The affordable housing segment, though identified as a focus area by the government, needs to still gain traction among developers as they await a suitable regulatory environment and incentives.
A report by real estate consultancy, Cushman & Wakefield said that the sharpest decline in launches of new residential projects was recorded in the affordable housing segment in the third quarter of calendar 2014 which fell 52 per cent over the previous year at 4,700 units. Affordable housing includes those which fall in the sub-Rs. 30 lakh category.
While demand remains highest in the segment, developers are apprehensive because of larger scale of construction required, unavailability of land parcels and lower margins. Shveta Jain, Executive Director, Residential Services, Cushman & Wakefield said, “input cost for development have started to inch upwards making it tougher for developers in key cities of India to provide affordable housing within city limits or even in the peripheral region”.
Sunil Mantri, Chairman, Mantri Group and president, National Real Estate Development Council (NAREDCO), said the housing sector in general had been facing a liquidity crunch. “Besides, there is no proactive policy for affordable housing. For developers, it should be incentivized given the scale of housing shortage,’’ Mr. Mantri said.
He hoped for an infrastructure status for sector and a cut in interest rate on retail loans. “There should be a single window clearance for projects as it otherwise requires 40 approvals. A more holistic approach for large projects with connectivity and infrastructure planning is needed,’’ he said.
However, larger corporate houses like Tatas and Mahindras have already ventured into the segment and it is expected that better quality, better prices and better ticket sizes will follow. “They seem to have cracked the code,” Ms. Jain said, adding, “The third quarter drop is in no way an indicator of recessionary conditions but more of a re-alignment. Launches have been merely deferred.”
Mr. Mantri felt some positive news could boost the sector. “We hope for environmental clearance reforms and land reforms. Besides, the sector needs better access to funds from banks. There could be something for affordable housing in the forthcoming budget and in a conducive environment, I see a pick-up next fiscal,’’ he said.
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