Says response to maiden project in Bangalore gave confidence
Value & Budget Housing Corporation (VBHC), promoted by former Citibankers Jerry (Jaithirth) Rao and P S Jayakumar, plans to launch six budget housing projects in the country by the end of this year.
It is looking at two projects for the Mumbai area, two in the National Capital Region and one each in Bangalore and Chennai, said Rao. “The success of our project in Bangalore has given us confidence to launch more such projects,” Rao, earlier the chairman of Mphasis, told Business Standard. In its maiden project in Bangalore, the company has sold 2,000 units so far.
Although he refused to disclose investment figures, he said the company would look at getting funds from private equity investors at the project and company level. Housing finance major HDFC and The Carlyle Group are major investors in the company.
He said each project would have 500 apartments. Unit prices and sizes are yet to be decided. VBHC had launched and sold apartments in the range of 350-640 sq ft and priced these in the range of Rs 4.5-10 lakh in its project, ‘Vaibhava’, in Bangalore. Unit sizes in upcoming projects are expected to be on similar lines, said company executives.
Hit by approval delays in the maiden project in Bangalore, Rao said the company would build the upcoming projects in phases and have lesser numbers of units. VBHC launched its Bangalore project in August 2010 and planned to deliver within 18 months of the launch (February 2012), but is seeing a delay of three to four months on account of delay in installing a power sub-station by the electricity board, he said.
The company did a soft launch of the Chennai project, for 150 apartments. The company is going slow on its Hyderabad project due to Telangana issues in the state, he said. “We would like to build 20 projects of 500 units instead of five projects of 2,000 units,” he added. Though VBHC had a target of a million homes in the next 10 years, Rao said they might take two more years to achieve the target.
“In places such as Bangalore, it takes 17 approvals before the launch of the project and seven more after it. If you take 15 months in getting approvals, the effective cost of the land goes up 50 per cent which puts pressure on the company and buyers,” he explained.
Recently, Mahindra Lifespaces, realty development arm of the Mahindra Group, said it was finalising value housing projects in Tamil Nadu and Maharashtra, where it plans to launch 1,000 to 2,000 units spread over 10 acres. Unit prices are expected to be between Rs 7 lakh and Rs 15 lakh.
The shortage of dwellings in urban India was estimated to be 26.5 million, says the 11th Plan document for the 2007-12 period. The poor form 90 per cent of this shortage.
Tata Housing and the Usha Martin Group are also major players in the budget housing segment. Though the segment has margins of as low as 10-15 per cent, developers are looking at this area to tap the large volumes.
“Many companies have realised this is the need of the hour. They are willing to live with the low margins and large volume,” said Pranay Vakil, chairman of Knight Frank India.
