Infrastructure development -Changing dynamics

Much has been about the meltdown in the US and how India will not be affected much. However, in a scenario where the entire world is learning after having a bad fall, India has a chance to adopt different economic strategies without really paying so heavily thanks to our stringent banking system. The country is springing back to plug the holes as much as re-orienting its policies to adapt to the new era. Indian housing sector too is changing its dynamics.

India and China represent an economic scenario has evolved separately and on very different parameters from the economies in most developed countries. It is merging economy with an emerging and maturing real estate market. The fall in demand will prevail for approximately ten to twelve months, but it will not be of a magnitude comparable to that of other countries.

Under these circumstances from JLLM in Mumbai the real estate mantra of the current era is middle-income housing. This is where the opportunity lies feel most developers who are now recognizing this as the real money spinner in the long term. This has opened up the market for investing in mid priced housing, especially in Mumbai.

It is with the middle to higher income group within the middle class that the investment opportunities lie, as these are the people to whom home loans are available says national director, advisory services, Knight Frank India, and developers are now working at making housing available to this group.

Not surprising considering that in India housing is a primary need and, most people are still buying their first homes. In a scenario when there is a severe liquidity crunch world over and salaries hikes are expected to be marginal, the young working couples in the corporates who are the main drivers of housing sector are increasingly looking for affordable housing at easy loans that could be paid off without much difficulty. On the other hand, fund crunch is also affecting the developers and they are increasingly looking for optimizing their resources and employing right strategies to find success in their projects.

It is perfectly possible to build homes worth Rs 2.5 lakh on a 250 sq.ft area. The margin of profit can be between 10 to 15 percent. Enterprising builders are looking forward to building such homes as there is a huge demand for them, but that cannot be possible only through the will of the builder fraternity. The government has to remove the cash crunch to be able to complete such projects

It is also important to have one window clearance which will expedite project completion.

While this is the call of the day, a lot depends on the government’s proactive attitude in setting infrastructure in far off areas at a rapid pace. Such homes are only possible when built in volumes on a large piece of land which is available around the peripheral areas but if the government is not looking into providing adequate power, water and transport. It may not be a feasible proposition as people want comfort in living and traveling. Continuous fund flow is yet another area that the RBI has to look into, as such projects have to be completed within the scheduled time.

The government sure is aware of these issues as there has been a spate of activity on this front in recent times. The Mumbai Metropolitan Region is setting up a core group to draft out a master plan.

The changing dynamics include the economies of construction which calls for innovation designing that optimizes the use of space, use of materials locally available and prefabricated parts reducing the turnaround time. Changing dynamics also means choosing new grounds.

Despite the current slowdown, there will be a gradual rise in rates as development in peripheral areas near large metros catch up with the planning. Growth sector owing to SEZ development and new airports planned can also contribute for infrastructure development without congestion. Thane one such area near Mumbai of India is seeing comparable market dynamics owing to the burgeoning IT/ITES sector there.

Another contributive factor is the increased road connectivity of Thane and Navi Mumbai to all other key areas in Mumbai. The gap between demand and supply is still huge and the government is also working up to this fact, by seriously looking at the possibility of reducing interest rates. This is the only way to ensure activity in the market.