The affordable segment is generating a lot of demand in the real estate sector. Eden Realty is one of the key players in this segment in eastern India. Sachchidanand Rai, Chairman, Eden Realty, spoke to BE’s Saptarshi Deb.
Q. How do you view the affordable segment of the real estate sector in eastern India? Is it experiencing a significant growth?
A. The affordable segment has been traditionally overlooked by developers. When we were young, real estate builders were essentially building for the affluent sections. The target group were those customers who already had some kind of accommodation and in doing so, the real estate sector was traditionally catering to a very small section of the population. Interestingly, the bulk of the demand was being generated from the sections who could not afford what was being offered.
But things have changed of late. I would say every adversity brings some benefits. The meltdown in the real estate sector essentially entailed the meltdown of this concept of building only for the affluent. Those who could not afford it earlier have now come into focus. It is a relatively unexploited segment and the sheer size of this market makes it viable for developers willing to take the plunge. I may take the liberty to say that this market size is around twenty times the size of the market that we have lost due to the meltdown in the real estate sector. As far as eastern India is concerned, the market is huge and is largely untapped. That makes this region viable for developers who want to explore the affordable segment. Eastern India has lower incomes as the salaries are generally less here. Business activities are also relatively limited. At the same time, there is huge demand in the affordable segment. That makes this region a huge, untapped market for the affordable segment.
Q. Your company has been using renewable energy in the affordable segment. How has been your experience?
A. Renewable energy is a necessity from the environmental point of view. But apart from that, it can be used very well in the affordable segment. Developers can alter various inputs to make these homes affordable to buy. But when people buy affordable houses, they don’t shed aspirations. They look for various facilities. For this segment, this is a once-in-a-lifetime investment.
The developer must understand that the project should not only be affordable to buy but also be affordable to live. Renewable energy comes into play in this aspect. Around 60%-70% of the common area maintenance cost goes for electricity consumption of lifts, pumps, and street lights. If we can subsidise that by solar energy, then the recurring maintenance cost can be pulled down substantially. That was the idea which forced us to explore renewable energy. It is essential for players in the affordable segment to take care of a lot of recurring costs. Solaris Bonhoogly is the prototype project for us and we have been largely successful. We would look to replicate this model in our upcoming projects.
Q. The affordable segment has become highly competitive. What facilities are being offered by the developers in this segment?
A. The affordable segment cannot be equated with the Lower Income Group (LIG) segment of yesteryear. The LIG dwellings did not fulfil aspirations. They were more of a kind of forced living. This affordable housing segment is targeted towards first time buyers. According to government regulations, no more than one apartment can be sold to a single family. Therefore, this is not an investment option. This segment is fundamentally focused towards the ultimate users. Therefore, developers need to factor in the aspirations of this section and provide facilities accordingly. Clubs, community spaces, swimming pools, and children's play areas are all being provided in affordable projects.
Q. How do you perceive the impact of the GST on the sector? What are your expectations from RERA and HIRA in West Bengal?
A. I feel that the Goods and Service Tax (GST) has had no significant impact on the real estate sector. Yes, developers need to plan and calculate carefully, but if that is done diligently, then developers in the affordable segment have nothing to fear. However, the same may not be said for the luxury segment. As far as the The Real Estate (Regulation and Development) Act (RERA) is concerned, I believe that it is bringing sanity to the market. RERA is forcing the builders to complete everything before collecting money from the market. They have to do everything before launching the project which might be a bit taxing initially but I am sure that the market will adjust. We did not face any problem. Rather, it is helping us to consolidate our position. As far as the Housing Industry Regulation Act (HIRA) is concerned, every law has to have a local flavour to it. I feel that the HIRA is well suited for West Bengal’s market. I must add that the HIRA has not diluted the key essence of RERA.
Q. What lifestyle inputs can be expected in the affordable segment projects?
A. The customers can expect better facilities in these projects which would be similar to upper Middle Income Group (MIG) projects. The reason is that most of these affordable projects are very large. We are providing playgrounds, clubs, swimming pools, gyms, community facilities, and places for children, women and the elderly to socialise.
Q. What are your plans for the future? Do you plan to foray into any other segment of the real estate like the hospitality segment?
A. No, we do not want to enter the hospitality segment at this point. But it is not that we are only interested in building for the affordable segment. We build for a varied customer base. This depends on the kind of land that we are able to get. We have a couple of projects for the MIG and the upper MIG groups. But for now, our focus is on the affordable segment. We are targeting to build no less than 20000 homes by 2019. We are launching around 5000 homes this year. Solaris Serampore and Solaris Joka are two projects that are in the pipeline.