The economic downturn and the consequent market slump have engulfed the real estate sector in India. The battered realty developers, reeling under a severe cash crunch are looking for a suitable antidote to relieve their pain. At this critical juncture, low-cost housing, especially in rural and semi-urban areas could be one such antidote.
In the given circumstances, developers are exploring various ways to improve their financials and alleviate the pressure on their dwindling margins. The small and mid-sized developers have been fighting a tough battle to stay afloat amid the crisis.
According to a recent report by Associated Chambers of Commerce and Industry of India (ASSOCHAM), venturing into the low-cost housing segment in rural areas could prove to be a profitable option for them to beat the slowdown blues.
The chamber has also recommended the public private partnership (PPP) business model for developers for such projects as it would help them secure necessary capital, which might be difficult to acquire on a standalone basis. The industry body further stated that realtors and government should come together to meet the demand for 47.43 million affordable houses by 2012.
There is a huge dearth of rural housing in India. With the economic downturn taking a bitter toll on the realty sector and most SME developers struggling due to the inadequacy of funds, it is felt that affordable rural housing could be a lucrative business opportunity for them.
Ambaji Rao, Director of a mid-sized real estate company in Hyderabad, Heera Constructions, says, “The ongoing credit squeeze and drying up of investments have severely impacted the developers who are feeling paralysed due to inadequacy of funds to finance their projects and resume operations. There is a huge backlog of rural housing requirement and it is the right time to cash in on the demand-supply gap.”
One of the essential prerequisites to increase the pace of development of rural housing in the country is the use of the latest building technologies for construction. This is why it is felt that private sector participation is extremely important for the introduction of new technologies in the market.
Sachin Soni, the Director of Nakshatra Estate Management, a mid-sized real estate company in Ahmedabad, says, “Till a few months ago, real estate developers were mainly concentrating on the 3-4 bedroom apartments in tier I and II cities while the single bedroom categories in the semi-urban and rural areas were completely ignored.”
Recently, with the demand for large-size apartments witnessing a slump, real estate developers have realised that it was a mistake on their part to ignore the rural low cost housing segment. But, in recent times, this housing segment has received a major boost due to the Indira Awas Yojana (IAY). As per the reports of the ministry of rural development, since the introduction of the IAY scheme in 2000, almost 171 lakh houses have been constructed at a total outlay of around Rs 1,89,898 crore.
Though developers, especially those belonging to the SME sector, have realised the importance of rural housing, care should be taken to ensure that certain factors such as clearances by the forest department, availability of land, lack of fund and a dearth of basic amenities do not impede the sector’s growth.
Aparna Mitra |
