The Hindu Business Line : Tata Housing building on the strength of low-cost homes

The low-cost housing sector should be de-linked from real estate and be accorded infrastructure status. — Mr Brotin Banerjee, MD and CEO, Tata Housing

S. Shanker

Mumbai, May 24 Tata Housing Development Company created waves recently when it announced its intention to build nearly 1,000 homes priced in the range of Rs 3.9-6.7 lakh.

The Nano homes, as they are popularly termed, got a flood of over 6,000 applications within a week of the announcement. The project will be commissioned in Boisar, 100 km from Mumbai, and planned as an integrated township.

In an interview to Business Line, Mr Brotin Banerjee, Managing Director and CEO, Tata Housing, talks about this plan in greater detail.

What was the starting point for this project?

Our initiative was not meant for making profits but work as a business model. There is a shortage of 24 million dwelling units in the country and I don’t think it is possible for the Centre and State governments to invest that kind of money for this purpose. It is only the private sector or a private-public participation that will work.

This game will be high in volume and comparatively lower in margin than the high-end formats.

If it is done in places where we have offices such as Delhi, Bangalore and Mumbai, the incremental cost as far as overheads is concerned will not be high.

Did market conditions prompt you to get into low-cost housing?

This company started in 1984 but, in many ways, was revived only in late 2005-2006 when an entire new management came onboard. It was not that market conditions forced us to go in for low-cost housing but it was what we would have done anyway.

You have allocated eight of the 63 acres for this initiative at Boisar. Will the balance area see high-end products?

We are not looking at high-end apartments but relatively higher compared to the low cost — a different product mix. We will have higher margins there but then these will not sell in two weeks.

How long will the entire project take given that landowners are partners?

We have a joint development arrangement with the landowners at Boisar.

In general, we do a mix of joint development, outright and joint venture. This project will take four years though the low-cost housing will be done in two.

Are you looking for land or would you prefer joint ventures as a business model?

We have about 100 offers from landowners from different cities but then all may not materialise as they would have to come to terms that margins will be lower in low-cost housing.

Would you be more inclined towards industrial hubs in Bangalore and Gurgaon for your next phase of low-cost projects?

These may come up in the other side of Bangalore, near Peenya. We try to look in between cities and industrial centres to provide relatively low-cost, and yet good quality living standards for people in industrial areas while attracting those living in crowded cities.

What must be done to give low-cost housing a boost?

I seriously believe that the low-cost housing sector should be de-linked from real estate and be accorded infrastructure status. Loans for such projects should be made available at lower rates and also qualify for stamp duty and registration fee waiver. Development and approval charges should similarly be done away with or at least subsidised. Some initiatives need to be taken for promoting reputed corporates to enter this area.

How much of your portfolio will comprise low-cost housing?

Today, it is only one among eight or nine projects. Going forward, I see it at 20-25 per cent, while another 25-30 per cent would be affordable homes with high-end products taking up the balance.

Do you see early signs of a revival in the realty sector?

Yes, and we are getting early signs even in the premium end. But, then, these are very tentative signs. One can be sure and more confident once the new government is in place. It will start to some extent in October-November. But then, if this does not happen then we are in for trouble.

Do you see a further price correction in the days to come?

No, I believe most developers have realised that they need to bring prices down for the middle class. If they only have to chase high-end clients, who already have two or three homes, how many more will they buy? It only leads to speculation. Home loan interest rates too, have to come down further.

Do you suggest that people buy now?

Yes, a buyer today is getting something that was at a higher price earlier. Second, whatever be the stated price, it is up for negotiation. Even if it is 20 per cent less than the quoted price, there is room to wriggle out another 15 per cent. Many developers who bought land in the suburbs where prices are lower have reduced their expectations and are offering projects at lower prices.

Finally, what do buyers look for, be it low-cost or high end?

Irrespective of his income profile, buyers look at the reputation of the builder. However big a developer is, project timelines must be met and pricing has to be transparent.

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