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Can affordable housing take off?


Can affordable housing take off?

Last updated: November 7 2013
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  • #11


    Re : Can affordable housing take off?

    Pioneer In Providing Houses For The Poor

    Source: Financial Express 07 March 2013
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    • #12


      Re : Can affordable housing take off?

      'Do not deny us our due'

      Leading developers evaluate the Union Budget 2013-14 and its impact on affordable housing, in interviews to Express Estates

      Will the Budget proposals stimulate affordable housing?

      It will certainly give an impetus to affordable housing but will not bring a turnaround as sops come along with certain caps. It will help boost housing sales in tier II and III cities, and metro suburbs, where the scope of constructing and selling affordable housing is more. The Budget proposal of additional tax deduction of Rs 1 lakh on home loans for first-time buyers will directly boost demand for affordable housing. This additional tax deduction can be carried forward to the next year in case the limit is not exhausted in the current year. With the ongoing interest rates of nearly 10.5 per cent, the total outflow for a loan amount of Rs 25 lakh would be Rs 3 lakh, of which, Rs 2.64 lakh (for first year) would be the interest outgo. The home buyer would get tax benefit equivalent to 95 per cent of the total interest burden, which was earlier only 57 per cent.

      For FY13, the impact will be marginal. There is a substantial extent of home loans up to Rs 25 lakh in size — all the new sanctions will have to be deferred to the next year, as borrowers will not like to lose this significant benefit.

      With this additional rebate for buyers, do you see an immediate spurt in demand for your projects?

      We expect to see a rise in demand in this space over a period of time. Our dedicated affordable housing subsidiary Smart Value Homes, has offerings in the range of Rs 15 lakh to Rs 50 lakh. Given this price point, it would not be wrong in assuming that most of our customers would be first-time home buyers. This year, we will be launching about 15-20 million sq ft of projects and will continue to expand our presence across 10 metros and emerging cities.

      Will the proposal to set up an urban housing fund help mitigate the housing shortage in urban areas? What else should the government do to enable more supply in this segment?

      The urban housing fund will work as a pool fund for developers strapped for cash. Most developers stay away from the affordable housing segment because it is not an attractively-priced segment and access to funds is limited. It has been a long-standing demand of the real estate sector to be granted 'industry status'. This will help the sector become better-organised and increase accountability and help the sector access bank lending at average interest rates with low collateral as against the high rates at present, which would help bring down home prices and increase supply.

      State governments should establish a single-window clearance system, which serves the three principal objectives of realistic price discovery, land allotment and granting approvals in a time-bound manner. This would ensure timely completion and avoid cost overruns. A haze of contradictory approval requirements, administrative delays and a dysfunctional system which works on multiple clearances are a bane for players in this sector.

      Other than Budget measures, what are the procedural constraints need to be eased, for you to operate efficiently?

      Developers are primarily looking at luxury, high-end and upper-mid housing segments since these fetch a premium. However, to be fair, it's not always been a case of higher profitability that has driven developers away from affordable housing. Restrictive civic laws limiting floor space index (FSI) levels and high land rates in metros have actually made affordable housing unviable. Planners really need to pursue strategic densification, including relaxing FSI limits, which will ensure developers get decent margins. This will also bring down property rates, and release more supply.

      The current focus of state governments has been limited to auctioning land to private players. This has contributed to escalation of land prices, detrimental to affordable housing.

      The government would also do well to consider that apart from land rates, there has been a significant hike in input costs (cement, steel and labour). For realty players promoting affordable housing, a tax incentive would be very welcome. Other incentives could include capital subsidy for PPP initiatives, regulated lower interest rates, discounts in stamp duty and registration, and priority sector credit for home loans up to Rs 25 lakh.

      Brotin Banerjee, MD & CEO, Tata Housing

      'Do not deny us our due' - Indian Express
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      • #13


        Re : Can affordable housing take off?

        Affordable housing sees slew of new entrants, renewed interest

        Source: Livemint By: Madhurima Nandy Publish: 14-March-2013
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        • #14


          Re : Can affordable housing take off?

          Policy changes key to affordable housing

          Affordable housing is the key to India's realty industry being able to change lanes to the fast track but cost escalations due to delayed permissions, lack of access to cheap credit and shortage of building material are proving to be major hurdles. The solution: Policy changes covering land to lending.

          The demand for affordable homes alone, in the range of Rs.1-5 million, is in the range of five million. Over a third of new homes is in this category. According to industry statistics, out of 500,000 homes to be delivered this year, a large part will be the affordable housing segment.

