Affordable houses to rule the roost - Dileep Athavale

(Means, in 2009, you will be happy to pay Rs. 2,000 per sq.ft. for a stripped down flat of 800 sq.ft., in a project which will not have any amenities and will be located somewhere on the periphery of Pune which will be low on infrastructure like roads, water, electricity or connectivity with the city and much lower on social infrastructure like educational institutions. Amen!)

Even as aspiring buyers of homes wait for property rates to fall further, the single most important factor that would dominate the realty scene in the city (Pune) in the New Year (2009) seems to be affordability.

Affordable flat means: stripped down smaller homes!

This subjective feeling of affordability may, however, find manifestation in the form of stripped down smaller homes, which would reduce the overall financial outgo of the buyer.

Affordable flat means: 800 sq ft @ Rs 2,000 per sq ft without lifestyle!

The real estate developers are unwilling to take a further hit in the selling prices of their products, though they have considered redesigning of the projects being built in phases.

(Do you think builder sell product? True, builders pretend to sell 'factory packed product'. But actually, real estate developers or builders are service providers. They offer service not a product. However, builders, thanks for taking trouble of redesigning!)

This essentially involves significant readjustments including reducing the area of houses from, say, 1,400 sq ft to 800 sq ft and cutting down on all the features which promised an enhanced lifestyle.

(Features - amenities do not enhance lifestyle, mostly only 'enhance' property rate and marketability of the project, what do you think?)

Another aspect of affordability would be to sell properties with a price tag of approximately Rs 2,000 per sq ft.

(Why Rs.2,000 per sq.ft.? Is it because builders can "afford" this property rate? Why not less?)

Affordable flat means: peripheral location without any infrastructure:

However, those connected with the industry feel that such housing is possible only at far away or peripheral locations which are low on infrastructure like roads, water, electricity or connectivity with the city and much lower on social infrastructure like educational institutions.

Who bothers about integrated townships (like Nanded City Pune)?

The much publicised township schemes have taken off, but will take a few years to create new stock, which will ease the demand pressure to some extent.

(Means builders can sell "stripped down smaller homes of 800 sq ft @ Rs 2,000 per sq ft without providing any lifestyle features at peripheral location which does not have any infrastructure!)

"We want Rates of 2005"!
(home loan interest rate and not property rate)

Lalitkumar Jain, president, Promoters and Builders Association, Pune (PBAP), said, "Cutting down the interest rates to the level of 7.5 per cent, which existed in 2005, and applying it to all loan amounts would be the only workable solution for now." Now that inflation has been arrested, such a cut is feasible, he added.

Interest-rate cuts failed!

The city's real estate market, as everywhere else in the country, stood tall for nearly four years, before suffering a setback as the demand for homes shrank drastically due to spiralling interest rates three months ago. The interest-rate reduction put in place by the state-owned banks, following directives from the finance minister, has not helped lift buyers' sentiment.

No property buyer in the market!

1) Real estate prices had touched unrealistically high levels and, now, despite the 10-30 per cent fall, there are no takers since the buoyant sentiment is gone," said real-estate advisor Niranjan Ghatpande.

"Projects which were selling at Rs 6,000 per sq ft are now unable to attract buyers at even Rs 4,000 per sq ft," he said, adding that in an economic situation like the one existing at present, people are unwilling to risk large exposure in terms of loans they take from financial institutions.

What perhaps corroborates Ghatpande's observation is that there is no significant movement in sales, in spite of real-estate brokers being offered brokerage at double the rate they got till six months ago from builders.

Moreover, freebie offers, such as luxury cars, have also not thrilled buyers.

Property rates to go down!

Industry observers said there may be a further decline in the realty prices over the next few months. According to Anuj Puri, chairman and country head of real-estate research and advisory firm Jones Lang Lasalle Meghraj, prices would come down as developers would find it increasingly difficult to hold the stock they are saddled with.

"Hold on than cut the property rates!"

Sunil Puranik of Nirmitee Developers, however, said the prices have come down to their lowest and no further fall could be expected. "We would rather hold on to the stock, than cutting the rates further."

(Yes, few can hold on. Let them. Go to his neighbor.)

Who needs affordable housing? Buyer or Builder?

"The slump in the realty market has brought centre stage the need for affordable housing, though we cannot hope to create it within the city limits," said Jain.

According to him, the city has a wide gap between availability and supply of housing. This, he said, has skyrocketed the land prices which is being reflected in the prices of homes. The slide in prices, according to Jain, is due to the redesigning of the units and cutting of frills.

"Until a couple of years ago, when the EMI for Rs 1 lakh was Rs 900, people were demanding three-bedroom apartments or row-houses. Now that the EMI per Rs 1 lakh in hovering around Rs 1,300, people do not mind a compact 800 sq ft two-bedroom house," he said.

Affordable housing, with rates ranging from Rs 1,500 to Rs 2,000 can be provided only in peripheral areas, but the government will have to ensure infrastructure there, said Jain. Since this is not possible in the near future, the only other aspect of affordability which needs to be considered is a further cut in the interest rates on home loans, he said. (!)

In 2009 property buyers may buy affordable homes!

Kumar Gera, chairman of the Confederation of Real Estate Developers' Associations (CREDAI), said there is a shift in the end products on offer and the term affordable' has taken on a high priority.

Both the developer and the buyer are attaching greater significance to affordability, he said. According to him, since the expected lower interest rates, reduced prices and a general stimulus to the economy as a result of government initiatives become available in the market, the unfulfilled pent-up needs of 2008 will result in home buyers translating their intentions into purchase decisions in the coming year.

The 2008 Story

-The year began with very high realty prices, making it impossible to buy a house for anything less than Rs 40 lakh anywhere in the city.

-In April, developers introduced a further hike of Rs 50-400 per sq. ft citing rise in costs of inputs, principally cement and steel.

-Three townships were announced between January and March under the Maharashtra Township Act, aiming to create additional housing stock of 6,000-8,000 units. Prices, however, hovered around Rs 3,500, indicating a high cost of acquisition.

-The global financial meltdown, that started in September and is still continuing, sent tremors through the realty market, stagnating sales and eventually sending the prices rolling down.

-In October, developers joined hands with lending institutions to share part of the interest burden with home buyers; the initiative failed to generate any significant response.

-Around November and December, high-end realty went on offer with attractive freebies, such as luxury sedans, but buyers were not amused.
Dileep Athavale - The Times of India