Developers turn focus on affordable housing

Developers are hoping to cash in on the credit-linked subsidy scheme (CLSS) announced under the Pradhan Mantri Awas Yojana by positioning apartments in the “affordable” segment.

And, accordingly, affordable housing — homes priced below ₹50 lakh — seems to be the flavour of the season for Kolkata developers.

Typically, affordable housing has different connotations in different markets. For example, a one-bedroom flat in Mumbai municipal area priced at ₹70 lakh is affordable as per the local market, while in Kolkata anything below ₹50 lakh is termed affordable.

“With top-end projects stagnating, developers are moving towards HIG or MIG projects,” Manish Jaiswal, MD and CEO, Magma Housing Finance, said.

A Cushman & Wakefield report in June said that during April 2016 to March 2017, the share of affordable segment (32,300 out of 1,08,200) in total launches has improved to 30 per cent, from 25 per cent (29,325 out of 1,17,650) in the same period in 2015-16. The share of high-end and luxury segments has fallen.

Rajib Ghosh, Managing Partner at BGA Realtors, which is primarily into housing projects below ₹30 lakh, too holds the same view. According to him, lower priced units are generally user-driven and hence their demand remains more or less constant.

“Most developers are trying to hedge themselves by entering the affordable housing segments. For instance, a player who was selling premium apartments of ₹1 crore and above, is now looking at selling apartments priced at ₹50 lakh. The demand for such units has been quite high in recent times,” he told BusinessLine.

Eden Realty Group, which was into the mid-income segment, launched 500 affordable units on a pilot basis in Baranagar, on the northern fringes of the city, in July. The apartments priced below ₹30 lakh were oversubscribed by five times.

The Orbit Group in Kolkata is another example. The group has so far focussed primarily on high-end projects.

According to Arihant Parakh, Director, the company plans to enter into the “affordable housing” segment. “We are yet to zero-in on the locations and price of apartments,” he said.

The Siddha Group, for instance, seems to have kept its prime focus on the “affordable housing” segment, with most of its units/apartments priced below ₹60 lakh. “Ninety-eight per cent of our offerings are in the affordable segment,” says the company’s MD, Sanjay Jain.

Bankers and housing finance companies, however, feel that the term “affordable” is being loosely used to ride on the interest subsidy (through CLSS) wave.

Market sources say that irrespective of the apartment price, the CLSS scheme is available to any user who fulfils criteria such as annual income of below ₹18 lakh, his/her first apartment, and so on.

Anuj Mehra, MD of Mahindra Rural Housing Finance, points out that for a housing unit to be “affordable” it should ideally come at a price which is 7-8 years of the purchaser’s annual income.

This means, if a driver in Kolkata earns ₹10,000 a month, his total income after eight years will be around ₹10 lakh, or the ideal value of the property that he can afford.

“Unfortunately, supply in these brackets are less because of unavailability of land parcels or delayed approvals,” he added.