Is the housing situation in Mumbai going to get any easier for the middle class person who aspired to own a home? To find out, we invited the realty men over to discuss the situation. The panel had Sitaram Kunte, principal secretary (housing) for the Maharashtra government; Parag Munot, director with Kalpataru Constructions; Gautam Chatterjee, CEO of Maharashtra Housing and Area Development Authority (Mhada); Vikas Oberoi, MD of Oberoi Constructions; Aditi Vijayakar, executive director (residential) at Cushman & Wakefield; Boman Irani, MD of the Rustomjee Group; Nabil Patel, director at DB Realty; Santosh Naik, CEO & MD of Disha Direct Pravin Doshi, chairman of Acme Housing and Brotin Banerjee, CEO of Tata Housing. While rates are still high, our experts feel that prospective buyers should take advantage of the economic recession to buy now when rates are a bit lower than they were even last year. As far as affordable housing in general is concerned, it seems that a public-private partnership is the best available option.

What is going to happen to affordable housing?
Sitaram Kunte: As secretary of the housing department, the focus is as mentioned in the national housing policy to see how much affordable housing stock arrives in the market.

We first need to see what is meant by affordable housing. The Central government has done this exercise by setting up a committee under HDFC chairman Deepak Parekh. The committee has defined affordable housing in two parameters: The minimum area each category of income should be living in and how much should he be paying for that area.

Say for example, a 300 sq ft flat is a decent livable area for a driver working in a government or private firm. Then, he should get it at 5 times his annual income which is defined as Rs 60,000 a year. So he should get a 300 sq ft flat worth Rs 3 lakh somewhere near his area of work. If he cannot get houses at that rate, then we have a problem that the market is not producing products that people could pay.

The other day at the seminar of Maharashtra golden jubilee celebrations, there was this talk to whether post-6th pay commission, the chief secretary who earns Rs 1 lakh a month could afford a house in Mumbai.

At this rate, he will probably get it at Dahisar. There is something wrong in the real estate market when such a large section of people cannot buy a flat. We need to look at the reasons. There may be problems of land supply, processes don’t work… there may be competition. Several factors are there.

We feel at the policy level at the government and even the private sector side, we are not able to crack this code on how to get affordable housing in sizeable numbers. This Diwali, if at all one can look for something, it would be affordable housing from the private sector.
Take the recent case when Mhada sold 4,000 affordable housing units and even in the thick of recession, they received 4.5 lakh applications. Mhada received almost Rs 1,400 crore with those 4.5 lakh applications. After the lottery, we returned that money and even after that, Mhada earned Rs 35-40 crore. So, there is money in the affordable sector. How that can be done is something both the private and government sector needs to contribute to.

Parag Munot: From the definition of affordable housing, it seems most people employed cannot afford a home. So, what can be changed? First is the raw material. Second is the FSI regulation, which allows only a certain amount of area to be consumed. We need to relook at Mumbai like another urban development. In places like Shanghai, Singapore the FSI ranges from 3.5 to 18, and not 1, as in this city. If the government does not take the initiative to increase FSI, affordability will always remain a myth for Mumbai.

Aditi Vijayakar: Actually, a large part of the city is underutilised. Which is why the pressure lands on suburban location in terms of infrastructure and access. You cannot have your drivers or bais come from back of beyond to service locations in South Mumbai. It is a huge challenge.

Brotin Banerjee: I think we need to grow tall. A city as congested as Mumbai has to grow taller and expand further. Infrastructure facilities have to be created. An FSI of 1 in the heart of city does not make sense. Shanghai, as a norm, has buildings of 70-80 floors.

Here, anyone making 70-80 floors is written about as if it is a big achievement. I am not saying this to deride anyone. But as a city, we need to go higher and thus, open up spaces.

Vikas Oberoi: When you are talking of providing a 300 sq ft flat at Rs 3 lakh, then you are looking at the development cost of Rs 1,000 a sq ft. But, there is no land component or infrastructure or process cost involved. Probably, our expectation is incorrect to expect a house at Rs 3 lakh. You need a reality check. Maybe you are paying little to the driver.

No one is talking about remuneration. We are trying to fit housing in the salary he is getting. Affordable housing, I guess, would probably start at Rs 2,000 to Rs 2,200 a sq ft and here, we have not considered land cost. There are two things to this. If you are looking at distant suburbs to create affordable housing, then build in infrastructure and amenities which they can afford, and ensure proper commutes from where they live and work. That can help to build affordable housing in distant locations.

One is clearly looking at the value. Or the government can probably subsidise another Rs 3 lakh. A fund can be created by the same luxury homes that one is trying to detest, to create this infrastructure. One can increase the FSI and generate revenue to build infrastructure that one requires to create homes in distant suburbs.

Having said that, the idea of growing vertical does not only increase ground space, but it will also environment friendly. How? People will commute less. If you increase the density in the city, then more people are living within the city.

There was talk about supply of affordable housing once the mill lands opened… what happened?
Nabil Patel: The sale of National Textile Corporation land was expected to generate a lot of supply. A lot of supply has come in, but unfortunately it has happened in the commercial segment…

Pravin Doshi: The government has recently come out with an innovative scheme wherein Mhada colonies will get an FSI upto 2.5. But, Mhada is now selling that FSI at Rs 2,000 a sq ft in Andheri. A developer buying this FSI after including the construction cost and his profits, would not be able to sell less at than Rs 4,000 per sq ft. So, affordable housing will have different definitions at Napean Sea Road, Andheri and Dahisar.

Gautam Chatterjee: By affordable housing, we are essentially talking of that sector of population which is today homeless. As per the 11th Five-Year Plan estimate, there is demand for about 24.7 billion housing units, about 99% from the low income group (LIG) and economically weaker sections (EWS).

