Expansion and Growth in Affordable Housing Markets
NHB-AUF International Conference
New Delhi- January 30, 2012
Presentation path
•
About Us
•
Housing Marco Statistics: Demand-Supply Mismatch
•
Addressing Supply Side Constraint is a large Challenge
•
Key Pressure Points
•
Some Suggestions on Increasing Demand Side
•
Conclusion
About us
•
Value Budget Housing Corporation (VBHC) is a professionally managed real estate
company
•
Construction of Affordable Entry Level Homes (AEL), priced range of Rs. 5 to 15 lakhs,
building self contained communities in suburbs/urban periphery
•
Marquee Investors whose direction to VBHC is in delivering Quality Homes, at an
Affordable Price, Transparent Sales Process and Reasonable Returns
•
Essence of Planning is to Experience the Joy of Living
•
Investment Thesis: Industrialization of construction is key to address the supply side
challenge and achieve balance between price, quality and speed of delivery
•
Application of Industrial Building Systems and building of trained skilled labour force
Acute shortage of housing in India
Housing shortage in India expected to be over 26 million units by 2012 (Source: KPMG). Over 90% of this
demand is in the 300 – 800 sq ft size category (defined as EWS and LIG).
Industrial building systems (IBS) at VBHC
• Standard prototype of apartments and buildings, use of BIM for acceleration in design
process
• Offline completion of bar bending, steel mesh, electrical and plumbing kit
• Cast In Situ, reusable Aluminium mould for completion of structures
• High quality design with high emphasis on sustainability measures
• Current speed, initial phase of 30 apartment every month, currently 90 apartments, plan to
achieve140 apartments completion every month
Key supply side challenges I – Offsetting Input Cost Increase
•
Increased cost of most inputs driven indirectly by
Material
2011 cost (2009
cost indexed to
100)
2011 cost (2010
cost indexed to
100)
Steel
150
120
energy cost
•
Cascading effects on adveloram charges
including higher circle rates
•
Labour cost both skilled and unskilled
Cement
160
130
•
Higher transportation costs
Energy
130
115
•
IBS application offer substantial opportunity to
offset input costs through productivity
Cycle time (days /
casting)
Completion time
(months)
Cycle time reduction: progress from
3
30
conventional construction-in-situ to precast
2
22
Sweating fixed assets, lowering period costs,
1
14
improvements
•
•
lowering cost of capital
•
Technology progress will provide more options
on material substitution, productivity gain to
offset input costs
6
Key supply side challenges II – Approval Lead Time
•
Prior history on non complaint behaviour on the part of builder community
•
Uniform bylaws will promote standardization and lower costs
•
Bylaws ambiguous , need for an appellate authority for appeal and early disposal
•
Density rules can be improved based on empirically established data – buyers are young, nuclear
families
•
Bylaws can be improved leading to more efficient design and loser costs
•
Long approval time lines, adds ~15% of total cost
•
Biggest opportunity is to focus on aspects that are costs to the consumer but not revenues loss to
the Government
Activity
Time taken (months)
Approvals
12*
Construction
18
Idle time to construction time ratio
40%
* Receipt of Occupancy Certificate (OC) takes an additional 4-6 months
7
Case study: Variation in bylaws across the country (1/3)
•
Bylaws vary between cities in critical design requirements impacting modularity and standardization
•
Some of the bylaws which determine the Master Plan are:
•
•
FAR/FSI - Ranges from 0.75 to 2.25
•
Setbacks - Ranges from 6m to 8m for a building of 30m height
•
Distance between buildings - Ranges from 1/2 the building height to 1/4 the building height
•
Fire driveway requirements - Ranges from 3.6m to 8m
•
Open space requirement - Ranges from 10% to 25%
Some of the bylaws which determine the Building Design are:
•
Minimum room sizes – Ranges from no min. size specified to 9.5 sqm for bedroom
•
Ventilation shaft requirement - Ranges from 4 sqm to 8 sqm for a 30 m high building
•
Fire distance within buildings – Defined from the exit door or from furthest point in the unit
•
Requirement and location of fire stairs – location, number and design req. varies
•
Minimum window sizes - Ranges from 10% to 20%:
•
Parking requirement – Based on plinth or FSI area. Floor area ranges from 50 sqm to 75 sqm
8
Case study: Variation in bylaws across the country (2/3)
9
Case study: Variation in bylaws across the country (3/3)
10
Key supply side challenges III - access to capital and funding
• 100% Equity required for land purchase at project Level.
• ECBs permitted for large township. Scope to provide flexibility for Affordable
Home Projects
• Long-term finance for purchase of equipments
• Working capital funding, real estate considered in negative category, stressed
portfolio also leading to conservative standards
• A more favourable environment for access of funding of projects... will also
lower delivery risks to customers
11
Customer profile (1/2)
Age-wise Distribution
20%
Distribution of Residence Type
20%
21%
49%
22%
38%
Young (<30 years)
MidLife1 (>=30, < 40 years)
MidLife2 (>=40, <50 years)
Senior (>=50 years)
Gender Distribution
31%
Rented
Others
Family Type
14%
19%
Self
22%
64%
81%
Male
Female
Unmarried Single
Nucleus
Extended
Note: customer profile is based on data collected from over 1,000 customers of the Bangalore project
Customer profile (2/2)
Income Distribution
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Upto Rs. Rs. 1.5 - Rs. 3 - 5 Rs. 5 - 7 Rs. 7 - Rs. 10 - Rs. 12 - Rs. 15 - Rs. 18+
1.5 lacs 3 lacs
lacs
lacs 10 lacs 12 lacs 15 lacs 18 lacs lacs
 Majority of the customers are young (less than 40 years of age) professionals
 20% of customers are women
 50% of customers currently live in rented accomodation
 Modal customer earns between INR 3 – 7 lacs per annum
Note: customer profile is based on data collected from over 1,000 customers of the Bangalore project
Demand side intervention
• Key is to encourage long term investors such as insurance and pension funds
in organized rental market
•
Young workers in our industrial corridors
•
Not ready to make decision to purchase
•
Rental / shared accommodation
•
Companies willing to provide guaranteed long term lease
•
Part purchase and part funding, option to purchase the balance property
• Individual, Social Sector, Philanthropy willing to guarantee facility to support
access to mortgage loans on prime rate
14
Demand side
Demand side intervention: Example of Guarantee Program
intervention
•
Guarantor, Dr. D.V.R. Seshadri is adjunct
faculty of Marketing at the Indian Institute of
Management – Bangalore.
•
Beneficiary: Mrs and MrUshanNaika
housekeepers for Dr. Seshadri with
combined income of Rs 15,000 per month.
•
Property: 1 BHK flat, total cost Rs 8.82 lakhs.
Loan availed Rs. 7.5 lakhs, EMI Rs. 8,132.
•
Guarantee: Is redeemed on reaching certain
trigger event such as seasoning and LTV ratio
•
Program on ‘ Cloud’, Opportunity to build an
institutional portfolio with individuals and social
institutional investors
,
a
15
Thank you