After euphoric times 'Realty sector' seems to have hit a low in the past one year. There are very few takers for the super luxury apartments offered by the Realtors. Caught with severe cash crunch and falling sales most realty firms are busy selling their land banks to improve cash flows. The murmurs about 'Affordable housing' are now being heard in the Board rooms of the real estate developers. Those companies that have announced new affordable housing schemes have got a better response in the recent past, whereas those offering premium housing are still looking for clients.
According to research firm 'Knight Frank' there will be an additional demand for 45000 affordable housing units in NCR region alone in the next 2 years. The research also says: largest contributor to this demand would be the Rs.3-6 lac income group. The maximum affordability for a household is around 5 times its annual income, for example a household with an annual income of Rs.3 lacs can afford a house worth up to Rs.15 lacs. If households buy more expensive houses, the chances of default in repayment are higher. The unit area for a affordable housing project is between 600-1200 sq. ft. (average size of the apartment is around 850 sq. ft.). But many companies are still offering units above 1200 sq. ft. which are not really affordable. Real estate firms will have to catch with the ground realities and start offering real affordable housing. After all there is no dearth of demand by genuine buyers. The interest rate scenario points to a stability in interest rates in the near term, which is a great impetus to the dream of providing affordable housing to the people of India.
Prices will need to become more realistic if developers have to succeed in finding enough buyers. As land costs need to be sufficiently lower for an affordable housing project, most of the affordable housing projects are likely to come up in suburban areas, given the prohibitive cost of land in cities. There is also an urgent need to develop innovative ways to reduce construction costs without compromising on the quality of housing. There is also an urgent need to look at the use of newer, energy efficient, environment friendly materials and innovative construction technologies. This will help construction companies/ builders improve demand and will eventually help them improve their cash flows.
1 comment:
The realtors have failed to understand the importance of affordable housing. Sensing an improvement in the economy they have already started increasing the prices, which will erode the concept of affordability. Infact they are inviting trouble for themselves in this competitive environment.
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