When we talk of creating housing stock, we are talking of those who are not in the purview of private builders and who are supposed to be housed by bodies like Mhada, who have failed. The idea is not just to provide him with a roof over his head, but also to provide adequate infrastructure, light and ventilation and also, a home located at a reasonable distance from where he earns his livelihood.

The idea is not to push him 40 km away from the central business district and term it as affordable. Thirdly, affordability as defined by the Parekh Committee means 4-5 years gross annual income or an EMI which is 30-40% of his monthly income.

We felt that the way ahead is through partnerships, with the government joining hands with the private sector and Mhada to create such housing stocks, keeping in mind that it has to be a symbiotic relationship between service providers and service takers. The Central government has come out with a scheme where it will be subsidy such an SPV by giving Rs 60,000 to Rs 1 lakh per unit constructed for EWS/ LIG.

Santosh Naik: I agree. Our research shows that there is a demand for 2.65 crore units as of today in India of which, 80% is below is for units Rs 10 lakh and below. As regards the GoI subsidy, what percentage of housing can be given to LIG/EWS?

Kunte: One example where bidding process has been completed in a similar project — DB Realty has won in that bid. In Pimpri-Chinchwad, a new township is coming up where 52 hectares of land was made available for development through PPP. DB promised to give the authority 14 lakh sq ft in the form of affordable housing of roughly 250 sq ft. The authority will then make it available to the EWS sector at affordable rates.

Boman Irani: When Mhada operates like a free market developer, it will be a slight issue for us. The point in question is the additional FSI which Mhada is charging — Rs 2,500 a sq ft cannot be affordable at Andheri, were earlier rates were Rs 400 to Rs 700 a sq ft.

Chatterjee: You say Mhada is charging an exorbitant rate of Rs 2,000 for that extra FSI,
but then would you sell that house at a certain rate? You want cheap rate for FSI, but you do not want any control over what you sell. That cannot be done.

Irani: Look at the bigger picture. If you flood Mhada colonies with more FSI at cheaper cost, more developers will get into this business and prices will go down. There is no one scheme that can change the city.

Earlier, Bandra seemed unaffordable and now, even Virar seems so. Affordable housing is not just governed by distance, but by the lifestyle you offer. If you give good education, health care, construct industrial areas, more people will be moving in. Earlier, Andheri was a working hub and now, it’s Malad. You have to keep on expanding the city horizontally and vertically. To do horizontal development, the government has to improve infrastructure. I will only say that a lot of things need to be done. We are only so few. The government should set a long-term goal of creating more housing stock. So what if someone makes an extra buck?

What is happening in Diwali? Let’s look at the middle class. What do you say would be a reasonable price in Andheri West during the festival?
Chatterjee: Even if we consider the chief secretary’s salary of Rs 1 lakh a month and calculate five-year income which comes to Rs 60 lakh, he would only get the Mhada house at Versova.

Vijayakar: One cannot fix a price. Each of these locations are evolving. There is no one answer for Andheri itself. Till five years ago, who would have seen so much development on the mill lands?

Patel: You live in a 4BHK flat, but want to shift to a 5BHK. There is a buyer. Everyone wants to go to the next level. It has aspirational value.

Irani: The solution then is to increase FSI, create that fund and use it to create infrastructure or subsidise construction for this sector. Take the government’s scheme to increase the FSI to 4, use FSI of 1 for the kind of houses they want.

Chatterjee: We raised the issue for EWS/ LIG. But, with MIG, the segment we belong to is left in the lurch. Where does that sector go? They cannot go to Mhada or to the private developer.

Oberoi: Why not bring in size and price restrictions? If you build 30% of houses and sell at a certain number, then you get this XYZ benefit…

Chatterjee: You were earlier up in arms against government control. Now, you want control.

Naik: If we give the right product at right prices, we find customers. We are a marketing company. Let me ask the developers here — what percentage of profit should a developer earn?

Irani: Depends… if it is guaranteed at 20% of profits, that would do.

Naik: If we are talking about 20% as reasonable profit, then two years ago, we were selling a flat at Rs 4,000 a sq ft at Andheri and now, it is Rs 15,000. Land cost was same. Add construction cost of 1,500 a sq ft. At 20%, then the cost should be Rs 6,000-7,000.
Oberoi: I am ready to do that if you replenish my land at the same rate I bought it.

Naik: Take another example — Virar, where flats, including those of Boman, are still selling at Rs 10-15 lakh. Two years down the line, the land cost would have been the same.

Irani: No. My holding cost and replenishment cost would have changed.

Naik: Let me give you two examples. In Thane, a developer started selling at Rs 3,000 per sq ft and increased it to Rs 7,000 a sq ft. In October, the market crashed... He started a new project in the next compound at Rs 3,200 a sq ft. He’s still making money at that rate. If he can make money at Rs 3,200, and why go up to 7,000? I do not agree that affordable housing should start at Rs 2,2,00 a sq ft. Tata Housing is the biggest example, which started its project at Boisar at Rs 1,385 a sq ft and sold 1,200 homes in one month. If they could construct with land and infrastructure, sell at this low rate and make profits, anyone can do it. We launched a project in Nagpur at Rs 1,200 a sq ft with a reasonable profit. We sold it all in a week’s time.

Banerjee: Lots of affordable housing has come in the market. One benefit of economic recession is that many good projects have come in. The problem would be for developers who have bought land at high prices. Even land owners have become saner in their price demands. If this drought continues and the economic doesn’t improve, then next Diwali you may be able to buy a house at an affordable rate.

Irani: Prices have rationalised about 20-30% lower. Developers have become wiser and are not in a hurry to increase prices. The housing stock has improved. Four to five developers have launched housing projects which are affordable rates above Rs 1,500 a sq ft. I would think this is the right time to buy.