Tag Archives: Affordable Housing

Century joins affordable housing bandwagon

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Century Real Estate is the latest to join the affordable housing bandwagon. It has come up with ‘Century Indus’ project that offers apartments in the Rs 20-30 lakh category.
Mr P. Ravindra Pai, MD, Century Group said, Acquiring land at historical rates has helped the company make the project affordable.
The company has a land bank of over 3,000 acres, most of them acquired in historical rates, worth about 2 billion dollar. There are plans to make use of some of the land parcels to develop few more affordable projects in the city.
“We propose to develop 6,500 apartments targeted at the affordable segment, approximately seven million sq ft development, with a budgeted outlay of Rs 1,050 crore in the next three years,” said Dr P. Dayanand Pai, Founder and Chairman, Century Group. The projects would be located in North and West Bangalore.
Mr Pai said that the group has now formed ‘Century Real Estate Holdings.’ About 300 acres, valued at Rs 1,200 crore, from the land-bank have been transferred to this company, and about 12 projects would be developed on this land.
The company is looking at raising funds at entity and project levels. At the entity level, it plans to raise Rs 200 crore as bank debt for pre-development of these 12 projects. “We have almost tied up the debt,” said Mr Pai.

Realty regulator is needed

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HDFC chairman Mr. Deepak Parekh said that there is need of real estate regulator at state level to deal with issues concerning the housing sector. He pointed out that the Government should layout an institutional framework for a real estate regulator. Regulators’ role would be to regulate the affordable housing agenda, promote real estate reforms and ensure transparency especially by mandating that flats be sold only on carpet area and act as a platform to protect buyers from real estate deceit. Mr. Parekh suggested that affordable housing has to be enable to cut all income segments and has to make economic sense in terms of distance from work place.

Realty regulator is needed

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Government should layout an institutional framework for a real estate regulator. Regulators’ role would be to regulate the affordable housing agenda, promote real estate reforms and ensure transparency especially by mandating that flats be sold only on carpet area and act as a platform to protect buyers from real estate deceit. Mr. Parekh suggested that affordable housing has to be enable to cut all income segments and has to make economic sense in terms of distance from work place.

Affordable housing is not more affordable for builders

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The  sector appears to have found its feet with focus on affordable housing and this may reflect in the June quarter results of the companies. The move has led to higher sales for many companies, but on the other hand, it has also impacted the margins negatively. The reason being that the mid-segment housing is a high volume with low margin business.

It may also be understood that only the residential market has seen a recovery, while the commercial and retail segments are still under stress.

Among all the listed companies, Orbit and Indiabulls Real Estate (IBREL) are expected to show a marginal improvement in sales. With a huge fall in property prices in the luxury segment, Orbit has shown 5% increase in sales. With a 70% YoY decline in revenue, Parsvnath is expected to see the highest fall. DLF and Unitech may follow with 60% and 54% decline, respectively. As a move to generate cash for business activities, both these companies have exited from unviable projects and also sold noncore assets. This would help in completing under-construction projects. Even some large SEZ projects have been shelved.

Many companies have launched new residential projects in affordable housing segment. Though construction costs would be low, EBIDTA margins would decline by 5-10 % average due to sharper decrease in prices. However, companies like Unitech, DLF, HDIL, and Sobha that have raised funds have improved their balance sheet positions and thus lowered their overall finance cost. Average EBIDTA margin for June’ 09 would be 39% as against 43% for March’ 09. Peninsula Land is expected to show positive margin, as the number of projects was very limited, hence leverage was also low.

Despite all the gloom, realty sector is seen to show some improvement in margins. The overall PAT margins for the June quarter will be at 26%. Though real estate sector is one of the major contributors to the over all profit growth for India Inc, yet it is low as compared to the past PAT margins of 35-40 %. However as alternate sources of funds have become available, builders have managed to improve their cash position. Loans have been restructured and thus interest liability has been reduced. Developers like Mahindra Lifespaces, IBREL and Peninsula Land are expected to report PAT margins upward of 30%.

Mumbai is the next target for DLF and Unitech

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Mumbai seems to be the next destination for realty giants DLF and Unitech. Both companies are trying to restart some of their projects in Mumbai which were on hold.
Unitech, said, “We have a number of slum redevelopment projects in Mumbai. We also have a focus on affordable housing and some projects will be announced by the end of 2009.” A company official said that the focus would now be on residential projects and prices would be lower than the current market rates.