Organised Developers Say Lower Price Homes Are Not Viable
The high cost of land, shambolic infrastructure around big cities, delay in approvals and wafer-thin margins are keeping organised developers from building lower price homes that a wider segment of people can afford.
The government want developers to build more affordable homes, but developers say lower price homes are generally not viable. That leaves customers of such homes at the mercy of unorganised developers whose integrity and ability to deliver reasonable quality homes are often questionable. Affordability can be a fuzzy term, varying from city to city due to differences in land and ancillary costs. What is affordable in Mumbai may not be so in Bengaluru.
An affordable house is roughly two-thirds to half the cost of the average housing cost in the city, suggests MD of property developer Puravankara.
Some industry executives say the capital value of such projects should be between Rs 3,000 per sqft and Rs 4,500 per sqft, depending on the city. Builders such as Puravankara, Tata Housing, Mahindra Lifespace and VBHC Value Homes have projects ranging between Rs 30 lakh and Rs 70 lakh, which are categorised as affordable based on the city they are located in.
For a large developer, the issue is whether the land is available at an affordable cost. FSI (floor space index) cost is higher in the metros. If you take the construction cost at about Rs 1,500 per sqft, add another 10 per cent of administration cost, 7 per cent of margins, interest cost, and want to keep the capital value at Rs 3,000, then there is only so much one can pay for land, says chief executive of brokerage business QuikrRealty.
He thinks the only way this can be accomplished is if state governments earmark land parcels for affordable housing. Even then, developers may have to do the projects on the peripheries of the cities, where land cost is comparatively less and where they can build a large number of units to benefit from economies of scale. But such areas are typically underdeveloped, often lacking basic urban facilities and no public transport.
That is where the industry expects governments to intervene. When an area is deemed to be upcoming for residential purposes, the government should ensure that basic amenities, infrastructure and public transport in the area keep pace with the property development.
Builders say the time taken for approvals also eat into their margins. The approving authorities do not distinguish between clearances for a luxury or a mid-segment project and an affordable one.
Source Link- https://timesofindia.indiatimes.com/