          But the affordability of home-buyers has been severely hit by cost escalations and high project cost is proving to be the main deterrent. The lack of sustained funds flow to the realty industry not only restricts supplies, leading to housing shortage (mostly in the affordable category), but also results in a spurt in property prices.

          Amid this liquidity crisis, a large number of realty companies today find themselves in a debt trap. So much so that promoters of a few companies have pledged a major part of their holdings to seek debt. There is a need to ease bank funding and make foreign direct investment and external commercial borrowings more accessible to developers.

          On the private equity front, statistics show that such investments in the residential segment registered a 50 per cent decline compared to the office realty space, as these investors were more interested in income-generating assets.

          In this context, speeding up the launch of real estate investment trusts, or listed companies that own and manage property on behalf of shareholders, on the bourses will help meet the large-scale fund requirement for mass housing.

          It is, indeed, heartening that the National Housing Bank (NHB) is setting up an urban housing fund with Rs.2,000 crore ($360 million) to spur affordable housing. The Housing and Urban Development Corp, with a target to build 500,000 affordable homes, has in its first tranche raised about Rs.2,200 crore ($400 million).

          Both these funds will work as a "pool fund" to incetivise cash-strapped developers aspiring to tap the high potential segment of affordable housing.

          It is on the policy front that there is the lack of effective initiatives. This year's budget sop of Rs.100,000 ($1,800) additional tax benefit on home loans will largely benefit tier II and tier III cities.

          But given that the top six-seven cities constitute less than a fourth of the overall affordable-housing supply, there is a need to launch incentivised policies for developers to provide mass housing in the suburbs and satellite towns of metros and Tier I cities.

          For developers, the tax exemption for low-income houses up to 60 square metre carpet area and extension of tax holidays for low-income housing under Sec 80 1B of the Income Tax Act could prove beneficial.

          With urbanisation expected to grow at a compounded annual growth rate of more than two per cent over the next two decades, there is the need to liberalise obsolete development norms, rationalising floor area ratio and density. There should be policy initiatives in place to fast-track the public-private partnership route. For that, the city development agencies should give up policy of land auctioning and instead allow land pooling for developer entities.

          Considering a major part of the mortgage disbursed - expected to touch the Rs.220,000-crore ($40-billion) mark by the end of this fiscal - will be in the affordable segment, there is an urgent need to regulate home-loan rates. A parliamentary panel on the finance has sought a cap and regulation on interest charged by housing finance companies.

          Raising home loan limit for affordable homes in the metros and tier I cities from Rs.2.5 million to Rs.3.5 million may well go a long way in encouraging developers and home buyers, thereby pushing up supply and consumption of mass housing.

          With a host of new private equity players and developers targeting mass housing, the coming months will witness increased traction on this segment of the realty industry. Increasing viability of affordable housing projects will be the way forward.

          Policy changes key to affordable housing - The Economic Times
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          • #15


            Re : Can affordable housing take off?

            Lack of affordable housing forces poor into death traps

            MUMBAI: Aslamkhan Bhikankha sold his wife's jewellery and used all his savings to buy a flat in a Mumbai suburb which he now fears will soon be razed, leaving his family homeless.

            The flat is in one of numerous illegal buildings in Mumbra that house poor migrant workers and face demolition by authorities over safety concerns after the collapse last week of a 7-storey block nearby in which 74 people died.

            "If they break this building, they should run the bulldozer over us and kill us too," said Bhikankha, a plumber who moved to Mumbai three years ago from a village 350 km (217 miles) to the north in search of a livelihood. "It will be better than losing all our money and living on the streets."

            The building collapse and Bhikankha's plight underscore the government's failure to develop policies to house the millions of people who flood from rural India into cities to do the low-wage jobs in a modernising economy, Asia's third-biggest.

            While building collapses are not uncommon in India, many were shocked by the Mumbra disaster, one of the deadliest such incidents in recent years. The apartment block crumbled in seconds, instantly killing dozens of construction workers and their wives and children who had been living there.

            BLIND EYE

            A shortage of affordable housing in Indian cities has led to rampant illegal construction by developers using cheap materials and shoddy methods in order to offer low-cost homes to low-paid workers, paying bribes to officials to turn a blind eye.

            Despite several promises by the government to build affordable homes for country's poor in densely populated cities, the country's urban housing shortage is estimated at nearly 19 million households. That lack of affordable housing is especially acute in Mumbai, country's financial capital and home to some of the world's costliest real estate, where an estimated six out of every 10 people live in slums.

