<!--?xml version='1.0' encoding='UTF-8'?--><div><root><static-content><!--[CDATA[<!--{14089503179580}----><div><root><static-content><!--[CDATA[<div-->With the central government estimating the shortage of homes in the country to be around 27 million, the need of the hour is mass, affordable housing for the middle and working classes. To encourage investment in this segment by the private sector, the government has over the years offered a slew of sops for ‘integrated township’ projects, including foreign direct investments. <br /><br />Integrated townships must have a layout of a minimum of 100 acres to qualify for government clearance. Typically, these towns offer education facilities, commercial complexes and sometimes even malls within the campus. With planned open areas and sustainable ecosystems, these usually offer a better quality of life than stand-alone buildings. Rajasthan and West Bengal have relaxed the minimum 100-acre norm for township development to encourage more residential construction. On the other hand, Maharashtra has made it mandatory for all projects to reserve 20 per cent of the built-up area for homes for the economically weaker sections (EWS).<br /><br />Lately, private equity funds have been showing great interest in the residential areas of these townships for their sheer scale, quick uptake and the relatively low risk. However, it is not the gated communities of the rich but the mass, affordable products that will be the future of housing in India.<br /><br />BW | Businessworld visited a few sites and tried to understand how developers are approaching the task of housing millions with some ground-level reporting. <br /><br /><strong>Upwardly Mobile</strong><br />Urbania is clearly targeted at the upwardly mobile. The Rs 4,000-crore Rustomjee project, developed on what was once agricultural land on the outskirts of Mumbai’s suburb of Thane, has just 19 one-bedroom apartments of 432 square feet each. Priced at Rs 65 lakh, they all sold out in a jiffy. Most of the 4,000 units the project will deliver are aimed at young professionals working in corporate outfits on the periphery of Mumbai or Navi Mumbai. At the top end of Urbania is a cluster of 12 buildings with two- and three-bedroom apartments priced between Rs 1.5 crore and Rs 2.25 crore. <br /> <table width="600" align="center" cellspacing="1" cellpadding="1" border="0"><tbody><tr><td><img width="600" height="400" align="middle" src="/image/image_gallery?uuid=3f08c409-604d-4e29-891c-fe46b6538796&groupId=520986&t=1408451516250" alt="" /></td></tr><tr><td>A NEW MODEL: Nanded City, near Pune, will hold 18,000 homes when complete (Photographs by Umesh Goswami)</td></tr></tbody></table><div><br />The 127-acre proposed township is split in half by the Thane-Nashik Highway, but it has all the trappings of a self-reliant township with 50,000 sq. ft of commercial and retail shopping in the pipleline, a dedicated water-supply system with a massive water reservoir, a police station and an alliance with the UK-based Cambridge University to set up a school in the complex. <br /><br />Such offerings make the project very attractive. However, it is moving slow. Work on Urbania commenced in 2007, whereas it opened for booking only in 2011. Saurabh Naik, deputy manager-Sales, Rustomjee, says that about 500 flats have been handed over, while 770 are expected to be completed this year. The sales are slow, perhaps, because of the high prices and strong competition from similar projects nearby. Besides, the prices too have been steadily going up. The project opened at Rs 6,800 a sq. ft in 2011, but the booking rate today has crept up to Rs 10,500 a sq ft. <br /><br />“Yes, sales velocity has dropped. In April, we sold zero,” admits Rustomjee chairman Boman Irani. He says costs have climbed, but insists that slow uptake is because the customer has endless choice today. “The home buyer has many more options today. He takes time to choose the location and ambience he likes,” adds Irani. <br /><br />Irani takes umbrage at the suggestion that builders only construct middle and luxury homes, leaving the masses to fend for themselves. Pointing to his Rs 3,500-crore joint venture with the Evershine Group in Mumbai’s suburb of Virar, he says he is developing 4,000 homes spread over 218 acres. “We opened bookings at Rs 2,000 a sq. ft a few years ago; it has now gone up to Rs 5,000. We are offering value-for-money homes in Virar,” says the Rustomjee chief. The bulk of the offerings is in one-room category — between 360 and 412 sq. ft — that initially opened at