Real estate firms target middle-income buyers
Bengaluru: With low-income homes not fetching enough margins and luxury homes not finding enough takers, builders have found a sweet spot in middle-income housing projects, where buyers are willing to put up Rs25-50 lakh for a home of their own.
Among developers who have launched mid-income housing projects recently are Shapoorji Pallonji Real Estate, Hiranandani Group and Puravankara Projects Ltd.
“More and more builders are now trying to build in the MIG (middle-income group) price bracket because they have the right balance of high demand and profitability of margins. It is tough for private developers to maintain the margins in LIG (low-income group) housing. However, one needs to venture into it as a long-term, 6-10 year business, and not just as a market reaction,” said Venkatesh Gopalkrishnan, chief executive officer, Shapoorji Pallonji Real Estate, part of the Shapoorji Pallonji Group, which builds Rs30-60 lakh homes.
With the challenges of building LIG homes becoming clearer—far-off project locations, poor infrastructure, low margins, mortgage unavailability—convenience of location, compact homes and pricing have attracted MIG buyers. For builders, the segment offers profitability and sales volumes at a time of unprecedented slowdown in the real estate sector.
It has helped that many of the government’s incentives for housing have also been in this price segment, boosting the confidence of builders and buyers alike.
Hiranandani Communities, which has two integrated townships in Panvel and Chennai, plans to build 2,000 500 sq. ft homes for Rs30 lakh each at Hiranandani Fortune City, Panvel. Hiranandani has always been associated with building premium and luxury homes so far.
“As you reduce the price points and customise the size of homes to fit the buyers’ budget, the number of customers goes up. The luxury residential market has got exhausted, and this is a natural choice,” said chairman and director Niranjan Hiranandani.
In the July-September period, a total of 64,781 residential units were sold across the top eight cities, of which 23,493 units were in the Rs25-50 lakh price category and 12,136 in the below Rs25 lakh category, according to Liases Foras Real Estate Rating and Research Pvt. Ltd. There is fair demand for homes in the Rs50 lakh to Rs1 crore category as well, with 18,682 units sold, the report said.
Interest subsidy on home loans for MIG households was announced in September. In November, the Union cabinet increased the carpet area of houses under the government’s affordable housing scheme which can help homebuyers, with annual income between Rs6 lakh and 18 lakh, access bigger, ready-to-move-in houses at lower costs.
Entrepreneur Jaithirth Rao who heads VBHC Value Homes Pvt. Ltd, which started off with low-income housing projects, believes that one and two-bedroom homes are now preferred by buyers.
“It is not about price of the unit but size now (owing to the government’s new regulation) and it will change the urban landscape in India,” Rao said.
Realty firms like Shriram Properties Ltd and Ruparel Realty have multiple project launches planned in the coming months in 2018.
Bengaluru’s Puravankara Projects Ltd, under its value housing firm Provident Housing, plans to launch 9-10 million sq. ft of homes in the Rs30-50 lakh segment in southern India.
“This is a good opportunity for first home buyers and it’s not just about the price but also the kind of homes and amenities that we sell. Branded developers always looked at luxury housing, and it’s good that even they are getting into this segment now,” said managing director Ashish Puravankara.
“Building homes below Rs20 lakh is a huge challenge in terms of infrastructure. Mid-income homes work well for buyers because developers are also getting more rational and building what customers want today and at prices that they can afford,” said Amit Bhagat, chief executive and managing director, ASK Property Advisors.