Provident Housing Limited (PHL), the Bengaluru-based affordable housing wing of Puravankara, plans to develop 10.7 million square feet (msf) across Bengaluru, Chennai, and Kochi with a cumulative investment of Rs 4,800 crore, within the next one year.
About 8,000 units are under construction and the company plans to add 27,775 units over the next year-and-a-half, with a revenue potential of Rs 5,000 crore.
"With renewed energy after Covid, several businesses are taking a larger risk. Compared to the global market, inflation in India is in a better position due to conservative spending by the government during the pandemic. However, we must be careful not to raise prices to a point beyond the reach of homebuyers," Chief Operating Officer Mallanna Sasalu told Moneycontrol.
Within the next one year, the company plans to develop 8.3 msf in Bengaluru, 1.6 msf in Kochi, and about 8 lakh sq ft in Chennai.
Of the total investment of Rs 4,800 crore, the company plans to invest Rs 3,500 crore in Bengaluru's residential sector. "Some land parcels, like in Chennai and Kochi, are owned by us. We will develop those ourselves. While others — like two upcoming projects in Bengaluru — will be developed jointly with landowners. From April 2023, every month there will be at least one launch," Sasalu said.
In Bengaluru, the company is launching one project near Whitefield, and another will be launched off-Sarjapur Road by the end of the year. It has two ongoing projects in the southern part of the city, as well as other projects located off-Kanakapura Road.
Additionally, the company plans to launch 6 lakh sq ft in the premium segment, priced upwards of Rs 1.3 crore. Work on this is scheduled to commence post-April 2023.
"Among the townships in the pipeline, the 8 lakh sq ft township in Chennai has gone for approval and is to be launched in May. In Bengaluru, the second phase of the 1.5 msf Provident Sunworth City township will be launched shortly. Additionally, we have a 1.6 msf township in the launch pipeline for Kochi," Sasalu said.
He added that every project of 1 msf or more will have 6-7 percent of retail space, negotiations for which are ongoing. The company will complete the construction of the projects, within four years.
A median shift
Post-pandemic, as homebuyers' savings and salaries have gone up, so have home loan and repo rates.
"The meaning of affordable housing has changed. The government has stopped subsidies, other than for the economically weaker segment, and land costs have been soaring," he added.
According to Sasalu, affordability differs city-wise and is highly dependent on the median income. "For example, in Kochi, land is cheaper but the construction cost is 1.3 times that of Bengaluru due to zoning rules, " he added.
Thus, with higher land prices, construction costs, and GST, median prices have moved up by 10 percent, Sasalu explained.
"We no longer say we’re in the affordable housing segment. We operate in the Rs 40-90 lakh range and our customers earn an average monthly income of Rs 1.2 lakh," said Sasalu.
With growing inflation, PHL has increased apartment prices across the board by Rs 10 lakh. "Every year, we see prices go up by 5-6 percent. However, if my input costs come down tomorrow, we will reduce the prices. It may also mean that demand is coming down elsewhere," he added.
In October 2022, Provident Housing raised Rs 93 crore from an alternative investment fund (AIF) for a plotted development in Chennai, with a development potential of 1.3 msf.
In December 2022, the International Finance Corporation (IFC), an affiliate of the World Bank, partially exited its investment in a PHL project in Bengaluru.
"The IFC is in talks to deploy an additional Rs 238 crore in two projects in Bengaluru. We are hoping to close the deal within two-three months," Sasalu said.