Low Cost Housing: The next step to beat housing crisis woes

In an earlier blog on September 4th 2008, i had made a few comments on the fact that many of the realty industry giants: DLF, Unitech, Hiranandani and many others have notable projects which are mostly HIG or MIG+ ones. These companies had not invested much in the economy housing projects or projects which would be less than 10 lakhs/ 450 - 800 square foot size. Read point no 6.7.8 in the blog: http://newspaper-posts.blogspot.com/2008_09_01_archive.html.

Three months later, now that the crushing reality of financial crisis and recession is rumbling the world economy, the first steps have now been taken by large realtors towards these economy housing schemes. http://news.in.msn.com/business/article.aspx?cp-documentid=1715713. Interestingly the reasons sighted for shifting focus from HIG and MIG+ housing is

1. Higher diversity in projects leading to better cash flows
2. Be a part of the Priority sector leding to allow banks refinance at concessional rates and fulfill norms of directing lending
3. The Government believes that low cost housing finance may a part of the solutions package to give the much needed fillip to the housing sector in India.

Realty Sector, Investments and a possible growth story

(This post deals with a view about realty sector players in the Indian Market,especially DLF. Read full details at ... http://www.livemint.com/2008/09/05003413/DLF-yet-to-start-work-on-Mumba.html)

Hi Madhurima

No one contests the financial might and lobbying abilities of the collossus, DLF.However in the regime of increasing interest rates and plataeuing consumer demand, (read recessionary symptoms/ slowdown), i am not surprised that DLF is going slow.

1. As of now, it seems that DLF has invested more than it is comfortable with in a horizon which is uncertain. Consumer demand is not exactly the shade of pink it used to be.

2. While partnerships with other real estate cos, would help DLF tide over the credit/cash crunch, yet the cash flows from exiting projects would not be as promising.

3. There would be some inventory (ready to move in, unsold properties) which DLF would be stuck with.

4. Hence the delays and slow execution...

5. Compare it with players such as Indiabulls etc, who donot have significant inventory at hand. Hence they can continue to invest, from their P&L standpoint.

6.One thing that really beats me is most of the projects that are being advertised, are targetted to the Medium High level consumer. We havent heard of mass housing schemes. Thats where most of the real estate companies are missing the trick.

7. Mass housing solutions (i remember Brazil having done one of these projects successfully) would be key to spurring growth in this sector in the years to come.

8. Besides, the development at the tech parks and SEZs that has happened has been much unplanned and infrastructurally bottled up. One just needs to see the Cybergreens/Gurgaon and Hyderabad at peak hours to understand how badly the projects were concieved.

9. Bottomline... Cos like DLF will have giant successes and those irritating nags that will be a cash drain. DLF probably needs to look at more economical solutions catering to wider audience solutions in "building India".

Thanks