Affordable Housing sales Helps Real Estate Firms Escape Slump

According to the CREDAI (Confederation of Real Estate Developers' Associations of India), sales in the mid income & affordable housing category in India have dropped only 5 t0 15% over the past one year, as compared with over 60% for luxury apartments.

Mr. Keki M Mistry, Vice Chairman & Chief Executive Officer, HDFC said, ''India's middle-income housing segment accounts for much of the growth in the slowing real estate sector. Consumer sentiment is still robust. For us, there has been good growth from the mid income housing segment"


The lender HDFC recorded a 23% year on year growth in its loan book in the first quarter (April to June) of 2012.

Mr. Mistry also said, ''For end-users, high interest rates are not too much of a worry. They need to buy a house and they know that over 15 to 20 years interest rates will average out. The overall drop in housing sales,  is primarily because investors, who make up a big chunk of buyers, have gone out of the market and high priced apartments are not selling as much as those in the mid - income category"According to Mistry, developers/promoters have become cautious since 2008 - 09, launching an affordable housing project for every luxury project they undertake. Developers who are making mid-income housing are doing good"


The slowdown in 2008 - 09 was preceded by a period of boom when many developers/promoters bought land at high valuations, launched luxury housing projects & opted for public offerings. When the slump came and markets tanked, they found it difficult to handle their debt.

Mr. Mistry added, ''A change in buyers' thinking had stemmed the flow of money that builders were earlier receiving as customer advances. There is a shift. Few people now want to buy when a developer launches a project. Now they want to ensure that approvals are in place & construction has not stalled. This has resulted in developers being forced to borrow more for their working capital requirements. So, we see more debt on the balance sheets of developers"

Over the last few years, property prices have risen Pan India, with the increase unusually high in some pockets.


According to property research firm Liases Foras, there is an unsold inventory of 40 months in the MMR (Mumbai Metropolitan Region) & 23 months in the NCR (National Capital Region).

Top City - Chennai..!

Mr. Mistry said, ''There could be some pockets in India where there might be a build up of unsold inventory, but house sales have been healthy in areas where developers have launched mid income affordable homes. Growth for us is now coming from the outskirts of cities.  Delhi-NCR is still the top city for HDFC, followed by Chennai, Mumbai, Pune, Bangalore & Hyderabad. There is also good growth in Tier-II and -III towns because property prices are still low."

The average loan size for HDFC is Rs.19.5 lakh & its loan to value ratio is about 65%, so the average property value works out to nearly Rs. 30 lakh, which falls in the mid-income category.

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