Affordable housing is set to drive growth for the residential real estate sector
January 25, 2019
Salarpuria Sattva Group was founded with the sole aim of developing the best of constructions. Striving on this, the group has today become a leader in Property Development, Management and Consulting organisation. In an exclusive interview to CONSTRUCTION OPPORTUNITIES, BIJAY AGARWAL, MD, SALARPURIA SATTVA expresses his views on the performance of the Affordable Housing initiative, major challenges faced by developers and a lot more.
Your assessment and comments on the performance of the Affordable Housing initiative, what kind of business opportunities has it generated?
Affordable Housing is one of the important initiatives of the government aimed at providing housing for all. It’s been more than a year since it was introduced and it is now showing results. According to KPMG estimates, India’s urban housing shortage is 18.78 million units, which is expected to touch a whopping 48 million. With a burgeoning population, there is a tremendous strain on the infrastructure, especially housing, which is linked to electricity, transportation, water supply, and health. Housing has a cascading effect on the Indian economy and therefore it should receive top priority. Most of the developers already have affordable housing as one of their business pillars. In fact, affordable housing is expected to drive the growth over the next one decade, as aspirational and prospective buyers are emerging from the middle class, who can only afford affordable homes.
Could you brief us of the role played by your company in terms of meeting the requirement for affordable housing?
We are launching about 5 new projects to meet the affordable housing requirement starting in 2019 and they are on the drawing board. Sanctions are done through the planning authority and upon approvals the application for RERA is filed and once we get RERA approvals we start on our marketing and sales activities. As a company we have always been stringent in following procedures and government regulations and this extends to affordable housing as well.
Cost/Benefit analysis of the Affordable segment for Builders/Developers?
We have worked out a model that works for us and we continue to leverage it. As a policy we never compromise on quality and the best of products are always procured from the original sources even if it costs us more. At the same time, we still pass on a very competitively priced end product to our customers.
The government in its last year budget had doubled the subsidy amount allocated to ` 8 billion. To what extent has this helped the sector in the last year?
The real estate industry, especially the residential segment, blossomed only in the last three decades. Reforms were brought in only in the last two years and the industry is being streamlined. Affordable housing initiative was well crafted and it needs to be updated like any initiative depending on the market conditions. The initiative has indeed enthused the developers. In order to make Affordable Housing work to its fullest, a host of other support programmes are needed.
Foremost is the availability of land parcels to build affordable homes; review the master plan/zoning provisions on a regular basis, so as to allow for optimum allocation of land for affordable housing; accelerating the building approval processes is critical, in order to limit the gestation period and the associated costs; align state level affordable housing policies with the central government policies to remove ambiguities around availing incentives; improve the institutional environment for the lower income categories to access housing microfinance; rationalise/wave off registration charges, as well as stamp duties for affordable housing units and co-invest in innovative construction technologies to promote mass housing developments at subsidised construction costs.
Can you list the major challenges faced by developers/builders/promoters, playing in the Affordable Housing segment?
As mentioned earlier, there is a dire need for a single window clearance or fast-track approval process for affordable housing projects. Land availability is a big issue – municipalities in metros and large cities have large tracts of unused land, which can be diverted to affordable housing, as there is no point in building low-cost homes away from towns and cities where lands area affordable. The government should also ease the FAR and density norms. The rules governing the real estate industry cannot speed up affordable housing, as it needs separate guidelines to motivate builders to take it up in a big way. The affordable housing project is also treated on par with the rest of the projects till recently. However, the centre has now permitted the local bodies to give environmental clearance to affordable housing projects and hopefully, this should spur the projects.
Which are the Affordable Housing hotspots, across urban India?
Affordable housing is set to drive growth for the residential real estate sector, as evidenced by the recent launches. A report indicated that affordable housing now accounts for 20 percent of the residential market, however, to fix a volume or value, we need to wait for at least another year. Many developers have announced new projects for affordable homes, some of them have even sold such homes, so the exact volume needs to be scientifically assessed. Hyderabad, Bengaluru, NCR, Chennai, Navi Mumbai, and Kolkata are emerging as affordable housing hotspots.
Your company’s plans for the future and outlook?
With the introduction of GST, RERA, and demonetization, the industry faced stagnation in the last two years, but now market conditions have improved. The government’s initiatives have eliminated unscrupulous players from the market. Home buyers are also seeing value from tier 1 developers. The outlook for the industry remains promising. Moreover, much will depend on the outcome of the general elections next year. If the new government continues to support the real estate industry, it will be a positive move.
We are entering into affordable housing in a big way starting from 2019 and going into the next two quarters. There are about 4 -5 new projects in the pipeline across Bengaluru in this segment alone. This will be a big focus area for us in the next few years. We are already present in Hospitality and will soon enter the Hotels and Resorts arena. By 2020 Salarpuria Sattva is also looking to enter into the warehousing space. In Bengaluru, we are expanding our commercial buildings and will put up 9-10 million sq. ft. of commercial spaces in various locations across the city. In Hyderabad, we are putting up 15 million sqft of commercial spaces and some of our well known upcoming projects are Knowledge Park, Knowledge Capital and Image Towers – a world-class animation, special effects, and gaming center. Our flagship commercial IT Tech Park Knowledge City in Hyderabad, is touted to be the best in Asia.
Tell us about the company’s agenda going forward?
We aspire to capture all facets of the Real Estate space be it residential, commercial, plotted development, logistics etc. We aim to be the single source solution for real estate to a wide array of customers across different verticals. We are built on the foundation of trust and innovation and this will continue to be our guiding principles.