The stampede for affordable housing by Indian developers may coming to an end. Indian property developer DLF has said they may withdraw from the much-hyped affordable houses, stating low margins under the scheme are unattractive. Is this the start of a new trend now that property in India has recovered?

Rise in debt is hurting
DLF is grappling with 25 per cent rise in net debt to Rs 18,463 crore so low margin housing does not cut the mustard.Talking to analysts, DLF executive director Saurabh Chawla said that along with other realty firms and associations, the company has approached the government for possible tax incentives to develop affordable houses, but have not got any.

“We are very focused on margins… If it doesn’t make sense, we will not be launching the projects,” he added.

Entering the race for low-cost housing, the company had planned to build 1,00,000 affordable homes at a price below Rs 20 lakh at major cities across India and the first such project was to come up in Gurgaon.

DLF, the India’s largest property developer, will soon conduct a poll among Indian property brokers to decide the pricing and number of apartments to be offered in the second phase of its Capital Greens project in West Delhi.

It’s a novel experiment, but property brokers in Delhi say the company is trying to test the waters in view of the vastly changed situation in the Indian real estate market.

Developers such as DLF, Unitech, Omaxe, Parsvnath and HDIL were among those that cut Indian property prices or forayed into mid-income housing, which were 25 to 30 per cent lower than prevailing prices, in the last quarters of 2008-09, as the economic slowdown and fears of Indian job losses impacted home sales. Indian property sales fell 50 per cent from their peak in 2007-08 (when prices had more than doubled froom 2004-05) as buyers stayed away.

Those days are rapidly becoming a distant memory, with many Indian developers increasing prices 15 to 30 per cent the moment they became sure of demand returning.

Knight Frank has released a research paper on ‘Affordable Housing’ in India, saying that this segment has a potential market size of Rs300,000 crores in India by 2011. The affordable housing segment of the Indian real estate industry is expected to see requirement of over two million units by 2011.

While the Rs3-10 lakh income group would drive this demand, the research findings further indicate that the largest contributor to this market size is expected to be the group earning Rs3-6 lakh income annually. Pranab Datta, Vice Chairman and MD, Knight Frank India said, “We have witnessed a tumultuous situation in the Indian real estate sector and the shift today is clearly towards Affordable Housing. The findings of this report clearly indicate a huge demand in a segment that should encourage developers to take increased notice.”

Although a number of affordable projects have been announced, the locations do not have adequate social infrastructure which is of utmost importance for the proper development and successful implementation of affordable housing, says the Knight Frank report. The report reveals that good connectivity to work places is the most important factor influencing the buyers decision in selecting the location of their residence. The Knight Frank survey took a sample size of 1,400 households across the seven cities. The respondents were mostly tenants, without tenancy rights under the rent control act, and had a strong intention to buy a house within the next two years, the report said.

The Indian government said that it was planning to launch a new housing scheme for slum dwellers and urban poor.

In a recent report by the Economic Times said the Government proposes to launch ‘Rajiv Awas Yojana’ in the country for slum dwellers and urban poor. The scheme would extend support to states willing to assign property rights to people living in slum areas,” Housing and Poverty Alleviation Minister Kumari Selja informed the Lok Sabha.

“Government’s effort would be to create slum free India through the scheme in next five years,” she said in a written reply.

In 2009, the Government has launched interest subsidy scheme for housing the urban poor. The scheme is aimed at providing subsidy up to five per cent on a loan of Rs one lakh availed by the poor.