            "This lack of quality affordable housing is why thousands choose to invest their hard-earned money in sub-standard construction," said Brotin Banerjee, CEO of Tata Housing, which is part of salt-to-steel conglomerate Tata Sons and is building cheap homes in Boisar, on the outskirts of Mumbai.

            Developers argue that expensive land, high interest rates, and corruption and red tape that cause delays make building low-cost homes financially unviable. "There is a need to increase affordable housing in the state and we are taking steps," said Sachin Ahir, the state of Maharashtra's junior housing minister. "The government needs to think about how to rehabilitate those who will be displaced."

            "We have tried to create affordable housing, but people have their own restrictions and aren't ready to go far from where they live," he added.

            Ahir said the government is also reviewing its rental housing scheme, designed to provide affordable homes for the poor. The Maharashtra Housing and Area Development Authority, the state body that builds homes, has also been asked to do more to create joint venture partnerships with private developers to increase the stock of cheap homes, he said.

            OUT OF REACH

            A report by property consultant Knight Frank shows house prices in Dadar, a middle-class area in central Mumbai, are Rs 20,000-30,000 ($370-$550) per square foot, out of reach for people like Bhikankha, 28, who earns Rs 7,000 a month. He paid Rs 605,000 for his sparsely decorated 2-bedroom flat on the ground floor where he lives with his wife, 2-year-old daughter and 12-year-old sister-in-law.

            The top three floors of the 8-storey building have been reduced to rubble by local authorities who in the aftermath of the nearby collapse broke down the walls and ceilings of empty flats built without approval. Electricity to the building has been cut and residents served evacuation notices. Bhikankha said he has spent the last few days at home as he fears authorities will evict his family and demolish the building when he's at work.


            As workers combed through the rubble of the collapsed apartment, another illegal and occupied building on the same site was being torn down. That 6-storey structure crumbled like a sandcastle as an excavator clawed at the walls, reducing it in moments to a pile of mangled steel and concrete. "The builders and government are playing with people's lives," said 32-year-old rickshaw driver Mohammad Khalid Sheikh, who lives nearby.

            Thirteen people have been arrested and charged on various counts, including culpable homicide and bribery, in connection with the collapsed building that left 74 dead and 62 injured, a spokesman for the local authority said.

            Built in under two months with poor quality materials and without the proper approvals, the apartment block stood on forest land in an area where nine of 10 buildings are illegal, officials say. It was still under construction when it collapsed, with the mainly migrant workers and their families living on the lower floors and paying as little as Rs 500 a month in rent.

            If a building, despite being illegal, is part occupied it cannot be demolished. That encourages developers to rent out flats at cheap rates while they continue building more floors. "People who are greedy and can exploit the system will continue to build these kinds of projects even if there was availability of affordable homes because they have figured an easier way of making money," said Chintan Patel, director of real estate and hospitality at Ernst & Young.

            Reshma Ansari lost the only earning member of her family in the Mumbra disaster. Her 60-year-old brother-in-law, who earned about 10,000 rupees a month at a bakery, was selling bread in the building when it collapsed, as one witness said, "like a pack of cards".

            Ansari, 20, lives with her husband and infant daughter in another illegal building because it is all they can afford. She said the government should do more to make housing available. "This happened because of their negligence and now they are out to break every building in the area and put us on the streets, but we won't leave."

            Lack of affordable housing forces poor into death traps - The Economic Times
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            • #16


              Re : Can affordable housing take off?

              Easier ECB norms to create more affordable housing: Crisil

              MUMBAI: The easing of fund-raising norms through the external commercial borrowing (ECB) route will lead to developers focusing on low-cost housing projects, says rating agency Crisil.

              Earlier this week, RBI lowered the total experience of developers or builders for affordable housing projects to 3 years, against 5 years prescribed earlier to avail of ECBs.

              Besides, the apex bank has also withdrawn the condition of minimum paid-up capital requirement of not less than Rs 50 crore for housing finance companies (HFCs) to avail of ECBs.

              "Both, housing finance companies and developers, are the direct beneficiaries while home buyers will also benefit in terms of concessional interest rates and greater availability of low-cost homes," CrisilBSE -0.64 % said in a report.

              Crisil estimates that the cost of funding for developers will come down to around 9-11 per cent (taking into account the hedging cost) from the current levels of 15-20 per cent, depending on the current source of funds.

