- 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.

TATA Housing has declared the list of selected applicants (draw results). It can be viewed at: www.shubhgriha.com/pages/applicant.php

For getting home loans for Shubh Griha project, please contact Micro Housing Finance Corporation helpline number is: +91 22 6725 8855 | Website: www.mhfcindia.com

From: The Economist print edition

Source: http://www.economist.com/displaystory.cfm?story_id=13837400

Indian property developers cater to the masses with low-cost housing

LAST month ten-year-old Azharuddin Ismail was woken in the middle of the night by the sound of bulldozers. As policemen beat him with a bamboo stick to shoo him and his family away, his home in Mumbai’s slums was swiftly demolished. Azhar, a celebrity since appearing in the film “Slumdog Millionaire”, has since been given a new home by the filmmakers. But other residents were not so fortunate.

India’s cities need at least 25m more homes, according to report from McKinsey, a consultancy, and the Federation of Indian Chambers of Commerce. In Mumbai, the commercial capital, more than 8m people now live in shantytowns, often paying substantial rent for the privilege. But buying a home of their own is way out of reach for most of them: a 70-square-metre flat in the centre of the city costs $500,000 or so.

Matheran Realty is one of several firms that think they have a solution: ultra-low-cost housing. In Karjat, 90km east of Mumbai, Matheran Realty is in the process of building 15,000 flats with prices starting at just 210,000 rupees ($4,500) for 19-square-metre units. Tata, the firm that makes the $2,500 “Nano” car, is building 1,300 basic units at Boisar, about 100km north of the city, and may add more. Priced at 390,000-670,000 rupees each, they are already oversubscribed. Other firms are planning similar developments elsewhere in India.

The cost is being kept low chiefly because the flats are being built outside big cities, where land is much cheaper. Owners are expected to commute. The units are also very small and spartan. The simplest consist of a single room with a sink in the corner and a toilet behind a partition. They are in buildings of no more than three storeys, so there is no need for expensive structural works. Instead of bricks, lightweight moulded concrete blocks are used for the walls. The concrete is often made with foam, fly-ash or other waste materials to make it lighter as well as cheaper. There are no lifts and just one staircase per block. All this means that the homes can be built very quickly and with unskilled labour.

The developers say the potential for very cheap housing in India is huge. Many of those living in slums today are employed as drivers, factory workers or tailors, with incomes of around 90,000 rupees a year—easily enough to afford a flat which costs 200,000-400,000 rupees. According to Ashish Karamchandani of Monitor Group, another consulting firm, India has 23m urban families with incomes of 60,000-130,000 rupees a year. Including rural areas, Tata Housing sees an even larger market of 180m households earning between 90,000 and 200,000 rupees.

Until very recently one of the biggest hurdles was finance. Banks were unwilling to lend money to people without credit histories or proof of permanent residence. But two government-owned banks—the National Housing Bank and the National Bank for Agriculture and Rural Development—have agreed to provide funds to finance companies so that they can offer mortgages to such buyers. To reduce risk, buyers must put down at least a quarter of the purchase price and employers must confirm their income. Borrowers are then charged little more interest than those with an established credit history.

Lenders and developers are convinced that they have struck gold. Who would have guessed that the combination of subprime loans and a building boom would have become attractive again so soon?

From: The Wall Street Journal India

Source: http://online.wsj.com/article/SB124218338028313861.html?mod=googlenews_w

Tatas’ nano housing plan takes off in style

Tata Group has sold around 3,500 application forms for its low-cost housing project, Shubh Griha near Mumbai, in the first two days of booking, three-and-a-half times the number of apartments the company is planning to build under the project, a company executive said.

The pricing of the project has taken many by surprise. Its Shubh Griha website has received 15 lakh hits in four days since announcement of the project. This includes 6.7 lakh hits from the US and 3.3 lakh hits from India, as per the executive.

From: Time.com (Nandini Lakshman, Mumbai)

Source: http://www.time.com/time/world/article/0,8599,1896894,00.html

India’s giant Tata conglomerate, whose subsidiary Tata Motors just successfully launched the $2,000 Nano, the world’s cheapest car, is ready for an encore: ultra-cheap homes.

Tata Housing Development, the real estate arm of the giant Tata group, is poised to start building apartment-style homes priced from $7,800 to $13,400 in a township being planned at Bhoisar, an industrial suburb located 31 miles (50 km) north of Mumbai. Like the Nano, which was designed to bring some middle-class comforts to the masses, the homes are geared for the hundreds of millions of Indians making less than $5,000 a year who are unable to afford decent dwellings. “We have realized that there is an opportunity at the bottom of the pyramid,” says Brotin Banerjee, CEO of Tata Housing Development. The homes will be built in three sizes, all extremely cramped by Western standards: 283 sq. ft. (one room, including kitchen plus a bathroom), 360 sq. ft. (ditto), and a 465-sq.-ft. model with a tiny bedroom. In addition to the modest proportions, Tata is relying on economies of scale and careful sourcing of materials to keep costs low. The Mumbai project, for instance, will get its steel from group company Tata Steel, which has plant at nearby Tarapore. Land-acquisition costs will be minimized by giving the original landowner a percentage of each project’s returns. The homes will occupy cement buildings no more than two stories high, because construction costs go up as buildings get taller. There will be eight to 12 homes per building.

Bargain-basement housing is a departure for Tata, which previously has developed luxury apartments costing upwards of $220,000, along with office complexes and shopping malls. The property company is planning to build 4,000 of the low-cost homes across India over the next four years. Projects near Bangalore in the south and Gurgaon in the north are the next destinations.

Tata officials say they expect demand to be strong, even though India’s once-booming real estate market has been deflated by a slowing economy and the global credit crunch. India has a shortage of 24.7 million dwellings in its major cities, according to a recent joint study by McKinsey and the Federation of Indian Chambers of Commerce. Housing shortfalls are exacerbated by migrant workers streaming into many cities who are forced to live in slums made up of shanties lacking basic amenities like sanitation and running water. Roughly 70% of India’s 1.2 billion people live on less than $1 a day.

With the high end of the property market in a downturn, other developers such as Unitech, Puravankara and Ansals are now eyeing low-income housing. ICICI Ventures, the venture funding arm for India’s largest private bank, has a project underway in Pune. The apartments, which come in 450 sq. ft. and 800 sq. ft. versions, are priced at $22,000 and $38,000.

Buyers are already flocking to the Tata construction site at Bhoisar. Overwhelmed by the response, the company is beefing up security to handle the rush. Customers can book flats by paying an initial installment of $200; successful applicants will be chosen by lottery. The Bhoisar township, the first phase of which will have 1,244 apartments, is expected to open for occupancy in two years.