Realtors eye huge profits from modest houses

Affordable housing, the most neglected segment of the real estate sector, is now attracting large-scale investments from developers as well as private equity funds.

While real estate majors like Ansals and Omaxe are planning low-budget housing projects in smaller towns and cities across the country, private equity players are firming up huge investments for this segment.

Recognising the potential growth in affordable housing segment, Delhi-based Omaxe Ltd has formed a company, National Affordable Housing Infrastructure Ltd, which will invest Rs 80,000 crore (Rs 800 billion) to develop 100,000 affordable homes across the country.

"Smaller towns and cities will be the primary target of this venture. The first project is expected to come up in Rajasthan or Uttar Pradesh by the end of this year," said Rohtas Goel, chairman and managing director, Omaxe Ltd.

Omaxe is planning to offer these houses, to be developed in the next five years, for Rs 250,000-Rs 20 lakh per flat, Goel says.

Ansal API President (marketing) Kunal Banerji said, "The market for luxury homes is limited while there is a big market for low- and mid-segment houses." Keeping the enormous growth potential in this segment, Ansal API is building affordable houses in Agra, Ajmer, Meerut, Panipat, Sonepat and Kurukshetra, Banerji added.

Private equity firm Red Fort Capital plans to invest Rs 430 crore (Rs 4.3 billion) over the next two years in affordable housing on the outskirts of Bangalore and Hyderabad.

"This (affordable housing) is the largest segment in the market and we, through our technology that reduces cost of construction by 15 per cent, will provide homes in the range of Rs 800,000-Rs 20 lakh," said Kuldeep Chawala, director, RFC.

Global private equity fund Warburg Pincus recently announced an investment of Rs 300 crore (Rs 3 billion) in Jaipur-based Mannat Group company, Unique Affordable Homes, for projects in North and West India.

Fire Capital Fund is investing over Rs 600 crore in seven of its affordable housing projects in Indore, Bangalore, Chennai, Nagpur, Dehradun, Ahmedabad and Jaipur.

"From affordable housing projects, we expect a return of 20-25 per cent, which is the same as in upper-end investments," said Om Chaudhry, CEO, FCF.