              "In addition to the cost of funds, since the criteria of past experience has been relaxed, relatively less experienced developers will also benefit as it will enable them to launch new projects in the affordable housing segment," it said.

              Easier ECB norms to create more affordable housing: Crisil - The Economic Times
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              • #17


                Re : Can affordable housing take off?

                Affordable housing as a concept is slowing catching up and seeing momentum in India. TVH (Chennai), Tata (MH) etc., are having projects running around this. However, for this to kick off - the pricing levels have to be 10 lacs or below per unit and more importantly the govt should provide and improve infra around the outskirts of cities to help builders build at lower cost and for buyers to buy and actually be able to live there.


                • #18


                  Re : Can affordable housing take off?

                  Major schemes for affordable housing to be modified: Girija Vyas

                  NEW DELHI: Major schemes meant for providing affordable housing to urban poor will soon be modified to make them more people-friendly, the government said today and invited the private sector to contribute more actively in this area.

                  Speaking to reporters here, Housing and Urban Poverty Alleviation (HUPA) minister Girija Vyas today said her ministry is modifying all the major schemes including the Rajiv Awas Yojana (RAY), Rajiv Rinn Yojana and the, Affordable Housing in Partnership scheme and added enormous budgetary support has been earmarked during the current plan period.

                  Secretary HUPA Arun Kumar Misra told reporters that a fund of Rs 35,000 crore had been allocated to the ministry for the implementation of three major schemes, including RAY, which was being run in as a pilot project earlier under 12th five- year plan.

                  He said the ministry would require approval from the cabinet for the implementation of these schemes and efforts would be made that through these funds 2 million affordable houses are encouraged.

                  He said that in addition to the central government funds, banks and credit institutions would be providing funds for construction of affordable houses.

                  Vyas said that with urbanisation, the number of urban homeless and area under slums had grown.

                  Vyas said there was a need for private developers to develop economic models to foster affordable housing for economically weaker sections and lower income group households in urban areas as government efforts in this direction needed to be supplemented.

                  Vyas also said a technical group, set up by her ministry, had shown that out of 18.78 million housing shortage in the country, 96 percent shortage is in EWS and LIG category and for this huge investments and private sector participation were required.

                  Misra said the group set up by the ministry has suggested incentives for the affordable housing sector included concessions to development-related charges and service tax exemptions.

                  It also sought direct tax rebates for affordable housing projects and inclusion of the sector in the 'infrastructure facility' he said and added the task force had felt that governments need to still provide direct capital grant support to affordable housing projects.

                  Misra said that in the symposium held today where states, experts and private sector representatives were present, there was unanimity on many of the suggestions.

                  Major schemes for affordable housing to be modified: Girija Vyas - The Economic Times
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                  • #19


                    Re : Can affordable housing take off?

                    'Land, quick approvals necessary for low-cost housing projects'

                    MUMBAI: Government needs to ensure availability of land and speedy approvals for effective implementation of low-cost housing projects, real estate developers' body NARDECO said today.

                    "For effective implementation of low-cost housing projects, it is imperative that the government ensures availability of land at subsidised rates, fast approvals, property tax relief, funding support, additional FSI, connectivity to suburbs and creation of special residential zones," National Real Estate Development Council (NARDECO) President Navin Raheja said in a statement.

                    Demanding infrastructure status for the sector, he said, "This will help the sector getting government incentives, subsidies and tax benefits. Besides, it will also lead to lower cost of funding and taking loans from financial institutions will become cheaper translating to more supply of affordable houses."

                    He further said that upward revision of floor area ratio (FAR), ground coverage and population density norms are required on priority basis.

                    "In most states, the floor area ratio (FAR) density and ground coverage norms do not support the creation of affordable housing the long approval process is another major problem. In major cities where land cost is high, this is possible only under PPP model," Raheja added.

                    'Land, quick approvals necessary for low-cost housing projects' - The Economic Times
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                    • #20


                      Re : Can affordable housing take off?

                      Untapped potential

                      Amid the current slowdown in the real estate sector where developers are struggling to sell their inventory, the low-income segment of the residential market has shown steady growth, according to a report. During the period from June 2011 to January 2013, there were 132 projects launched across 22 cities that offered at least 30,500 units priced under Rs 10 lakh.

                      The absorption too, has been high, with an average of 70 per cent for projects launched between June 2011 to May 2012, and 45 per cent for the six-month period beginning May 2012. This comes at a time when the average absorption rate for mid- and high income group residential projects fell to below 15 per cent during the same period, according to real estate consultancy Jones Lang LaSalle.

