- Nilima Phatak, Freelance Writer (New Delhi)

Having drawn the global spotlight with the launch of the world’s cheapest car (the Nano is priced just over $2,000). India’s Tata Group knows a thing or two about making things affordable. The same operational gameplan in now being adopted for its real estate exposure. Tata Housing Development Co. is putting its mite behind Shubh Griha, an integrated housing estate where one-bed-room units are priced between Rs.390,000 and Rs.670,000 It is located in Boisar, about 100 kilometers from Mumbai. These are rates that leading developers would not have given a fleet thought to in the past. But Tata seems to have hit the right notes with its new project – on the first two days of bookings opening last month, over 3,500 applications were sold. This being more than three times the number of apartments being built for the project, allotments will be done through a lottery.

In all, 1,240 units will be built on the 67-acre township, and will be available in three configurations – 283, 360, 465 square feet.

Mortgage options

Tata – which is expecting a turnover of Rs. 1 billion from the development – has partnered Micro Housing Finance Corporation (MHFC), State bank of India (SBI) and Housing Development Finance Corporation (HDFC) to help buyers with financing options. The application forms have been sold at Rs. 200 and the initial booking amount is Rs. 10,000. “The MHFC loans will be long-term micro-mortgages for need-based housing, we intend being flexible in our documentation and the interest rates charged will be affordable,” states Brotin Banerjee, Tata Housing’s Managing Director and CEO.

“Our policy is different – we are not for profit.”

Low-cost venture

“All this is in continuation of the group’s commitment towards quality living for the masses. We observed that since most people in the low-income bracket live away from their families in order to earn a livelihood in the big cities, there is a large migrant population living in rented.”

Tata’s feasibility studies show that about 48 per cent in the low-income segment currently stay in rented places. The low-cost housing venture is thus seen by the developer as a means to empower this section of the society by providing the opportunity to own a house in Mumbai.

It will be followed by similar constructions across Tier 1 and Tier 2 cities, with Delhi-NCR and Bangalore on top of the list.

The Shubh Griha Project

The Shubh Griha project to be delivered in two years, will have one-bedroom units priced between Rs. 390,000 and Rs.670,000. The dwellings will be built under the guidance of the Indian Green Building Council. Official statistics show that India faces a shortage of 24.7 million dwelling units, with more than 70 per cent of this among the middle and low-income groups. But actual shortages could be much more. Mortgage penetration is still only about 7 per cent of India’s GDP which is considerably lower than the 10 to 50 per cent recorded in other Asian countries and 80 per cent in the US.

- Mona Mehta

Even as recently as a year ago, the real estate market was considered as sellers’ market. Now, with the economic downturn, the tables have turned as the market for high end real estate has begun to dry up. Builders are now, for the first time, foraying into selling affordable housing built mostly in the distant suburbs of metros, and allocated through a lottery system. For instance, Tata Housing has recently announced a move into low cost-cost housing by launching ‘Shubh Griha’ as its first valus homes concept in Boisar near mumbai. The project will be spread across 67 acres of land where the company will sell about 1,200 apartments in Plase-I. These will be priced between Rs. 3.9 lakh and Rs. 6.7 lakh and will be built in three sizes – 280 sq ft, 380 sq ft and 465 sq ft. A Tata Housing survey showed that 45% of the low-income and migrant population live in rented accomodation. Project like these aim to convert many into homeowners.

However, the moot point here is that Tata Housing alone will not be able to meet the involving needs of all homebuyers. Under the Shubh Griha project, only 1,200 of all applicants will get possession and that too only after two years. The government needs to free a lot more land for builders to construct affordable housing on the scale that is necessary to satisfy the huge demand.

The government also needs to consider creating a regulator for real estate that affordable housing remains affordable. Certain builders still demand a premium for affordable 2 and 3 BHK appartments in faraway suburbs despite advertising them as affordable property. Moreever; some buyers complain that certain builders even refrain from meeting them when they want to negotiate. A regulatory body which can register end-buyer’s complaints and enforce standards on builders is necessary.

Builders have their own reasons the be cautious about affordable housing. The repeated rise in cement proces, for example, threatens to raise constructions costs and reduce margins. Still, the logic of the market demands that the next wave of construction takes place in the affordable segment.