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The affordable segment of the real estate sector is experiencing growth. There is a renewed interest among private players regarding mass housing projects. The Shukhobrishti project initiated by the Bengal Shapoorji Housing Development Pvt. Ltd. is one of the largest mass housing projects in India and is nearing its completion. BE’s Saptarshi Deb spoke to Rana Gupta, Executive Vice President, Shapoorji Pallonji Pvt. Limited regarding the emergent trends in the affordable mass housing segment of the real estate sector.

Q. The participation of private players remains low in mass housing projects. What sort of policy changes can encourage private participation in mass housing projects?

A. Success for a mass housing is a favourable combination of various factors, which include the location, magnitude and the commercials of the planned development. Plan for a mass housing project in New Town was conceived by WBHIDCO. As a part of the initiative, a land area of 150 acres was awarded to Bengal Shapoorji Housing Development Pvt Ltd. for development of 20,000 dwelling units for Lower Income group (LIG), Middle Income Group (MIG) and Upper Middle Income Group (UMIG).

Since inception, on the way ahead, Shukhobrishti faced obstacles from various fields of procurement, construction and infrastructure development. Such challenges were addressed with the active support of the government and our success can be cited as a perfect example of a successful Public Private Partnership (PPP) model.

Positive sentiment and more private participation in mass housing projects are expected in near future on account of three major factors. In line with the union government’s “Housing for all by 2022”, it was announced, that the central government will create a dedicated fund in the National Housing Bank to promote the growth of affordable housing. According to the Union Minister, this fund will be used for developing infrastructure, like road, rail, and air connectivity in rural, semi-urban, and urban areas. The fund will be capitalised for significant expansions like highway construction, metro and inner-city rail networks and that would eventually beef up the market for affordable housing. The dedicated fund will definitely strengthen the affordable housing sector and drive the demand from end-users as well since real estate usually develops in and around well-connected areas that have solid infrastructural facilities.

The Goods and Services Tax (GST) council came up with a significant and favourable development for the home buyers especially in the affordable segment. As per the new guidelines, the buyers of affordable segment have to pay the GST at the rate of 8%, as compared to the existing 12%. This will be applicable for all new and under-construction homes that are purchased under the credit-linked subsidy scheme. First time home buyers with a household income of up to Rs.  18 lakh per annum, purchasing an apartment or a house of up to 150 square metres, will be eligible for the 4% cut in GST under the said scheme and this is expected to be a considerable demand booster.

The West Bengal government, in its last budget, has proposed a 1% reduction on stamp duty for all property deals valued up to Rs. 1 crore. On its implementation, property deals of up to Rs.  1 crore will attract a stamp duty of 6% in urban clusters, and 5% in rural areas instead of the prevailing rate 7% and 6% respectively. These could turn out to be the decisive factors governing the demand supply scenario in the lower, upper and upper middle class housing segments.

Q. How has been your experience with Shukhobrishti? What sort of demand are you experiencing for this project?

A. Being the largest mass housing project of India, the process of conceptualisation, planning, development and delivery of Shukhobrishti is enormous. Shukhobrishti is a planned development of 20,000 dwelling units consisting of 10,444 nos. 1 BHK units for the lower income group, 3840 nos. 2BHK units for the middle income group and 5716 nos. 2.5 BHK units for the upper middle income group. The support and infrastructure facilities include-sports and social club, community centres, amphitheatre, school, health centre, central water body, landscaped gardens, football and cricket grounds, commercial complex and corner shops.

Construction, allotment and handover of Shukhobrishti are carried out in phases. Phase 8 of the project was launched in April 2018 and the last phase of the project is expected to come early next year. Till now, about 15000 apartments have been allotted and about 10,000 of them has been handed over. Retail outlets of Arambagh Foodmart, Apollo Pharmacy, Mother Dairy, SFDC, Sufal Bangla are operational inside the project. Today Shukhobrishti is a home for about 8000 families.

The experience of its execution, maintenance and challenges faced is unprecedented. Shukhobrishti has experienced over-whelming response in all the phases that has been launched till now. Apartments have been allotted by draw of lots.

Q. How has been your experience with GST? Has it significantly impacted the affordable segment of the real estate sector?

A. Introduction of GST in India is one of the biggest fiscal and economic reforms in India. It has replaced multi-level taxes at both the central and the state level, thereby contributing to a more simplified tax regime. As a whole, GST has brought about more clarity in terms of compliance. GST has brought about significant changes in taxation structure of the real estate sector both with respect to tax rates as well in the case of availability of input credit for utilisation against output liability. A recent central government notification has provided for concessional rate of 12% GST in place of 18% on billing for flat and parking value. Additionally, the central government has provided for further concession in GST for the affordable housing sector by fixing GST rate at 8% in place of existing the 12%. Moreover, the central government has made it mandatory to pass on the benefit due to reduction in rate of tax or from input tax credit to the consumer by way of commensurate reduction in prices.

Q. How important is cost optimisation for the successful completion of mass housing projects?

A. When we talk about mass housing it means the mass production. It is beneficial if we procure the material directly from the manufacturer in order to enjoy the price benefit.  New technological inputs upgrade the quality of the material and bring the cost down. So it’s always recommended to adopt the new technology based materials if it improves the quality and reduces the cost. A focus on eco-friendly products is also needed. The best examples of such products are Mivan shuttering, AAC block and fly ash bricks.

Long term rate contract can be used as a tool for cost optimisation. We can reduce the cost by binding the manufacturer with the long term rate contract. There is greater scope for availing of input credit from the inputs consumed under GST. This also gives scope for cost optimisation. There should be close coordination between the construction progress and customer billing to ensure maximum usage of input credit to minimise cash outflow.

Q. What are your expectations from the HIRA regulatory framework of the West Bengal government?

A. We hope there would be great scope of work for the developers to deliver the best product in a fair and transparent manner. This is indeed a great step taken by the Government of West Bengal. It will work well for the end users and for the developers. Moreover the decision to include real estate agents under the framework and the accountability imposed therein will benefit the industry enormously. The whole framework of WBHIRA upholds the principle of natural justice and we sincerely hope the same will ensure growth of the whole real estate industry by ensuing confidence of the end-users and will be instrumental in facilitating healthy competition among developers.

Q. How is your project in Howrah shaping up? Are there any other projects in the pipeline?

A. Joyville Howrah, located strategically at the western side of Kolkata is one of the most sought after residential projects in Howrah, Kolkata. Located near the Salap railway junction, the project is strategically placed within the golden economic triangle of West Bengal – Kolkata, Durgapur and Kharagpur. It is well connected to vital roads like the Asian Highway 45 and National Highway 117 and provides easy access to the airport as well. The proposed three-lane elevated corridor over the Kona Expressway would provide instant connectivity to Vidyasagar Setu and National Highway 6.

Joyville offers 1, 2 and 3BHK luxury residences from 600-1300 sq.ft. The grandeur spreads across 30 acres of land, comprising 3400 units in 29 towers of G+19 to G+ 21 categories. With the state of the art facilities and amenities, Joyville brings much joy and content to its dwellers as it offers 80% open space, an amphitheatre, a well-equipped clubhouse and a retail centre. There are also options like aerobics, a tennis court, a swimming pool, a central playground and a senior citizen's park. The first phase of the project was launched in 2016 and is nearing completion. The handover process is expected to start by the end of 2019. We also have a few more projects that are in the advanced stage of planning.