Liases Foras Report : Affordable Homes Turn Into Investment Option..!

Houses in the so - called affordable segment across our country India are finding buyers. But, most are investors, not people who plan to stay in them because these are located too far away from offices and have little support infrastructure, analysts &  trade experts said.

That they say is defeating attempts by the central government to increase the accessibility of housing through income tax breaks &  other incentives, the benefits of which are therefore going towards those more interested in turning a profit.

About 50 per cent of the total housing stock of 29.3 crore square feet sold in the fiscal year ended March (2012-13)  was priced below Rs. 50 lac, according to real estate research companya Liases Foras.

  

Apartments that cost Rs.25 lac to REs. 50 lac accounted for 37 per cent of the total housing stock sold in the same period, while those below Rs. 25 lac had a 13 per cent share.

Mumbai, known for its high property prices, accounted for 13 per cent of the sale of houses priced below Rs. 25 lac and 28 % of houses in the Rs.25 lac to Rs. 50 lac range.

 Mr.Pankaj Kapoor, MD,Liases Foras said “Most new launches in the past 3 quarters are in the affordable category. The rise in sales in part to government regulations that have been favourable to both developers &  buyers in the relatively more affordable segment.

In December, 2012 the Reserve Bank of India allowed developers and housing finance companies to raise up to $100 Crore (About Rs.5,500 crore ) through external commercial borrowings (ECBs) to promote housing projects in the category, sometimes referred to as low-cost because they are cheaper than more upscale properties.

 Mr.Pankaj Kapoor, MD,Liases Foras

The 2013 budget proposed a Rs.2.5 lac deduction on the total taxable income on housing loans of less than Rs.25 lac, applicable to loans from banks & non-banking financial companies (NBFCs).

Such housing is a profitable business for developers.

In Mumbai, they offer an internal rate of return (IRR) of 45 % and gross margin of 24 %, according to a report by consulting firm Monitor Deloitte in 2010.

Most of these apartments are being bought by investors rather than genuine low income buyers despite the lower prices &  interest rates, since these houses are being built in far-flung places with poor connectivity and social infrastructure, analysts &  real estate consultants said.

For instance, a person who buys such a house in Karjat, one of the last stops on Mumbai’s suburban Central line in Mumbai, will have to travel nearly 85 km if her office is in the central business district of Nariman Point. That’s about 2 hours by train each way.

 

Mr. Pankaj Kapoor said, ''The Trans Harbour Link “would have eased connectivity between the mainland and the island city and provided a much-needed boost for affordable housing”. The Trans Harbour Link is 22 km road across the sea that will connect the island city and Navi Mumbai. It is  now expected to be operational by 2018-19.

To be sure, investors are also taking a gamble for the same reasons of connectivity &  support infrastructure.

Mr. Om Ahuja, Chief Executive, Residential services, Real estate consultant Jones Lang LaSalle India said, “Most projects are not affordable in terms of living and these projects are bought by investors who park their money. If it is a wrong product, their investment gets stuck”

Src: Mint


Contact: 

Liases Foras India
C - 705, Pramukh Plaza,
Cardinal Gracious Road, Chakala,
Andheri (E), Mumbai - 400 099 
Telephone : 91-22-28391486
91-22-28391463

E-Mail : contact@liasesforas.com

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