Buying a builder apartment between Rs 10-25 lakh turning a reality in small cities

Believe it or not, prices in the residential space are heading upwards. If you have plans to buy a house, then it is time to kick-start due diligence of the property you are aiming to buy, rather than postponing the decision any further.

In an exclusive interview to Archana Khatri Das of Zee Digital, Mr Jogy P Thomas, CEO, ATS Infrastructure Ltd. spoke of why prices of residential properties, especially in big cities are not likely to fall any more, and how owning a house for many in smaller cities is no longer going to remain an unfulfilled dream.

How has the year 2014 and 2015 been in terms of sales and prices?

A: The general market trends was slow, and the sales were flat. The years 2014, and 2015 were slow, but some of the developers were able to demonstrate their ability to deliver, their graph was better, and ATS was one of them.

What were the high-points that were selling during the slowdown?

A: When the market shrinks, buyers become more selective in buying. Customers look at how the developer performed in the past. Whether the project was delivered on time; the prospective buyer even compares the pace of work going on at the site.

Those who demonstrated the development capability, captured the market share. I would say that developers should focus more on civil engineering, and not on financial engineering!

How would you differ between the end users and investors?

A: If the developers are focusing on end users, he will interact directly with buyers. 2014 or 2015 was not an investor's market. Investors generally move along with brokers, but the end users prefer to interact directly with the developer.

Do you see prices in the residential space coming down in the days to come?

I was told by my friends in the industry that there are signs that prices have started moving up. In Gurgaon, the builder Ireo, who is delivering a project, is observing an upward movement in prices in the resale of properties.

What is the quantum of price rise do you see?

A: It is too early to say, but if prices in the secondary market have started moving upwards, then it is a positive sign.

It means that the end users who are looking for ready-to-move-in property, they have started valuing it. This trend is always followed by positive price movement.

So would you advise in going for a 'quick buy'?

A: I would not suggest panic buying, real estate should not be speculative. The buyer should hold a long-term view.

But, given the fact that interest rates are moving down, the market has been slow for a long period. With not so much fresh supply hitting; even population has moved in over the last few years; so prices are not expected to fall.

It is wise to buy at this stage, there is no point in postponing the decision for long.

Do you see the price rise in residential properties in pockets across the country?

A: Each region will have its own trend in terms of prices. However, it is a fact that the construction cost has gone up in the last few years.

The land is bought at high equity cost, inflation has increased the cost of installing a project, and the developer's margins are shrinking.

This situation cannot go on for far too long. So in the medium term, I see this changing.

As Service Tax gets replaced by GST in 2016, which could be 17-18% unlike the current service tax rate of 14.50 percent, do you see the GST also impacting property prices?

A: If government brings down the borrowing cost, there will be a balancing act, even if the GST impacts prices. Let us look at the macro picture, the salary structure of government employees going up next year, their ability to pay will have a domino effect on the real estate market.

What are the attractive pockets for building projects in the coming days?

A) Builders should seriously look at affordable housing in smaller cities. This is the area where we are working very seriously. We have delivered our first project in Bulandshahar, which is a 400 dwelling- unit- development and the houses range between Rs 10-12 lakh.

These are 1-2 room sets with exclusive ownership to the roof. ‘Chat bhi aapki, zameen bhi aapki,’ so that as the family grows, the buyer has the ability to expand more floors.

What are the features offered in these affordable houses?

A: There is a desire for quality housing in every small city. We strictly follow the government norms, while focusing on Kuchha colonies--which are happening in all cities, without amenities, without permission, people are even buying property there. 

We are creating quality housing in such colonies. We maintain 45 percent of the land for roads, we have sewage treatment plant, water supply scheme, water treatment plant, solar panel lighting, rain- water harvesting.

The features are basic, the house is small, so the house can come within a certain price range. A business can have a motive for profit, but there should not be greed.

We have done such affordable houses in Bulandshashar, construction is going on in Moradabad, we have applied for license in Bareilly, we plan to go to Bijnor and many more areas.

Depending on the location, the smallest unit we have built is 45 sq meter in size and the largest one planned is 80 sq yard. Again, depending on the place, the price would be between Rs 10 to 25 lakh.

Who are the financiers supporting the buyers?

A: There are two categories: People who have the proof of income, for them there are banks like HDFC, LIC housing and others who are ready to finance.

Then there are the others, the housing finance companies who are willing to finance on the basis of the evaluation of the prospective buyer's trade.

The state government should support these housing finance companies who finance on trade. The growth of the sector depends on the second category, because in small cities, furnishing the proof of income is a huge challenge.