More than 80 per cent of India borrows home loans that are below Rs 20 lakh and it is this segment in the Tier II and Tier III cities that stands to gain after today’s interest rate cut by state-owned banks. Prospective buyers in metros will have to wait for banks to cut rates across the board or for property prices to plunge.Public sector real estate company National Buildings Construction Corporation Limited (NBCC) CMD Arup Roy Choudhury said, “The question to be asked now is whether the builder is ready to provide housing in this category.” He rules out the possibility of being able to provide affordable housing beginning at Rs 5 lakh stating sky rocketing land prices in metros and their suburbs.
“Rs 5 lakh is nothing. Even in Tier II cities, land prices have shot up in the last two years,” Chowdhury said. NBCC is trying to build affordable housing in the range of Rs 20 lakh to Rs 40 lakh in Delhi NCR region, Kolkata, Vizag and Kochi, he said.Real estate experts say homes in the price range of Rs 5 lakh to Rs 20 lakh are few in metros. The demand-supply mismatch in the affordable housing category — defined as homes costing not more than Rs 25 lakh — leaves little to celebrate for people living in India’s key metros. According to the Planning Commission, there is a shortage of 24.71 million homes in urban India, 99 per cent of which falls under the Economically Weaker Section and Low Income Group housing segment.
The move might, however, find takers in the Tier II and Tier III cities with affordable housing within reach now, said Naredco (National Real Estate Development Council) director-general R.R. Singh. However, the paying capacity in these cities remains low. Hence, it is unlikely to generate enough demand for real estate companies to launch a large number of projects specifically for this segment.
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