AFFORDABLE HOUSING

R . V COLLEGE OF ARCHITECTURE, BANGALOREMASTER OF ARCHITECTURE(UD) 2009 BATCH, SEM 11

1.0 PREMISE

2.0 INTRODUCTION

2.1.AFFORDABLE HOUSING IN INDIA SCENARIO

2.2.AFFORDABLE HOUSING IN IN BANGALORE SCENARIO

3.0.SITE ANALYSIS

CONTENT

1.0.PREMISE :

The real estate world has changed significantly after the global

financial meltdown caused by defaults on sub-prime loans in US.

India was no exception and the real estate market witnessed a

contraction in both volume and value. Real estate developers

were gripped with the liquidity crisis and were forced to change

the ways of doing business. Downturn and liquidity crunch forced

developers to adopt a two pronged strategy - smaller units at

lesser prices. This oriented developers focus on the Affordable

Housing segment, which has become the buzz word in the real

estate market for the last few months .In this study we have

attempted to define Affordable Housing by using three key

parameters viz. income level, size of dwelling unit and

affordability. While we have assessed the demand and supply

constrains, we have also highlighted the initiatives taken by key

stakeholders and their perspective concerns.

2.0 INTRODUCTION:

Home buyers face challenges while deciding “when” to purchase houses. While favorable economic

conditions lead to higher incomes for homebuyers, it also leads to spiraling real estate prices making it

difficult for a buyer to purchase homes even given their higher incomes. On the other hand, during

economic downturns while real estate prices decline, people have become skeptical about their incomes

and adopt a more cautious approach to purchases. Affordable housing may be a good strategy to this

home-buyers dilemma and can help to ensure housing across different sections of society.

2.1.AFFORDABLE HOUSING IN INDIA SCENARIO: The past year was one of several highs and lows for the realty sector. 2009 commenced with the

economic slowdown worsening and growth trajectories of the previous year seeing a setback. With

uncertainty playing a key role in driving market sentiment, the one constant feature through the year

was the focus on 'affordable housing'. While India has always been confronted by the housing dilemma,

2009 saw a spurt in activity to house India's poorest. With genuine end-user demand existing within this

property segment, several fund strapped developers in an attempt to improve cash flows and liquidity,

took up the baton of low-cost housing.

"Affordable housing is not about box-sized, budget homes in far-flung places where there is no

connectivity to work places and little surrounding infrastructure'' ."Affordable housing has to be able to

cut across all income segments and has to make economic sense in terms of proximity to work place. In

India affordable housing is a combined public-private collaboration and a strong political to enforce

change‘‘. .

There is serious shortages of urban land at affordable prices in India, where encroachments, irrational

land use and absence of urban spatial plans are the norm. The total urban land stock in India is 2.3% of

its geographical area and it houses 30% of the country's population.

Is 'Affordable Housing' Really Affordable India :'Affordability' has crudely been touted as the consumers' ability to purchase. However, this is a relative

term that could acquire different meanings under varying circumstances. With the government focusing on

the LIG segment, 'affordable housing' is now being measured in terms of property cost to annual household

income ratio.

Affordable housing projects work on very different business models, which have a very low cost base. In

India, where the price of land, especially in metro/Tier I cities is exceptionally high, due to perceived

scarcity, projects incur huge costs with Government regulations forcing the developer to pass most of these

incremental costs onto the customer in the form of EDC(external development charges), IDC(infrastructure

development charges) , PLC(preferential local charges), transaction costs, stamp duties and registration

fees.

However, with several developers opting to be part of India's housing revolution, a very different real

estate market belonging to the buyer is starting to take shape. Innovative construction techniques with the

inclusion of value engineering and better space management are being deployed, to help reduce

construction costs by up to 20%. Also, the sector is being given a boost with the favorable mindset of

developers along with the government's thrust on infrastructure; continued reform; lower interest rates;

and housing friendly policies.

