Realtors join fray in affordable housing segment, take the middle path

So far the demarcation in the real estate sector was clear —premium housing catered to high-end customers and affordable segment was for low-income consumers.

Realtors have now embarked on a middle path — the premium affordable segment. It stands at the lower end of the premium segment, averaging a price range of  Rs 5 million or more, but a far cry from the regulatory definition of “affordable housing”.

“In the context of the Indian real estate sector, the term ‘affordable’ is about as extensively misused as ‘luxury’. Builders have been generously using the ‘affordable’ tag for quite some time now,” said Anuj Puri, chairman of ANAROCK Property Consultants.

Recently, the Embassy Group, which had traditionally focused on the high-end segment, forayed into the premium affordable housing space with its Embassy Edge project. Located at Devanahalli near the international airport in Bengaluru, the apartment carries a price tag of  Rs 3.6 million to  Rs 8.1 million. Similarly, Puravankara recently launched its first premium affordable housing project post implementation of Real Estate (Regulations and Development Act) with a Rs 2.7 million to Rs 5.4 million price tag.

According to the Ministry of Housing and Urban Poverty Alleviation, affordable housing is defined on the basis of property size, price and buyers’ income. An affordable house meant for the economically weaker section must measure between 300 and 500 square feet and should be priced below  Rs 500,000, with a monthly EMI of not more than  Rs 4,000-5,000. These numbers change for the lower income group and the mid-income group.

On the other hand, the Reserve Bank of India’s definition on affordable housing is based on the quantum of loans to homebuyers. According to the central bank’s latest definition, the loan limit for affordable housing loan ranges from  Rs 2.8 million to  Rs 3.5 million in metros, and  Rs 2 million to  Rs 2.5 million in non-metros, provided the overall cost of the home does not exceed  Rs 4.5 million and  Rs 3 million, respectively.

“The term ‘affordable’ has caught the fancy of developers. For many of them, it is a marketing gimmick to attract customers,” according to Ramji Subramaniam, managing director of Sowparnika Projects, which works in the affordable housing space in Bengaluru.

“Many of these developers have taken to branding, bringing even houses that cost  Rs 6-8 million under the affordable housing category,” he added.  

According to data from real estate consultancy firm ANAROCK, 22,120 new units were launched in the affordable housing category in the first quarter of 2018-19, almost half of the new supply in the market. Out of these, nearly 6,530 units were launched in the price bracket below  Rs 2 million.  

“The government’s initiative, Housing for all by 2022, provided a major boost to the affordable housing segment despite lack of a clear-cut definition. Also, granting of infrastructure status and interest rate rebates were attracting more players to enter the space,” said Shrinivas Rao, CEO, APAC, real estate consulting firm Vestian.