Affordable housing will outpace other real estate segments: Getamber Anand, CREDAI National

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ET Bureau|Nov 28, 2016, 06.30 AM IST


With demonetisation boosting liquidity, the real estate sector could witness lower lending rates and accelerated growth, Getamber Anand tells ET.

How is the affordable housing segment evolving in India?
Affordable housing has always been a strong market in India. The recent emphasis on this segment through government initiatives like ‘Housing for All’ is accelerating the growth by facilitating large-scale inventory creation. The top eight property markets are Mumbai, Pune, Delhi, Bangalore, Kolkata, Chennai, Ahmedabad and Hyderabad. Total launches, across segments, rose 17% from a year ago, to 60,000 apartments. However, the demand for quality affordable housing projects far outstrips the supply. Developers are now noticing this potential demand and focusing on this segment.
Such projects also provide monetary benefits for both developers and consumers, in terms of reduced costs and tax sops. Affordable housing takes less time to be completed than mid or high-end apartments, while the sales momentum is faster, which helps developers realise their costs quickly.
Is affordable housing a viable option for homebuyers in metros?
For now, we are seeing affordable housing grow in metropolitan centres, which is where the largest demand is. Tier II and III cities also have a considerable market, especially in terms of supply. However, in terms of demand, metros far outpace these centres. With the growing emphasis on affordable housing and with notable players getting into the market, the viability for homebuyers in these cities is beginning to surpass expectations.
If in the next 10 years home loan rates vary between 5-7%, the future of the sector as well as the segment will surely be bright.
Is demonetisation likely to impact this segment?
Real estate has mostly been driven by loan-based consumption and is highly regulated. Demonetisation will have an impact on the immediate liquidity of the overall market, but as a sector we do not expect any notable changes. We hope that overall demand will go up as the banks lower interest rates in response to the large influx of funds.

Banks will have three choices: making RBI deposits at 4.5%; investing in government bonds at 5.5%; and lending at 6.5 to 7%. The influx of funds will result in competitive lending, which will lower the interest rates further. It is a deadly combination of low inflation and high liquidity. A liquidity surge of 25% will result in 25% lower finance cost or 3% reduction in interest rates at the very least. This bodes well for the sector. Affordable housing will be the first segment to see the resulting boost and grow much faster than anticipated.
How are developers likely to realign their businesses to comply with RERA?
To be compliant with RERA, every developer will need to set up a separate department to update information online, in order to ensure transparency for clients and customers, since the process is so heavy on paperwork. Ongoing projects have also been included in RERA, which presents a new challenge for the industry.
Since the contracts for such projects were signed years ago, with completely different understandings, most developers are sceptical about what could happen with these projects. Nevertheless, some preparations are underway to ensure compliance.
When do you expect housing demand to come back strong?
A demand of around 20 million units for housing has been documented by opinion makers and consultants. So, there is no question of the demand coming back, as it has always been there. A perception has been created in the minds of buyers that there is going to be a price correction soon, which is misleading. A correction of about 20-25% has already happened in 2014-15.
It is important to understand that property prices will not go down further, because the input cost is what it is, and there is no way a business can offer an out-of-pocket product, on which they are losing money. As long as this perception is not corrected, buyers will not believe that this is the right time to buy.


  1. Katia says:

    Thanks, it’s quite informative

  2. Affordable housing takes less time to be completed than mid or high-end apartments, while the sales momentum is faster, which helps developers realise their costs quickly.

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