Low cost housing that had almost become a bad word for real estate companies is the latest buzzword in the business now hit by an economic slowdown. Companies, which prided in building luxury villas and houses for higher segments, have suddenly started chanting the mantra of ‘affordable housing.’ “Villas for Rs 55 lakh are out, now-a-days apartments for Rs 20 lakh are in. We are targeting young professionals who may not have been affected by the recession (read: non-IT professional) and want their own home,” says an industry observer. Companies now rushing into the Rs 20-22 lakh range include Janapriya Engineers Syndicate, Puravankara Projects, Golden Gate and Modi Builders among others. Analysts, of course, point out that there is no definition of affordable housing and aver: “It’s just that builders think a home that’s priced around Rs 20 lakh is within the reach of more buyers.” A developer reputed for lowcost housing here explains the rationale for many builders now rushing into this segment.

“When considering an expensive home, a buyer will definitely wait a few months for the prices to drop, but this does not happen with affordable homes, because prices are quite low already,” he says, adding, “the effective EMIs on home loans for this category come around Rs 15000-18000 per month, which many can afford.” Real estate companies also think that cheaper affordable houses will draw not only more but also younger customers. Bhanumurthy PVS, deputy general manager of Golden Gate Properties, says, “by keeping the prices low, we are trying to bring down the average age of the home buyer from 25-35 years to 25-30 years.” The company recently ventured to offer 960 sft 2BHK apartments at Rs 19.9 lakh. Nitish Ranjan, a 26-year old says, “Together, my wife and I earn Rs 80,000 per month. It wasn’t difficult to get a home loan since we could convince the banker that we could pay the EMI,” adding that he is not sure if he would have got a loan for a higher amount that a luxury home requires. Apart from the young, retirees are also drawn to houses at this level.

“Even pensioners can afford these homes, when they come with frills like ‘Book now, pay on possession’, life-time guarantees on title deeds and other lucrative warranties,” says V P Arvind, a retiree who recently booked an apartment at Miyapur. Real estate developers are also buoyed by volumes. “Thinner profitability spread over a larger volume will result in large profits,” explains a builder. India’s housing shortage increased from 19.4 million units in 2004 to 22.4 million in 2005-06 and “there has been a steady 25% year on year growth for the past five years in this segment,” says Ravinder Reddy, CMD of Janapriya Engineers Syndicate, adding, “we have already developed 21,000 such apartments, including 12,000 in the last five years.” This unwavering demand has led to a steady price rise in this segment that has never seen a ‘correction’, not even during the current slowdown. “It’s the Rs 50 lakh plus segment that has the jitters; the Rs 15-20 lakh range is still selling fine,” say observers.

In fact, Puravankara Projects recently announced an investment of Rs 80 billion for affordable housing. It plans to develop 64,500 homes and a built-up area over 59.80 million square feet in major cities, including Hyderabad, in the next five years. City-based players are also increasing projects around Madinaguda, Miyapur, Patancheru, University of Hyderabad and Nagole which are either industry hubs or close to the MMTS and metro zones.

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