Value homes in Bangalore are purely a result of the slump that the realty market faced starting around Aug-Sept 2008. By December builders, large ones too, were so cash strapped that they were unable to pay salaries to employees, for months. The one thing they heard from the market in unison was that the prices are ridiculously high. The result, more than a year later, homes in the prices of 10-20lacs with a compromise of 20-30km extra travel, 50% on the space of your homes. Some builders had already launched affordable homes earlier and some even specialised throughout their existence on the mid-budget category but i'm not refering to those anyways.
Conceptually, low cost housing is a no-brainer. With India's demographics it just has to work. It has been something that a lot of us have been advocating from 2005. I remember the marathon meetings with sreekanth of ambience for the 'studio apartments' they were studying the market for. I couldn't have been more excited about what I thought would take India by storm.
Apparently most builders i spoke to didnt share the sentiment, they were too busy doing what was helping them rake in the moolah, today!
While the market has been asking for low-cost housing for long enough, I am shocked at how the builder community has been ignorant enough to assume that people only want property that costs lesser conveniently forgetting that these homes also have to be livable. This has a whole lot of other implications like basic infrastructure, amenities, facilities, transportation, proximity to their work places, et al,. and you know what? Buyers cannot gamble on the Government to wake up to this reality. I am clearly not putting in my money on a brochure, any more. I need to see reality, I am investing today in what i can touch and feel.
I am sure the projects in the form they are being offered today will find a market but what i am not sure about is if the builder community will be happy with such projects. Clearly over the last 10 years the construction community has got too used to living on the borderline of profiteering. These projects are being in the executed in numbers excess of 2500 homes a project.
Almost all builders are getting into this if they haven't already, assume 20 large builders (Bangalore has at least 40) offer two such projects in a city throwing up over 1 lac homes. While i am sure the demand exists but the current offerings, in my opinion, do not fit the bill to help them enjoy complete sales. I would assume they wouldn't be able to sell in excess of 50% of a project.
Some projects lack even the most basic factor that would drive demand - commercial / corporate activity. Some people respond to this with "I want to use this for my living". Imagine investing in a project of 2500 homes, buying a flat of 700sft some 30kms from MG road with no corporate or commercial activity around. What happens if for some reason you decide not to live there? There would be at least 1250 more flats available for rent and 750 for purchase. Basic rules of demand and supply work here.
What would work very well in increasing sales is transparency along with a cost plus pricing approach with a clear mandate to make what any decent business can offer.
It is kinda odd to think that despite the magnitude there still isn't any Government intervention here. No entry barriers, no exit barriers, no price regulators.
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