Builders Bet On Affordable Housing Amid Realty Slowdown

A slew of developers has lined up robust expansion and investment plans for affordable housing this year, despite the prolonged slowdown in real estate.

Not only large realty firms but also mid-sized ones are betting big on building and selling homes in the Rs 20-60 lakh segment, propelled by demand from home-buyers and encouraging government tax incentives.

Shapoorji Pallonji Real Estate plans to invest Rs 600 crore in buying land parcels this year to build a pipeline of projects. These are in National Capital Region, Hyderabad, Bengaluru and possibly a fourth, in Maharashtra. It is also planning to launch a project in Hinjewadi, Pune by the end of the year.

“We have around 35-40 million square (sq) feet of housing projects under various stages of development. The focus is on mid-income housing in the Rs 30-60 lakh category,” said Shapoorji Pallonji Real Estate chief executive officer (CEO) Venkatesh Gopalkrishnan.

Tata Housing Development is also in discussions with multiple landowners across Kolkata, Pune, Mumbai, Chennai and Bengaluru and hopes to launch at least three large projects this year, a company spokesperson said.

“All our affordable housing projects will be upwards of 20 acres and will be launched under our affordable housing brand New Haven with a starting price of Rs 25 lakh,” he said.

After some delay, Mahindra Lifespace Developers expects to launch a project in Palghar, near Mumbai, later this year under its affordable housing brand - Happinest.

“We are also looking to buy land, primarily in Maharashtra,” said Happinest business head Sriram Mahadevan.

Housing shortage at the beginning of the 12th Five-Year Plan (2012-17) was estimated at 18.78 million, according to a report by the Ministry of Housing and Urban Poverty Alleviation.

The 2017 union budget proposed infrastructure status for affordable housing projects to facilitate higher investments in the sector and a 100 per cent tax deduction on profits for building houses of up to 30 sq metres in four metro cities and 60 sq metres in carpet area in other cities.

Mumbai-based Poddar Group plans to launch three projects in suburban Kalyan with homes priced at Rs 25 - 40 lakh.

Emgee Group, also based in Mumbai, is gearing up to launch its largest ever project in the distant suburb of Neral, in the next few months. The 80 acre project, which will build around 14,000 homes of Rs 8 -16 lakh, will see an investment of around Rs 1,600 crore over the next 7-8 years.

The project is under the government’s Pradhan Mantri Awas Yojana (PMAY), and buyers can avail its credit-linked subsidies.

“We are also planning to build another 1,000 homes in Asangaon but that will launch that in early 2018,” said Emgee Group chairman and managing director Mudhit Gupta.

Earlier this week, the government amended the PMAY scheme and extended it to private land to increase the scope to build affordable housing projects.

“We feel this is a much-needed reform and will provide a great platform to showcase sustainable partnership between public and private sector. Our member developers showcased immense support to affordable projects post budget by committing to 375 affordable projects in April 2017. With this new amendment, we expect this number to grow twice or thrice,” said CREDAI president Jaxay Shah.

Not only developers, investors too are confident about returns on investment in mid-income projects. Brick Eagle Capital Advisory plans to launch its first affordable housing alternate investment fund to raise Rs 700 crore some time soon. “The need for capital may be around Rs 10-50 crore in a project, but there are thousands of projects that need money,” said Brick Eagle Group founder and chief executive officer Rajesh Krishnan. Brick Eagle Group funds and incubates affordable housing firms.

Kotak Realty Fund will also raise a $100 million fund that will invest in smaller-sized apartments both in large and tier-II cities.

This article was originally published in Mint and has been republished here with permission.