Realtors keep off PM's low-cost housing bus citing low returns

Tags: Real Estate
Prime Minister Narendra Modi's vision of "housing for all by 2022" may turn out to be an uphill task with developers keeping off low-cost housing projects citing regulatory hurdles, high land cost and low retunrs making such projects "unaffordable".

Currently, there is a shortage of 187.80 lakh dwelling units in urban areas, but this is not attracting developers to take up low-cost units as the sector is facing many challenges on the land acquisition front, soaring land and material cost and liquidity issues, say experts.

"The cost of project has significantly increased due to the delays caused which makes it unaffordable. Besides, increasing cost of land makes such projects economically less viable," PwC associate director Bhairav Dalal told PTI.

According to official data, 2,20,741 houses have been built in urban areas during the past three years under different programmes like the Jawaharlal Nehru Urban Renewal Mission (JNNURM), the Rajiv Awas Yojana (RAY) and affordable housing in partnership.

"Developing a low-cost housing project in the current market conditions is challenging given the number of approvals needed before starting a project which increases the overall cost. Margins are very less, maximum 10 per cent, in this segment, but the costs are high which makes it unaffordable," Kolte-Patil Developers chief executive Sujay Kalele told PTI.

On the liquidity front, he said, banks are already reluctant to fund realty projects and private equity funding is costly.

"Banks lend at around 18 per cent while PEs expect returns of up to 23%. Thus in a project which is costlier than its returns, financing them becomes a major challenge," Kalele added.

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