Realty biggies line up affordable housing projects

Helped by the government’s budget moves and the Reserve Bank’s (RBI’s) recent notification on affordable housing, the big names in the segment are gearing for new project launches.

An investment of Rs 5,000 crore (Rs 50 billion) is estimated for the segment in the current financial year.

Among those planning launches are Tata Housing’s Tata Value Homes, Puravankara’s Provident Housing, Jerry Rao’s Value and Budget Housing, Mahindra Lifespace Developers and others.

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Leading the pack is Bangalore-based Provident, planning to invest Rs 2,500 crore (Rs 25 billion) to develop five projects, with a total space of at least 10 million sq ft across Bangalore and Hyderabad.

Provident’s projects will have a total of 8,000 units as against the 6,276 units it had sold from its inception till end-March.

Tata Housing plans to launch three to five projects, with about 1,000 units, involving an investment of Rs 500 crore (Rs 5 billion), by the year-end.

Jerry Rao’s VBHC plans more launches this year in the Mumbai metropolitan region, Chennai, National Capital Region and Bangalore.

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“VBHC already has projects in these cities and we want to deepen focus in these places,” said Rahul Sabharwal, chief operating officer.

Mahindra Lifespace Developers has already said it would launch two affordable housing projects this year, one in Bhoisar near Mumbai and at Avadi, close to Chennai, in the next two months.

Between the two, the projects would have about 2,000 apartments. Based on their success, it would launch more such projects in other cities.

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In the Union Budget, the finance minister allocated Rs 4,000 crore (Rs 40 billion) to National Housing Bank, for increasing the flow of cheaper credit for affordable housing to the poorer sections and other low income groups.

First-time home buyers’ tax break for a self-occupied home has been raised from Rs 1.5,00,000 to Rs 2,00,000.

The personal tax limit is also being raised from Rs 2,00,000 to Rs 2.5,00,000.

RBI recently brought housing loans up to Rs 50,00,000 under priority sector lending, which meant cheaper rates now. 

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Developers say this will fuel demand for affordable housing projects in that bracket.

Home buyers who were borrowing up to Rs 50,00,000 were paying 10-11 per cent and thanks to the new norms, they can expect a 25-50 basis points reduction in home loan rates in the medium term.

The new government also announced setting up of 100 ‘smart cities’ across the country’ with an agenda of ‘housing for all’.

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“Availability of cheaper credit will fuel demand and will help developers like us to mobilise cheaper finance for development of affordable housing projects,” said Brotin Banerjee, managing director at Tata Housing.

Added Jackbastian K Nazareth, group chief executive officer, Puravankara Projects: “With these changes and announcements, buyers can expect lower interest rates, which will fasten the decision making process for buying homes.

All this augurs well for the real estate industry, the affordable housing projects in particular.”

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Developers are already seeing improved enquiries and demand for their projects.

“We are expecting this momentum to continue in the coming quarters as well,” said Nazareth.

Banerjee said were still sitting on the fence but inquiries had increased by at least 20 per cent in a month.

Sanjay Dutt, managing director of realty consultants Cushman & Wakefield, said even the big developers could now look at this segment.

“They know there is huge demand in this segment but the attractiveness was not there,” he said. 

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With the government and RBI incentives, prospect of better demand and better cash flows, more developers could now look at this segment.  

Building blocks

• Bangalore -based Provident planning to invest Rs 2,500 crore (Rs 25 billion) to develop five projects with a total space of 10 million sq ft across Bangalore and Hyderabad
• Tata Housing plans to launch three to five projects with an investment of Rs 500 crore (Rs 5 billion) by end of the 2014
• VBHC is also planning to do more launches this year in Mumbai Metropolitan region, Chennai, NCR and Bangalore
• Developers believe RBI’s sops for the sector will fuel cheaper credit for buyers and boost demand in the segment