The definition of affordable means different for
different people depending on the socio-economic class, income levels etc. In
India, the term applies most pertinently to housing created for the EWS
(Economically Weaker Section) of society so that they, like the middle class,
can also benefit from the financial and emotional security of home ownership.
While this segment of housing did not receive sufficient impetus in earlier
years, the incumbent BJP Government has made it clear that it intends to see a
significant increase in housing projects aimed at the bottom-most and the
thickest part of the income pyramid. This means that we are looking at an
interesting new phase in India where affordable housing in India is getting
preferred rather than 'poor cousin' status.
There is much that the new
Government can do to boost this sector, including promoting re-development of
old buildings and providing high-grade infrastructure to peri-urban locations
where the population could reside while continuing to work within the city. The
key factor here is to ease the commute time and allow access to vast land
parcels outside the city. An interesting and important fact related to Indian
real estate is that affordable housing projects have the fastest absorption
rates. In other words, the creation of more affordable housing makes sense not
only from a socio-economic point of view but also in terms of the real estate
business. The demand in terms of units is phenomenal, and developers who have
been focused on affordable homes from the start (or who are getting into this
segment now) can build and sell their projects for years to come. Though
affordable housing has not seen the kind of growth that India requires in this
segment, it is in fact the most sustainable business model for real estate
developers. Developers who concentrate on this segment of housing are
completely insulated from recession or sentiment-induced market slowdowns. In
fact, genuinely affordable housing - projects wherein units are priced below
Rs. 20 lakh - are completely recession proof since demand is not only steady
but in fact constantly growing. As a direct effect of this dynamic, affordable
housing is now also the most preferred asset class for property investors.
There has been a huge supply in mid-income and high-end properties in all
cities of India, but a marked lack of willingness among buyers to pay the high
rates for residential spaces.
As a result, we are seeing more and more investors
focusing on budget homes. Clearly, affordable housing is a business vertical
that has stood the test of time when larger format housing has failed to
attract buyers and investors. Today, larger developers who previously focused
only on mid-income and high-end housing projects are seriously looking at
building up their presence in affordable housing, as well. Their rationale is
that the higher-volume/lower-margins affordable housing segment is a reliable
hedge against the market slowdown in costlier housing, and also because budget
housing is a new means for reputed developers to leverage their brand value.
courtesy inputs: moneycontrol