Price of unit2 > Rs 25 Lacs Potential demand from ~2 M

HHs with estimated Market Size of ~Rs 500,000 Cr

Various mortgage finance options available for segment

The low-income housing segment (MHI of Rs 5,000 – 20,000) is estimated at 22 Million households with

an estimated opportunity size of Rs. 1,100,000 Cr and is largely underserved

Urban Income Pyramid Offering & Supply of Housing

Price of unit: Rs 10–25 Lacs Potential demand from ~5 M

HHs with estimated Market Size of ~Rs 900,000 Cr

Mortgage finance available broadly

1%(0.7MM)

5%

(3.4MM)

22%(15.0MM)

33%(22.4MM)

4%(2.7MM)

10000–20000

>80000

30000–40000

<5000

40000–80000

31%(21.1MM)

5%(3.4MM)

5000–10000

20000–30000

MHI1(Rs)

Price of House: Rs 3–10 Lakhs Potential demand from ~ 22 Mn3

HHs with estimated Market Size

~Rs 1,100,000 Cr

Supply of Housing Finance

Various mortgage finance options available for segment

Potential size of mortgage market ~ Rs 400,000 Cr

Mortgage finance available broadly

Potential size of mortgage market ~ Rs 675,000 Cr

Severely constrained supply of housing finance for informal sector

Finance available for MHI > Rs 12K in the formal sector, limited availability below MHI of Rs 12K for formal sector and 20K for informal sector

Potential size of mortgage market ~ Rs 8,80,000 Cr

DEMOGRAPHICS AND HOUSING

Over-supply is also being blamed on 'price rise'. While earlier, projects were launched at subsidized

rates to tide over the economic crunch, with market sentiments improving and both investor and end-

user interest picking up, prices are being revised upwards to improve developers' profit margins.

Research firm Prop Equity, while analyzing 882 projects launched in 13 cities across the country has

highlighted that there has been a 10-15% increase in the price of budget homes in the second half of

2009.

Affordable Housing Project In India:

In the absence of adequate levels of research to determine customer preference on size, cost, and

location a situation of over supply seems to have set into the market in some locations. Even with

several developers flooding the market with projects, buyers opted to stay away, as smaller sized units

of 800-1000 sq. ft. as compared to the anticipated 1200-1400 sq. ft. units were being priced in the same

bracket of Rs. 25-40 lakhs.

Location of these projects and proximity to civic amenities were other considerations that kept buyers at

bay. In fact, in 2009, the last few months barely 30-40% of new projects have seen absorption in the

market. In some cases stock pile up's in cities such as Gurgaon, Kolkata, and Bangalore are quite

extensive and may take 4-16 months to clear.

Ahmedabad: VatvaTaral BakeriPhase 1: 800 unitsPrice: Rs 3.3 Lakh– 5.6 Lakh

Mumbai :AmbiviliNeptune Group100 acresPhase 1: 1800 units; Sector 1: 600 flats sold out in 3 days1-BHK and 2-BHKRs 4.73 Lakh and Rs 8.40 Lakh

Maharashtra: KarjatTMC – Matheran Realty 15,000 units by June 2011;3,000 units in Phase 1 – June ’096,000 flats @ Rs 3 Lakh

Maharashtra: BoisarTata Housing67 acres: Phase 1: 1200 units for LIH1-RMK and 1BHKRs 3.9 Lakh and Rs 6.7 Lakh

Bangalore: AtibeleJanadhar11 acres: 1500 units1BHK and 2 BHK; Rs 4 Lakh and 6 Lakh

Bangalore: Value Budget Housing Development CorporationRs 3-9 Lakh townships on minimum 10 acre plots; 1 Million intended flats

There is increasing construction of low income projects across India but access to home financing for

low income customers is the major choke point

• “The biggest challenge for our customers is accessing loans - 1,700 out of 3,000 customers in Phase 1 wanted loans and out of these 1,300 have got sanctions after 6-8 months. There are still 400 customers who are trying to get loans”- Joe Silva, Chairman and CEO, Matheran Realty Pvt Ltd- Promoters of TMC.

