Keeping it real – real estate
INTERVIEWED BY JAYASHREE MENDES
How do you manage to acquire urban land for affordable housing development?
After the financial crisis of 2008, several foreign special purpose vehicles (SPVs) that invested in Indian lands found they had to jettison many of their assets here. We were able to leverage their positioning as a foreign firm with strong connections with local stakeholders to rescue these firms’ investments, thereby acquiring distressed land parcels at discounted values. And what we plan to do now is develop them at a lower cost and sell at affordable rates.
There’s a shortage of nearly 19 million dwelling units. How can public sector housing companies and private developers help create infrastructure?
The question isn’t really, “how can they,” but “how should they.” With infrastructure so overstressed in major Indian metros, the only sensible thing to do is develop outwards. We are not merely developing homes. We are building communities. What use is a home without nearby roads, railways, schools, and hospitals?
To that end, development and infrastructure exist symbiotically. We believe that infrastructure can naturally catch up with development, as engineers and bureaucrats realise that a surplus of people are underserved in a specific area and invest in transportation, power, sanitation and water in the communities therein. However, we cannot wait for the government to solve our problems. Hence, we have pursued public-private partnerships to increase our reach. Sheltrex, one of our investee companies, is a pioneer in this field. Each Sheltrex project has a ‘city manager’ with connections to local stakeholders who is responsible for developing infrastructure within the project. Sheltrex has partnered with IBM to create smart infrastructure systems, with sensors and distribution networks for water and power that automatically sends regular feedback to each township’s suppliers, so our customers never have to.
What are some of the regulations that curtail timely approval of projects so that affordable housing can get a boost?
One of the largest boosts to affordable housing came with the increase in floor space index (FSI). FSI acts as a limit for the amount of saleable space for anyone to develop. By roughly doubling it in most parts of Maharashtra, from approximately 0.6 to 1.2, builders can now build higher and with more units. Additionally, the government can give affordable housing a boost by speeding up approval for the environmental clearance process, a vital part of land approval than can take multiple years to attain.
Brick Eagle has created three investee companies: Xeco, Phalcomm and TPC. Could you explain the roles each of them play in affordable housing?
Brick Eagle seeks to create a universe for affordable housing in which each part plays a role in standardising and raising the quality of the home-buying experience. Technik Project Consultants (TPC) provides engineering expertise and allows for developers with whom we work to scale their designs at low cost to make these homes truly affordable. Phalcomm handles the back-end work such as sales and coordinating with developers, and once the sale is made, the loan and payment process – with customer support all the way through. Xeco helps our developers build a distinctive brand to attract, and retain, their target audience through specialised marketing practices.
What are some of the technologies you employ to create large projects?
To start, we usually acquire large land parcels of about 100-200 acres, so that our incubated developers can benefit from economies of scale. Our projects employ advanced construction technologies, such as formwork, that reduce labour and enable fast, durable and environmentally-friendly construction practices — by eliminating and reducing significantly the usages of steel and brick. Furthermore, our master plans designed by noted architect Hafeez Contractor feature a mezzanine in our housing units so that we can create larger living spaces within a limited area.
What are some of the statutory charges that can bring down the cost of affordable housing?
As an impetus, the Reserve Bank of India (RBI) announced that bank loans for projects offering housing at less than `10 lakh per unit will qualify for priority sector lending thereby opening up PSL funds for the sector. Brick Eagle can access funds more cheaply through this route, thus bringing down the cost of capital. Another way to bring down the cost of developments is the exemption of service tax for affordable housing.
Some states have managed to make affordable housing a reality under the PPP model. What are the initiatives their state governments have taken?
Governmental initiatives such as Rajiv Rinn Yojana have expanded the pool of homeowners, allowing more people to own their own home. This scheme provides governmental subsidies for interest rates, reducing it by as much as five percent per month. Another influential public scheme was to raise the FSI of developments, increasing the height to which one can build on given land, allowing for more units and lower prices for each.
How can banks help in making affordable housing affordable for buyers?
More schemes such as the one offered by Axis Bank would dramatically widen the scope of affordable housing across India. Asha Home Loans allow first time home buyers with family incomes between `8,000-10,000 per month to leverage their family incomes, instead of only relying on their individual salary. This can turn into a loan for as little as `1 lakh to `25 lakh, depending on the market in the selected city. This encourages housing supply particularly in the peripheral areas of India’s largest metros such as Maharashtra’s Eastern Mumbai district encompassing Karjat, Khopoli, Shelu and Neral.