Tuesday, May 29, 2018

Flats shrink as realtors focus on affordable sector


PUNE: A 1BHK unit crunched into less than 300 sqft or a 3BHK flat not exceeding the 700 sqft mark - small is turning out to be a big draw for top developers entering the affordable housing sector here.

The incentives for the developers opting for such nano units are not only the tax benefits but also the opportunity to get going in a market that is taking baby steps to recovery after a prolonged slowdown. Two top developers, who have so far only focused on big projects and commercial real estate development, recently announced their foray into affordable housing.

Mumbai-based Peninsula Land launched a project at Gahunje, where it aims to construct 51 four-storey building blocks with each floor housing four unis. Peninsula Land’s smallest unit is pegged at 274sqft, in which it will put out a 1 BHK unit and its largest offering is a 3BHK with about 671 sqft carpet area.

Recently, Pune-based Vascon Engineers forayed into the segment with the plan to have a “focused business approach” on affordable housing. The company said it will, over time, build 1,140 units in Talegaon in sizes between 227 sqft for a room-kitchen unit and 2BHK flats measuring 462 sqft.

At the lower end of these offerings, the unit sizes are smaller than what is being proposed to be offered under the slum rehabilitation authority (SRA) of over 300 sft. The current SRA size is 269 sqft. Developers engaged in the segment said the reason for this is the similar business model adopted by players as they do for regular housing and the frequent changes of definition by the government.

“Multiple players are into housing the same way they had done in the past. And by squeezing sizes, they are calling the projects ‘affordable housing’ now. All of this is primarily aimed at attracting faster sales and reaping benefits of the 80I BA (tax sops),” said Vastushodh managing director Sachin Kulkarni. Vastushodh has so far delivered over 3,000 low-cost homes in and around Pune.

Kulkarni said the dilution of the definition of affordable housing units by the government “further helps the new developers doing such projects.” The government has in two successive budgets changed the contours of what is “affordable.” It has shifted focus from the income to the size criterion.

Experts feel that the income criterion was a better way of targeting buyers as only those within a certain income range can purchase such units. These homes are priced between Rs 13 lakh and Rs 38 lakh and this range makes it easy for investors to pump money into these projects, with the hope to cash out at an appreciated value.

These properties are far from the heart of the city and carry a lower sale price tag. The per square feet rate, however, works out to be more or less same as what one can get a property in most parts of the city (between Rs 4,500 and Rs 5,000 per sqft).

Credai-Maharashtra president Shantilal Kataria the entry of big players in the affordable housing segment was a positive move. “Earlier, people said big developers never came into affordable projects. It’s a good sign that they are finally foraying into the sector. Over 75% demand for housing is in this category,” he added.

“For a developer, everything remains the same and only the land cost varies. Besides, there are imponderables such as approval, interest, premium and opportunity costs that a developer has to factor in. The land cost is not coming down as expected,” he said.


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