• “We find many people willing to buy our flats in Ambivilli like drivers, shop keepers and even priests, however their biggest problem is accessing finance in buying our flats”- Nayan Shah, Director of Neptune

• “Ever since we launched, we have been getting enquiries almost every day on housing loans from informal sector customers. The challenge has been to service all such requests”- Rajnish Dhall, Promoter MHFC

Ahmedabad: VatvaFoliage DevelopersPhase 1: 400 unitsPrice: Rs 2.81 lakh upwards

Large real estate players like the Tatas and entrepreneurs like Jerry Rao are starting to recognize the business potential of low income housing and constructing large projects, thereby giving the field increased credibility

The Imperatives For Success Of Affordable Housing Segment:

India's housing market has been forecast to grow to $90 billion by 2015 as compared to $12 billion in 2005.

Affordable housing is expected to account for 80% of the total housing demand over the next 4-5 years.

This is indication enough that this property segment will primarily drive the realty sector.

In fact, the residential segment is already leading the economic recovery of the sector and is expected to

bring about progressive solutions for effective implementation of projects through 2010. Some of these

include the developers' ability to overcome the challenges of project execution. Presently, builders lack

technical and manpower experience in delivering mass volumes as required under these housing schemes.

Additionally, as funds are being diverted to complete projects that were earlier put on hold, subsequent

project delays are inevitable. In fact, recent data is indicative of the fact that residential bookings

outnumber deliveries in India by a ratio of 10:1. However, this scenario could be reversed with shorter

project execution timelines of 24-30 months with developers willing to make lower margins. 

The industry is already abuzz with the anticipation of the upcoming budget and the incentives that both

developers and customers could benefit from. Buyers are looking forward to the implementation of the

Direct Tax Code that will see an increase in tax exemption limits against interest payment and rental

income from the present Rs. 1.5 lakhs to at least Rs. 3 lakhs. Prospective customers are also hopeful that

the interest rates will remain unchanged. Developers too are counting on incentives for the introduction of

rental housing and relaxation in ECB(EXTERNAL COMMERCIALS BORROWINGS) norms for the development

of integrated townships

Considering the stimulus that has been provided to the realty sector, especially in the residential segment,

the onus now lies on the developer not only to leverage these benefits to derive maximum returns on

projects but also to ensure that these benefits are shared equally with the customer, which would truly

make affordable housing a reality. 

Like microfinance, low income housing finance is a fundamentally different business model than

traditional housing finance, and requires completely distinct processes to appropriately assess

customer credit worthiness and risk

Income documents / tax papers generally inadequate

Credit appraisal

SalariedBased on income documents / tax forms

Determine eligibility based on income proof

General creditappraisal

Sanction loan

Self employed / Professional

Use surrogates for credit appraisal

Scope of Business: Margins, Credit/Debit Terms, StabilitySavings Habit (e.g., from chit funds)Track RecordReference Checks,Supplier/Customer ReferralsGross ReceiptsPersonal DiscussionBackground and ProfilePrior History and Relationship

Based on the parameters sanction / reject loans

SELF

EM

PLO

YED

SALA

RIED

Illustrative Credit Appraisal Process for Low Income Informal Sector Customers

•Credit appraisal to accurately understand element of risk within the informal sector requires proxiesfor traditional income documents•Due to the lack of income proof and other verification, the informal sector requires a more ‘field-based’ approach to verifying income and credit worthiness including visits to the customer’s business, conversations with NGOs/ chit funds/local institutions the customer is linked to etc.

•Credit appraisal to accurately understand element of risk within the informal sector requires proxiesfor traditional income documents•Due to the lack of income proof and other verification, the informal sector requires a more ‘field-based’ approach to verifying income and credit worthiness including visits to the customer’s business, conversations with NGOs/ chit funds/local institutions the customer is linked to etc.

2.2.AFFORDABLE HOUSING IN IN BANGALORE SCENARIO :

The housing shortage in urban areas accounts for approximately 24.71 million housing units, according

to official estimates. 21% of the total urban population lives in slums and 35% in one room tenements,

without adequate basic facilities such as piped water, sanitation, schools, health, and so on. These

numbers are expected to touch 200 million by 2020.

There is a huge demand-supply gap in urban housing for poor. The demand today is not just for

affordable homes but also for lifestyle products. Considering this factor, some real estate developers are

now customizing their product to cater to the affordable segment of real estate.