Rs 8 lakh. Today, these flats are sold at Rs 32 lakh, whereas a 580 sq. ft two-bedroom flat is sold at Rs 50 lakh. <br /><br /><strong>Two-pronged Strategy</strong><br />At the other end of the spectrum is Vastushodh Projects, a developer marketing ‘affordable’ homes. Over the past four years, the company has developed two brands of housing projects in and around Pune. The housing units at Anandgram are priced between Rs 5 and Rs 15 lakh, while units at Urbangram are in the range of Rs 15 lakh and Rs 30 lakh. <br /><br />BW visited two Urbangram projects on Pune’s periphery. Approaching the cluster of buildings at Kirketwadi was a nightmare, with bumpy roads and narrow alleyways, but once there, the 226-apartment layout was a neat, well-paved set of buildings that had just been occupied. There is even a small, non-functional swimming pool awaiting water supply. The most expensive flat in the project, a crunched three-bedroom, hall and kitchen (BHK) measuring 1,200 sq. ft, costs Rs 42 lakh. The one and 2 BHKs are cheaper at Rs 24 and 32 lakh, respectively. <br /><br />“When we opened for bookings, we sold out in 24 hours,” says Nitin Kulkarni, director-Technical, Vastushodh Projects. “We don’t believe in benchmark pricing; our pricing is cost-plus, and we keep costs under control by personally monitoring the sites,” he says. Pointing to the genset for power back-up in the compound, he says: “At the same time, we don’t skimp on quality.”<br /><br />Vastushodh’s first project, Anandgram, at Yevat, about 45 km from Pune, was aimed at those further down the income ladder. It is designed to serve autorickshaw drivers, blue-collar workers and even street vendors who can’t produce income documents. Having handed over 622 units, with the bulk selling at Rs 8 lakh, Anandgram has become a brand for good budget homes on the periphery of a city. It is being replicated with townships coming up in Baramati, Kolhapur and even Boisar, a town on the Mumbai-Ahmedabad trunk line. <br /> </div><div>break-page-break</div><div><br />Anandgram at Yevat was funded at the special purpose vehicle-level by Avenue Venture Fund, which took an 80 per cent stake in the project for Rs 22 crore. The promoters, however, have the option to let the VC go at twice its investment — Rs 44 crore — in three years. Going by their growing business, the promoters are confident of being self-sufficient to exercise the option. In 2010, Vastushodh had one site and 600 homes under construction. Four years later, it has grown to 14 locations with 1.3 crore sq. ft and 15,000 homes under construction. “When we touch one lakh homes, hopefully in a year’s time, we will be ready to divest equity in the parent company and go for scale,” says Kulkarni. <br /><br />Illustrating the ‘affordable’ model at another site in Kondhedhawde, a Pune suburb, where Vastushodh has handed over 165 flats, Kulkarni says: “When bookings opened, it was like a fish market, with people hurling cheques at us. We closed in four hours, but we were forced to create a waiting list of 575 applicants.” <br /><br />The reason was simple: affordable price and good quality. The Kondhedhawde project offered 1BHKs at Rs 14 lakh and 2 BHKs at Rs 20 lakh in the vicinity of Pune. A visit to the project revealed spacious corridors, functional but crunched interiors to allow more bedrooms, and a functional swimming pool, too. The downside in both its projects was the excessive paving in the compound area that prevented development of more green patches and water run-off areas.<br /><br /><strong>A Self-contained City</strong><br />Near Pune, a different model is being developed to target the middle class. Seven hundred acres — adjoining a village called Nanded — is being developed as Nanded City, a 49:51 joint venture between farmers and the Magar family of Magarpatta City, by the Nanded City Development Corporation. <br /><br />With over 5,000 flats handed over, the project now has the feel of a large, independent town. A drive along the 5 sq. km layout reveals under-construction commercial complexes, two schools and a dedicated fire brigade unit. The roads have been laid out with street furniture at corners, and excellent landscaping of thick, manicured shrubbery that forms a pollution filter between the roads and the building compounds. <br /><br />Sales officer Xerxes Amin took us to Shubh Kalyan, a 22-storey building, and the tallest in the project. It offers 3BHKs (1,557 sq ft), priced at Rs 84 lakh. The construction and interiors are without frills, but the flats offer fair quality, are