Alpha International City Karnal

The Indian real estate sector plays a significant role in the country's economy as this sector is second only to agriculture in terms of employment generation and also contributes heavily towards the Gross Domestic Product (GDP). The housing sector contributes almost 5% of the country's GDP. Affordable Housing in India has become the new Mantra for everyone related to the realty sector in the country. From buyers to sellers and realtors to investors, everyone is pitching for affordable quality homes in India.

The new age real estate developer has envisioned a dream – a dream of housing every family in the country. ‘Affordable housing’ is a term that possesses the potential to transform this dream, also harboured by millions of households, into reality. In fact, the main reason for increase in absorption of new launched products is the drop in per sq. ft. rate and the reduction in the size of units, which brought their prices within the affordable range of many more buyers. Most of these units were launched at a price almost 40% lower than the average pricing of apartments that were available in the first quarter of 2008. The average unit size of these apartments was also lower by almost 35%. The cost effectiveness or affordability factor contributes to the ever-increasing attraction of suburban areas.

Huge segments of untapped space, especially in tier-2 and 3 cities and towns with large scope and potential for expansion will ensure a steady trend. The trend of expanding Megapolises will be stronger in 2010 and give far more flexibility in designing townships, commercial complexes and city centres.

These encouraging trends are indicative that the markets are poised for recovery if proactive measures are adopted by the real estate community to offer the right product at the right price to the consumers. There is a need to develop innovative ways to reduce construction costs without compromising on the quality of construction apart from harnessing new methods in the use of newer, energy efficient, environment friendly materials and innovative construction technologies that minimize skilled inputs and deliver faster results at affordable prices. Paving the way for such trimming in construction cost is the use of ‘pre-fabricated materials’, or ‘systems technology’. The use of these practices can bring down construction time by as much as 50%, reduce costs by 10%-15% and also avoid employment of a large and skilled work force. At the same time, these practices help in delivering a quality end product.

The government should consider tax sops, including cuts in duties and levies for the real estate sector in a bid to promote affordable housing in the country besides actively encouraging the adoption of appropriate technologies and suitable building materials to enable construction of safe, durable, comfortable and sustainable dwellings and commercial areas.

The recent slowdown in the economy resulted in buyers constituting more 'end-users' segment than investors and speculators. Since the new class of buyers are more aware of legal documentation, approvals and due diligence, we have seen the advent of professionalism and accountability in the industry. As a result, the real estate sector in India has at last become more professional and customer-centric.

 
In the coming years, Indian real estate sector will witness a high growth path again. This is due to the following factors:
• Government initiatives and reforms for realty sector
• Growing Indian economy
• Growth of IT/ITES segments
• Facilitation of foreign direct investments in real estate sector
• Corrected market rate valuations
• Growing urbanization. Rapid expansion in Tier-I, Tier-II and Tier-III cities and the emergence of Megapolises and of integrated townships projects as a consequence
• Forthcoming SEZ projects and other industrial establishments
• Drop in home loan interest rates
• Increasing income levels of rapidly rising middle class + approximately 2 million graduates are produced every year in India, and that in turn creates a demand for  real estate, especially in the affordable housing segment
• Expansion of organized retail and growth of mall culture
• Emergence of 'Green Buildings' concept

In particular, projected growth of the IT sector @ 14% per annum and the growth of urbanization @ 2-2.5% per annum are the 2 key factors that will generate additional demand. This is apart from the existing shortage of 24.7 million houses and related infrastructure in the country. Better infrastructure, enhanced job opportunities and an accountable and responsible real estate industry would bring sustainable growth to the business.

 

The rising cost of residential accommodation has led to the popularity of Home Loans in India. Home loan is the finance borrowed from a bank or financial institution to buy or modify a residential real estate property. Any Resident or Non-resident individual who is planning to buy a house in India can apply for a Home loan. If you have decided to buy a property in the near future you can even apply for a loan before you select your property. It becomes easier if the property you are planning to buy is in a condominium or township that is pre-approved by a bank or financial institution.

The steep rises in the real estate prices in India are mainly due to the disparity in supply and demand of quality residential accommodation. The largest group of the Indian demography, the middle-class Indian population avails the major bulk of home loans in India. Home loans are facilitated by all public and private sector banks operating in India. Financial institutions specializing in home financing are also cashing in on the latest boom in home loans.

The recent downturn in the economy resulted in buyers constituting the 'end-users' segment rather than investors and speculators. Since the new class of buyers is a relatively younger set of customers, more aware of legal documentation, approvals and due diligence, we have seen the much-needed professionalism and accountability become more prevalent in the industry.