Affordable Housing

Affordable housing can provide huge benefits to families, communities and aid overall economic

development of state

Aiding Overall Economic Development Construction of low income housing

provides disproportionate job creation Creates significant economic value for

state (taxes, ancillary economic activity, source of labor potentially leading to industry, etc

Provide alternative to Urban Slums ~40M people live in urban slums without

basic facilities such as sanitation, water, schools, etc

Renters disempowered. All power is w/ slum lords

Slum lords “own” houses and benefit from Slum Rehabilitation Schemes

Slums create high pressure on infrastructure within a cityBenefits for families of Urban Poor

Housing is essential for the well-being of a family

Enhanced security and health through organized housing with access to sanitation

Access to better services (schools, healthcare etc.) which are typically available to higher-income groups

Creation of Low-Risk Asset for Families Long term wealth creation due to value of

asset, “saving on rent” & collateral for loan

A “security net” in crisis Low income houses typically built on land

with low cost per sq. ft. Low likelihood of price depreciation, Hence downside risk is low

Benefits to Communities Neighborhoods with good quality

housing have lower crime rates, stronger local economies and a better overall quality of life

According to real estate consultancy firm Knight Frank, good connectivity to work places is the most

important factor influencing buyers’ decision in selecting their residence. Pranay Vakil, chairman, Knight

Frank, says: “Some projects were launched with the expectation that they can influence connectivity.”

The Knight Frank survey also revealed that developers have to pay external and internal development

charges to the government which are ultimately passed on to the consumer thus increasing the overall

cost of a house. “The EDC and IDC costs coupled with the high transaction cost and stamp duty can go

as high as Rs 350-400 per sq ft which is transferred on to the end-user by the developer,” the report

stated.

However, there have been a lucky few like the Patel Realty India’s project in Bangalore which sold 800

units out of its 1,000 affordable apartments in its Bangalore projects within 50 days of its launch.

Similarly, Puravankara claims to have sold 700 of its 1,120 apartment in the first phase in Bangalore. In

Chennai, it claims to have sold out 900 of the total 1,000 apartments. However, industry sources said

the firm has so far sold out only 300 units and is struggling to sell the remaining apartments in the

market

UTTARAHALLI ROAD

MEYSORE ROAD

VIEW FROM HILL TO THE SITE

JSS COLLEGE

SITE IS LOCATED :

BOUNDARY CHART OF SY

No. 39/1&2, 40(P), 59/1&2,

60(P), 61/1&2, 62/1&2, 63, 64,

66 OF THURAHALLI VILLAGE,

BANASHANKARI 6TH STAGE

BANGALORE SOUTH TALUK

3.0.SITE ANALYSIS :

21

3 1 OMKAR HILLS, TEMPLE

2 OMKAR HILLS, BANYAN TREE

3 VIEW FROM SITE TO THE HILL

SITE

TEMPLE

HUDA Housing Scheme has been instrumental in providing Group Housing in Haryana's

urban towns like Gurgaon, Faridabad, Karnal, Panchkula, Sonipat, Hisar etc. In fact, owing

to the constructive efforts, the face of Gurgaon and Panchkula has been really altered.

HUDA- Haryana Urban Development Authority came into force in 1977 under the Haryana

Urban Development Authority Act to undertake Planned Development of Urban

Infrastructure, to facilitate Property Management by acquisition and disposition of land for

Residential, Commercial, Industrial and Institutional Purposes.

HUDA Residential Plots

HUDA Allotment of Residential Plots is undertaken on the basis of the HUDA Plots Draw

Results while, an open HUDA Auction decides who would get the commercial HUDA Plots in

Haryana. Hence, Haryana HUDA has done a commendable work of keeping the Haryana

Property market vibrant to attract Foreign Direct Investment.

