Home seekers have been thronging affordable housing options at exhibitions

The phenomenal response to the recent MHADA scheme was a clear indication of the strong demand for budget homes from Mumbaikars. This trend was further witnessed last weekend at two property exhibitions, one held in the western suburbs and the other, in the central suburbs.

At both places, the stalls offering budget homes witnessed heavy crowds, with visitors making detailed inquiries about the overall cost break-up and finance options available. Site visits were offered by most builders and in some cases accepted on the spot, as the extended three-day weekend provided scope for that as well.

What also emerged from these events was that projects offering a combination of price and trust are more preferred. The overwhelming response to the MHADA scheme and the readiness of home seekers to stand patiently in queue for their turn at certain stalls, while other stalls in the vicinity witnessed hardly any visitors, certainly points in that direction.

Pawan Swamy, managing director (West India), Jones Lang LaSalle Meghraj, points out that the middle class is as ready as ever to buy homes, but affordability is the primary criterion. Prices have still not fallen to rational levels in many pockets, and there are widespread hopes for further corrections. Meanwhile, entities such as MHADA are the only institutions that have been able to secure land at rational costs in the past, and their model of no-frills mass housing allows them to cut costs even further.

"The demand for their offerings is huge, and there is an important lesson to be learned here - genuine end-user demand is as high as ever before, but aspirations and expectations have dropped. While the more affluent classes may still buy prime properties - albeit also only at reduced rates - the overweening market mantra of the moment is financial feasibility. Those who genuinely need homes are willing to forego the clubhouse, swimming pool and high-level security measures in favour of homes that allow them to house themselves and their families in reasonable comfort. Such buyers may consider selling their budget homes and buying better-appointed ones at a stage when the economy revives, jobs are more secure and sufficient savings are possible," he explains.

According to Pawan Swamy, in cities like Mumbai and Pune, affordable homes must necessarily be seen in context with affordable land. Since land rates can never fall sufficiently in the more preferred locations, budget home projects will always happen in the far suburbs and outskirts. Buyers are aware of this fact and are willing to factor in increased commuting-related inconveniences. What they are not willing to do is spend money that they do not have or over-burden themselves with unsustainable borrowing costs in a time when their very jobs cannot be taken as a given.

"As a rule of thumb, the price of an affordable home equals five years' cumulative salary of the buyer. In other words, a family earning Rs. 12 lakh a year can afford to buy a house worth 60 lakh, factoring in generalized expenditure and saving patterns. Banks also see this as a safe lending norm. The minute the price crosses this benchmark, affordability is compromised and demand reduces. Again, affordability as a concept changes from city to city in accordance with prevailing salary scales for that city," he feels.

The bottom line is that home seekers have begun to do their home work in earnest and no longer hesitate to demand certain information in black and white. With the aura of a sellers market dispelled, there is a greater sense of confidence involved in the home search process. With new project launches being announced on a regular basis, the days of taking hasty decisions due to the fear of losing out on a great location are also over.

Now, their attention is focused primarily on those projects, which can inspire trust and offer affordable prices. Any builder who can fulfil these criteria has a win-win proposition that will draw crowds of home seekers.

Vijay Pandya/ DNA-Daily News & Analysis Source: 3D Syndication