wiseman

Realacres,

The number is attractive and there are many hurdles from here to there ...

This is a nw trick of the modern analysts who use these tantalising numbers to drum up some TRPs for themelves. Then there are the marketing chapswho come next and use these numbers to suit their pwn purpose. Let us see ...

First of all, India's unmet housing demand has always been in the millions for decades. Did that automatically mean all these millions of houses got built?

Second, get into the numbers in detail. There are 2 relevant facts buried in there. The maximum demand, as per the analyst, is in the 3-6 lakh income earning population. I'm assuming here that a good part of this segment would be just getting into a family segment or would have got into it recently.

If you notice, I had used a 5L income level and figured that the new tax proposals would leave little extra for this segment to be motivated extra to go into housing, any more than they already are!

Second, the homes looked at is 15L in cost. Given the price of land today, the analyst doubts to what level private builders can cater to this price levels with any level of profit.

We must all realise that much of housing in India is done by private builders. To be able to get onto the "affordable" cost housing, they first have to get rid of all the inventory on their hands which is bleeding them with high debt and interest costs.

So, they first have to sell all the 40 - 80 lakh housing before they can dream of making it big in the affordables segment! How?

Then they have to take all their costly land banks and build low-price housing on it and end up with a cost structure that will leave little profit if they have to sell at the 15-20L levels.

Additionally, they have to get very low-cost debt to be able to control costs to keep prices to 15-20L levels.

If this Industry becomes so unattractive (reasons above) with little profits and difficulty in raising capital at low cost, funds will stop flowing into this sector, thereby making all that 2 million homes only a dream. This is why, even after 62 years of independence we still have a large , unmet demand for low-cost housing. Its simply unviable for most builders.

The only reason they are all talking about it is their desperation to clutch at any straw to get them out of this killing debt load!!!

Which explains why, in the boom period of 2004-08 not a single one of these stalwarts said the word "affordable" even once!!! They were too busy shafting all the buyers of fancy housing with all kinds of crazy facilities while laughing all the way to the bank.

LEt us revisit this housing demand in 2011. We will still have an unmet demand of 3 million affordable homes!!! And we will still be talking about it!

cheers