Affordable homes: Affordable for whom?
Affordable housing is meant for people belonging to low-income group to help them buy their own homes. Such projects offer the eligible first-time purchasers a chance to own newly constructed houses or apartments at lesser prices compared to the then market value.
Leading developers like Tata Housing, Jaypee, Wave Infratech, etc. have experimented with affordable housing; the affordable housing scenario is far different from its actual cause of evolving. It has been observed that whenever the economy hits a downturn, developers think of affordable homes as a safe investment destination, said experts.
Pricing factor in affordable housing segment
In general, the price range for an affordable housing project in a proper location with good connectivity has to be in the range of Rs 15 lakh to 30 lakh. But in fact, the range keeps varying for different builders in different locations.
In the case of Wave group’s affordable housing project, Wave City in Ghaziabad, one and two bedroom housing units were offered in the range of Rs 14 lakh to Rs 18 lakh. The project was launched at Rs 2,300 per sq ft, but was later sold at Rs 2,500 per sq ft.
Smart Value Homes, a subsidiary of Tata Housing, offers low-cost units in the price range of Rs 5 lakh to Rs 35 lakh in its projects in Boisar, Vasind, Ahmedabad and Bangalore. Jaypee Group is offering affordable flats in Greater Noida within a price range of Rs 26.5 lakh to Rs 58.4 lakh. Supertech is planning to sell around 30,000 affordable units in Eco Village, Yamuna Expressway, with price starting from Rs 30 lakh and goes up to Rs 70-75 lakh.
Home loan factor
To buy an affordable residential unit, a buyer may have to borrow a loan from the bank, for which he will have to pay monthly EMI’s. An important point to be considered here is that the monthly EMI amount should not exceed 30 percent of the buyer’s monthly income.
Affordable realty v/s Luxury realty
Low profit margin is the prime reason why builders show less interest in developing affordable housing. Consequently, the supply of affordable units is much less compared to the demand. Developers are much interested in luxury housing, due to the high profit margins associated with it. The profit margin can’t exceed 15 to 20 percent in case of affordable projects while the margin is way above that in terms of luxury projects.
Even though if many projects have been launched in affordable segment, the sale of units in luxury projects is more than affordable ones. Most affordable housing projects in India have not survived as everything from apartment size and price to amenities changes after the launch, as many developers are only profit-oriented.
Around 1,241 and 1,083 affordable units were launched in January and February 2013 respectively, while 4,816 and 3,821 units were launched in the luxury segment. And in terms of absorption, 2,551 affordable homes were sold in January and 2,271 in February. In the luxury segment, the sale or absorption was almost double at 4,991 and 5,459 units.
Around 50 percent of the total housing stock of 293 million sq ft sold in the fiscal year 2012-2013 was priced below Rs 50 lakh, reveals real estate research firm Liases Foras.
Apartments that cost Rs 25-50 lakh accounted for 37 percent of the total housing stock sold in the same period, while those below Rs 25 lakh had a 13 percent share.
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