functional, and with spacious common areas at the ground level. <br /> </div><table width="600" align="center" cellspacing="1" cellpadding="1" border="1"><tbody><tr><td><img width="600" height="366" align="middle" src="/image/image_gallery?uuid=11ce94e2-b99b-4f82-8c99-e9a3708b4172&groupId=520986&t=1408451605061" alt="" /></td></tr><tr><td>HIGH END: Urbania is a self-reliant township on the outskirts of Thane</td></tr></tbody></table><div><br />At Nanded City, the options for customers are many. The smallest, 570 sq. ft flats, are available at Rs 35 lakh. A comfortable 2BHK in Madhuvanti, measuring 937 sq. ft, costs Rs 52 lakh. Currently, bookings are on at Rs 4,500 a sq. ft, and one can see robust interest. “We are doing around a 100 transactions a month,” claims Amin. When completed, the project will hold 18,000 homes. <br /><br />‘Buy a Flat, Get a City Free’ proclaims a marketing slogan at the site office. The one downside is: there is no transfer of common areas and maintenance tasks to residents’ societies, as should be the natural process. Nanded City will continue to hold the land and common areas in perpetuity and remain in charge of maintenance. A fixed fee of around Rs 3 lakh for ‘lifetime’ maintenance is also collected at the time of booking. It’s only a matter of time before the Magars face a challenge on this front.<br /><br /><strong>Eastern Promise</strong><br />In the east, another large corporation is implementing India’s largest mass housing project. In 2007, Shapoorji Pallonji & Company was allotted a 150-acre plot at Rajarhat for developing a township of budget homes. Disputes kept the project inactive until last February when the state cabinet approved the terms, and SP Sukhobristi in New Town, Rajarhat, finally got going.<br /><br />Executed in alliance with the West Bengal Housing Infrastructure Development Company (WBHIDCO), the Rs 1,500-crore project is on its way to deliver 20,000 homes. Of these, 12,000 units will be one-bedroom flats (320 sq. ft) aimed at low-income earners and priced at Rs 14 lakh, while 8,000 units will be 2BHKs of 480 sq. ft for middle income earners and priced at around Rs 25 lakh. Shapoorji claims the open space in the township will be as much as 73 per cent of the project area. As an integrated township, the builders are required to provide sports clubs, community centres, amphitheatres, primary schools, a health centre, as well as commercial complexes and corner stores. <br /><br /><strong>Good Business</strong><br />Two significant developments have taken place in the ‘affordable’ segment. Developers are realising that building budget homes, far from being a punishment or a CSR activity, is a viable business model. Significantly, those like Vastushodh have have undertaken more such projects after their initial foray in the budget segment. Vastushodh’s Kulkarni says the cost-plus mode of pricing, with a 40 per cent outlay for land purchase, has also given the company a 20 per cent margin. Listed realtors are also lining up to tap this opportunity. Mahindra Realty, for instance, has launched a budget brand called Happinest that will offer one- and two-bedroom homes ranging from 350 sq. ft to 650 sq. ft in Chennai and elsewhere. These will cost no more than Rs 20 lakh. <br /><br />The other development is the availability of housing finance. Earlier, banks were wary of lending to low-income segments because of the perceived high risks. They have, however, now learnt that these income groups are less prone to defaults. Besides, a whole crop of private housing finance companies has emerged with its sights on low-income groups with loan requirements in the range of Rs 5 to Rs 15 lakh. These include Micro Housing Finance, India Shelter Finance, Shubham Finance and Aadhar Housing Finance. These lenders don’t insist on detailed documentation and have their own ‘informal’ methods of determining ‘safe’ borrowers. <br /><br />Clearly, the future lies in ‘affordable’ homes. <br /><br />gurbir@businessworld.com <br />twitter:@gurbir110 <br /><br />(This story was published in BW | Businessworld Issue Dated 08-09-2014) </div> </div>]]> </div>
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Gurbir Singh is an award-winning senior journalist with over 30 years experience. He has worked for BW Businessworld since 2008, and is currently its Executive Editor. His experience ranges from covering 'Operation Bluestar' in 1984 to pioneering coverage of the business of Media & Entertainment and Real Estate for The Economic Times.
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