HUDA Group Housing Scheme

The initiation of HUDA Housing Scheme certainly was a landmark step by HUDA-Haryana

Urban Development Authority in order to ameliorate the Housing and community living

conditions in Haryana.In 1983, HUDA-Haryana Urban Development Authority felt an urgent

necessity to look into the Housing arena and initiated the HUDA Group Housing Scheme

that aimed in providing affordable homes with raised FAR-Floor Area Ratio and efficient

Facility Management.HUDA undertakes Allotment of Plots to Co-operative Group Housing

Societies, Haryana Welfare Housing Organizations and various Government Departments

for construction of flats and houses under Haryana Group Housing Norms.

Haryana Housing Board has prepared a plan to develop economical flats in the NCR cities

of Haryana. The move will made residential properties in Gurgaon and its adjoining areas

more affordable.

The Board will buy its own land. These flats will be built across the state, says SP Gupta,

Chief Administrator, Housing Board.

According to the drafted plan, 2,000 flats each will be built over 60 acres of land in

Gurgaon and Manesar. 200 more such flats will come up over an area of 10 acres in Farukh

Nagar and Pataudi.

The government will be constructing 50,000 houses for the economically weaker section of

society. HUDA has been asked to hand over the land to people for the same purpose.

Around 422 EWS houses will be developed in Gurgaon soon, adds Gupta. The housing

board will also come up with more multi storeyed deluxe houses in the lines of 256 flats

under construction in Sector 43, Gurgaon.

Source: Indianrealtynews .

Here are the latest Housing Projects that are available in Bangalore and Chennai for Home

buyers. All prices are in INR / sft as quoted by the Developer directly.

DLF Westend Heights Btm Extension Bangalore

Westend Heights New Town - Bangalore

Yes, I am interested

Location : BTM Extension

Plans : 2 & 3 bedroom apartments

Sizes : 1085 sq ft - 1820 sq ft

Land Area : 86 acres

Completion Date : End 2011

* DLF BTM Extension Bangalore *

DLF Westend Heights New Town offers 2 & 3 bedroom apartments ranging from 1085 to

1820 square feet. It is G+19 storeys with excellent amenities. DLF Westend Heights

Location  3.5 km from Apollo Hospital, 4 km from IIM-B, 6.5 km from Jayadeva Flyover, 8 km

from Electronics City, 9.5 km from Forum Mall, 13 km from MG Road, 16 km from Railway

Station / Bus Stand, 50 km from Airport. DLF Westend Heights Common Amenities 

Clubhouse with indoor facilities like gymnasium, banquet hall, restaurants, Billiards room,

cards room, Spa, massage and beauty parlor, swimming pool, healthcare centre, shopping

complex, play area, iptv, safety & security, cctv, intercom facility, street lighting, earth

quake resistant construction, state of art infrastructural facilities, 24 hrs power back up, 24

hrs water supply and water treatment plant, municipal water and Rainwater harvesting.

DLF Westend Heights Plans

Types----------Size(sq.ft)------Price INR(sq.ft)

2b+2T-------------1085-----------------2100

2b+2T-------------1225-----------------2100

3b+2T-------------1365-----------------2100

3b+2T-------------1395-----------------2100

3b+3T-------------1575-----------------2100

3b+3T-------------1585-----------------2100

3b+3T-------------1620-----------------2100

3b+3T+S.Room----1820-----------------2100

3b+3T+S.Room----1820-----------------2100

Highlights

- High Rise Apartments (Stilt+18)

- Excellent Location in Begur BTM Extension

- 4 Kms from IIM Bangalore, 8 Km from Electronic City, 13 Km from MG Road

- 86 Acres layout replete with fully loaded club house, landscaped gardens, sports facilities, natural and maintained

water body, wide roads.

DLF New Town Bangalore, BTM Ext. 2,100

Puravankara Purva Venezia Bangalore, Yehalanka 2,800

Puravankara Provident Welworth City Bangalore, Yehalanka 1,800

Sobha Sunscape Bangalore, Off Kanakpura Rd 1,978 - 2,128

Sobha Sunbeam I & II Bangalore, Off Kanakpura Rd 2,254

PROPERTY RATES IN SITE PREMISES :

Kengeri region ,

Rs. 2000 – 2400 / sft

1 BH – rent starts from Rs.3000 – 3200

2 BHK unit – rent starts from Rs 6000 onwards.