Today, the amount of money that a city dweller spends on rent is roughly the same, or only slightly less than the amount he pays as the EMI (Equated Monthly Installments) on a housing loan. Home loans are made available by financial institutions to both Indian and NRI applicants at floating or fixed rate of interest and also at attractive EMI options:
• For construction or buying a new home
• For purchase of plots for construction of house
• For home repairs and renovations or extension of an existing house or flat
• Against mortgage of property
• Purchase of home consumer durables and furnishings as included in the project cost

The buyers should try to take loan from established banks and financial institutions that screen the entire project before approving a loan for an apartment or plot in that project. In the course of approving a project, these institutions ensure that the developer has all the requisite approvals and sanctions. The government has recently announced interest rate subsidy of 1% for housing loans up to Rs. 10 lakhs and earmarked Rs. 1,000 crores for the scheme. The subsidy of 1% will be available for the first 12 EMIs on loans up to Rs. 10 lakhs for houses costing less than Rs. 20 lakhs.

For those planning to take a loan to buy a house, there is good news. The prevailing home loan rates from nationalized banks and housing finance companies are fairly reasonable:

• State Bank of India (SBI): 8% – 8.5% for Rs. 30-50 lakhs loan for 20 years (8% fixed for 1st year and 8.5% fixed for the next two years)
• Punjab National Bank (PNB): 8.5% for Rs. 30 lakhs and 9.25% for Rs. 30-50 lakhs loan for 20 years (fixed for three years)
• Life Insurance Corporation (LIC): 8.75% for Rs. 30-50 lakhs loan for 20 years (floating home loan rates)
• HDFC: 9% for Rs. 30-50 lakhs loan for 20 years (floating home loan rates)
• ICICI: 9.25% for Rs. 30-50 lakhs loan for 20 years (floating home loan rates)
• Dewan Housing Finance Corporation Limited (DHFL): 9.25% for Rs. 30-50 lakhs loan for 20 years (floating home loan rates)

Further, various banks and finance companies are coming up with schemes ahead of Diwali. Deals include low, adjustable introductory rates for initial years, with some lenders giving the option to shift to either fixed or floating rates in subsequent years. Lenders like Canara Bank, Bank of Maharashtra and Dena Bank are offering fixed-rate loans for the first 5 years, and subsequently, linking the loans to their prime lending rates. While others like Bank of India are offering fixed-rate loans for the first 2 years. India’s largest bank SBI is offering fixed rates for the first 3 years. Development Bank of Credit introduced a fixed rate of 7.95% for the first year, the lowest, at least, for the first year.

Moreover, in order to attract investors, Housing Finance Companies are offering incentives like:
• Free accident insurance & property insurance
• Waiving of pre-payment penalty & processing fee

My advice to all prospective home buyers: Be diligent, be bold and fulfill your dream as it is a buyers’ market at present. Just one word of caution; check the credentials and track record of the Developer you are buying from. 

Alpha International City Kurukshetra

Is Affordable housing still a dream or a reality? Affordable housing can be a reality if the government and developers are sincere in their intent to meet the huge unmet demand for affordable housing. The margins in this category are not as lucrative as the premium segment, which in any case has witnessed an oversupply. With the slow down and recession, the prices in the premium segment fell to almost 50% in one year. This resulted in a vacuum and informed investors acknowledge that the buzzword today is ‘Affordable Housing’ -- a vision of housing every family in the country.

Added to this most sustainable trend, the resurrection of investors seems imminent which we as developers will precipitate along with financial institutions and banks that are now actively encouraging low interest rates on affordable housing.

The question is how to best realize the potential?
Part of the infrastructure in the NCR is being built to decongest the city road network by way of expressways, which should be further encouraged by enabling and facilitating large and mass habitats along these expressways where cheap land could be made available by the Public Enterprise. Within that initiative, Private Developers could be encouraged through Private Public Partnership (PPT) to build affordable housing where the general populace could live and use rapid transport systems to travel to work.Mass scale housing for the general population is the need of the hour for initiating and sustaining inclusive growth. This will also help clean the environment of cities that are bursting at their seams. As a consequence of such increased infrastructure and development there will be an automatic expansion of Megapolises that will envelop several tier 2 and 3 towns in their growth. Further, the cost effectiveness or affordability factor will contribute to the increased attraction of these suburban areas.

The thrust to build such mass habitats will also call for innovative methods of construction by using newer energy efficient environment friendly material with technologies that are not only affordable but also qualitatively durable. Besides, these modern innovations are efficient in terms of deliveries and simple to complete through the use of pre-fabricated ready-to-use material.

Many of the developers in the surrounding outskirts of metros have announced affordable housing in the range of Rs.5 Lacs to about Rs.15 Lacs for 1 to 2 BHK units. Some even have provided 3 BHK units at prices of Rs.18 to 20 Lacs. In addition to the initiatives by the developers, the government should also consider tax sops including cuts in duties and levies on every completed affordable housing project that meets with the requirement in terms of accountable deliverables.

Of course the slowdown will probably continue for some time to come but with the second successive fiscal stimulus by the government coupled with the buoyancy to build affordable housing, will help to realise the dreams of many a common man of finally owning a house.