If the global recession forced IT firms to cut down on their expenditure, renegotiate or cancel their deals, reduce employees’ intake and office space as well, it made real estate developers to come out with affordable housing for those in the bottom end of pyramid.
Soon affordable housing became the industry’s buzzword and houses in the price range of over Rs.40 lakh were described as affordable.
But investors started to quiz about those in the Rs.25-40 lakh brackets.
At a recent meeting on “South India real estate – the way ahead” organised by Confederation of Indian Industry, the end-users said that there was hardly any drop in the housing prices and sought the reason from the developers for selling land at abnormally high costs, even though it was procured at cheaper prices.
To this, the developers said that the land resources was limited and the prices were fixed based on the demand-supply factor.
Since there has been a mismatch, the prices were on the rise. But, the end-users were not convinced. As a next step, the developers urged the State government to allocate lands to them at low cost for development.
Vikram Kapur, Member Secretary, Chennai Metropolitan Development Authority (CMDA), said that Government lands were not available for housing in Tamil Nadu, particularly in Chennai.
On the flip side, the CMDA planned to develop large parcels of land by partnering with farmers to avoid legal tussles.
The developed land would be given to public sector for development of housing on a large scale.
Kumar Gera, Chairman, Confederation of Real Estate Developers’ Association of India (CREDAI), attributed the high land cost and taxes as key factors that impacted the development of affordable housing.
Extend boundary
R. Sellamuthu, Additional Chief Secretary and Housing Development Commissioner, Tamil Nadu, said that to avoid people migrating to city and to meet the ever-growing metropolitan needs, it was planned to extent the boundary of the Chennai Metropolitan Area to 1,500 sq.km from the present 1,182 sq.km.
After a decade or so, this boundary line would be extended to 2,000 sq.km.
The boundaries of other cities in the State will be expanded. Besides, total transport mobility will be in place in the next five to six years to offer better, cheaper, safer and quicker transportation.
Immediately, the topic changed to affordable office space. R. Siddarthan, Centre Head – Infrastructure, Tata Consultancy Services, mentioned that the company closed down their facility in Vadapalani and moved people to its premises on Rajiv Gandhi Salai.
It was unthinkable in other times as people would have simply refused to move. “It was a wrong way of long-term planning to meet the infrastructure needs. For the Q2 2010, our net addition to manpower was 1,692 or 1.21 per cent and office space was 76,140 sq.ft or 1.21 per cent. We haven’t thought about 2010 graduates,” he said.
To meet the space requirement, his suggestions were: reduce flexibility, but remain agile; change the way of long-term planning to meet infrastructure demands, look for more options; revisit or re-do the contracts; consolidate space requirements and improve efficiency.
Today building value and rentals are done based on current market conditions rather than the past transactions and there was a likelihood of being overvalued in a downturn. Developers will have to adjust to new market conditions, if they have to survive, the speakers said.
Ramesh Nair, Managing Director, Jones Lang Lasalle Meghraj, said that a study of Singapore market revealed that upward trend lasted for three-four years and downward trend for two to three years.
“Recession had impacted every single market in the world. The worst is over and recovery would start by mid-2010 and it will be stable during 2011 and 2012,” he said.
News Published Under: The Hindu