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Low supply deters ‘affordable’ dreams

State Bank of India (SBI) on Monday had announced a reduction in the affordable home loan rates by 25 basis points (bps) from 8.60 pc to 8.35 pc per annum, which came into effect on Tuesday.

Low supply deters ‘affordable’ dreams
Representative Image


The development has evoked a mixed bag of reactions from developers in the city, who have lauded the Centre’s push for affordable housing. They also highlighted supply side inadequacies that could turn speed breakers for this positive movement. 

Ajit Chordia, Director, Olympia Group says, “The rate cut has come at a good time as the affordable housing segment is gaining momentum with the Centre’s provisional subsidy scheme. There is certainly going to be a good sentiment on buying. The only deterrent is supply side constraints that still exist. If those are removed, more homes can come into the market in the affordable segment. 

Today, the existing homes are in the premium and the luxury segment, which have a huge supply. But supply in the affordable housing segment is poor. Supply side constraints such as need for proper incentives from the state government and regulatory clearances to be set in place are the challenges facing more developers from entering this segment.” He adds, “We have drawn two projects in the segment. 

We are looking at almost 2,000 apartments for launch in the next few months. We may take the short route of reducing the size of the project and then come up with 300 homes to test the market and then expand.” 

A deep fissure between the demand for affordable homes and the supply is a concern that plagues the realty sector right now. N Nandakumar, MD, Devinarayan Group, tell us, “Today we are only cannibalising the existing projects and trying to downsize them to suit the bill. But then creation of organically designed affordable houses is yet to come. 

Supply will surely fall short of demand in this category. While the govt has offered the buyer many benefits, we are not geared up supply wise to match the demand for these homes. The industry will bloom gradually over the next 5 years as developers embarking on such projects can expect good returns. The market will absorb these projects, provided the location matches drivers of economy like employment hubs.” State governments must open up new parcels of land by giving connectivity in terms of infrastructure like roads, water and electricity. 

“That would give a multiplier effect to the economy. A jump of 20,000 to 30,000 homes coming in would result in the market going up by 50 pc,” Chordia says. Sanjay Chugh, Founder, Skylines Property Consultants, tells us, “SBI’s recent rate cut would certainly stimulate entry level buyers as it is primarily targeted at borrowers taking a loan exposure of up to Rs 30 lakh. Coupled with the ongoing Pradhan Mantri Awas Yojna Scheme, it will result in a saving of a minimum of Rs 3 lakh to Rs 3.5 lakh per home in the affordable segment.”

  • Houses costing between Rs 10 lakh and Rs 50 lakh come under the ambit of affordable housing 
  • Assuming the current backlog is cleared, at least 3 cr additional homes will be needed by 2020, as per a JLL report 
  • GST Road, OMR, Mount Poonamallee Road, Outer Ring Road, Ambattur and parts of Northern Chennai will stand to benefit the most especially in the entry level affordable home segment in Chennai

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