                      Low income housing is no longer a subject confined to seminar rooms and academic studies — it is a viable business opportunity, says Monitor Deloitte, a unite of consulting firm Deloitte that has brought out the report 'State of the low-income housing market', after extensive surveys in tier I, II and III markets.

                      A key finding of the report is that the market is beginning to serve the low-income customer. "No longer is it a corporate social responsibility initiative on the part of large developers to venture into low income housing. There has been an emergence of developers who are catering exclusively to this segment," says Vikram Jain, head-low income housing practice, Monitor Inclusive Markets, a unit of Deloitte India.

                      Among the cities surveyed, Ahmedabad, Mumbai suburbs and Indore have the maximum number of such projects.

                      Among the developers surveyed, over 90 per cent intend to continue developing houses for the low income segment, and with good reason. At least 80 per cent of the inventory is sold within 12 months.

                      There are, however, several challenges to unlocking this 'fortune at the bottom of the pyramid'. The first is land prices. This is the reason why the number of units on offer has come down, an average of 500 units after 2010, even as the number of projects increased.

                      Developers are resorting to mixed developments where a portion is low-income while the others are middle-income offerings. Prior to 2010, the average number of units offered stood at 3,000. Finding parcels of land at affordable rates is getting increasingly difficult to find especially in the vicinity of metros such as Mumbai, which means going further into the suburbs, which comes with its own set of problems. A buyer would factor the travel time from the home to the workplace.

                      Next comes approvals, for they take 24 months on an average. "For a developer in this segment, keeping costs low is the key, and longer approval times mean cost escalation," says Sachin Kulkarni, MD, Vastushodh Projects that has projects in Navi Mumbai, Pune and Kolhapur.

                      The buyer also faces one challenge: access to finance. The report cites the presence of several housing finance companies who are funding such buyers, but their numbers are few and restricted only to a few markets. The key issue is to get banks to finance such buyers.

                      "When I began developing my project, I found that buyers were queuing up but only a minuscule number could get a home loan. The others could not, as banks had tailored their scoring mechanism to the high income buyer," says Raghav Garg, MD, Garg Group that is developing a low-income housing project in Pilkhuwa, located 20 kilometres from Ghaziabad in Uttar Pradesh.

                      Garg had to persuade the State Bank of India to change its mechanism, which it did. This has now got the housing ministry interested and is exploring on ways to get other banks to come up with a mechanism that takes into account the situation of a low-income borrower.

                      The other issue is that local governments are not sufficiently sensitised to the need for private sector developers to enter this space. "The first question we were confronted was, why are you developing such houses? It is the job of the state government," says Garg, about his interaction with the local authorities at the time of applying for approvals. "Ghaziabad, where I am based, has several slums that keep sprouting up, that are then regularised. But I find it difficult to offer housing for the low-income population."

                      A related challenge is the lack of master plans for areas where such housing typically comes up. "Banks are willing to finance only those projects that come up in areas with a master plan. There are several towns and cities where the demand is high, but we are not able to venture for they lack master plans," says Getamber Anand, president-elect, Confederation of Real Estate Developers Associations of India (Credai).

                      The next issue is regulation. "Currently the policy direction is tailored towards increased FSI (floor space index), with high rises being seen as a solution to the problem of affordability. FSI does not work in all markets," says Kulkarni.

                      "Regulations being followed for a usual middle/high income project is being followed for such projects as well. What purpose does it serve when I am building two low rise developments with small units separated by a 70 feet road? We need a new set of rules for such projects," says Garg.

                      Kulkarni calls for a special environmental certification mechanism for low-income projects so that more supply can enter on larger tracts of land and would not get caught in environmental clearance tangles due to the threshold norms. "There has also got to be a mechanism for reserving lands in non-metros for such projects," says Kulkarni.

                      Developers in this space are exploring new technologies that bring in a "manufacturing mind set" to housing projects. However, they are not taking off since projects are scattered and haven't reached numbers that can afford economies of scale. "There is also the issue of excise duty. The raw materials are taxed, and so is the finished product. This has to be rationalised," says Kulkarni.

                      With nearly 49 per cent of such home buyers being under 35 years, there is a huge opportunity waiting to be tapped, says the report, and identifies "enabling environment" as a key deliverable from the government to enable home ownership.

                      Untapped potential - Indian Express
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