that the residential sector will continue to thrive. The increase in allocation for slum redevelopment to Rs 1,270 crore will ensure that key areas in city centres will begin to yield quality real estate supply.”

Mixed reaction to budget from real estate sector

February 27, 2010

“We would have been even more grateful for the re-introduction of the Sec. 80IB (10) tax benefit scheme, first implemented in 2001, which is definitely a boost for developers of affordable housing. Nevertheless, the fact that existing incentives continue to be in place is positive,” said Anuj Puri, Chairman and Country head of property consultancy, Jones Lang LaSalle Meghraj. He felt that it was a positive, growth-oriented budget and growth in the economy always equalled growth for the real estate sector. “Because of the overall economic growth implied in their enablement by this budget, we have no overt complaints on behalf of real estate.”

Will there be a boost to low cost housing?

February 20, 2010

“Akruti, HDIL, Unitech and Hiranandani are some of the developers that have successfully implemented the PPP model in slum redevelopment. In fact, this model has managed to boost a name like Akruti to a high level of national recognition, though the company has no significant land holdings in the city. The PPP platform is currently a very workable one through which slum rehabilitation proposals can be implemented, though the possibility that an even more progressive model will evolve cannot be discounted,” says Shubhankar Mitra of Jones Lang Lasalle Meghraj.


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