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Cost of land biggest challenge for affordable housing: Pradeep Aggarwal, Signature Global

If DDA decides to auction its land parcels to private developers, it would be increasing the cost. Instead, they should fix the land price, says Pradeep Aggarwal of Signature Global

Vandana Ramnani @vandanaramnani1

In a wide-ranging interview, Pradeep Aggarwal, Chairman, Signature Global, tells Moneycontrol about his company's plans and discusses the challenges being faced by players in the affordable housing segment.

His company is currently constructing 10 affordable housing projects, comprising around 9,500 units, under Haryana government's affordable housing policy. Signature Global has raised Rs 200 crore fund from private equity player KKR and Rs 150 crore from ICICI Prudential to fund its projects.

Edited excerpts:

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Q. What is the role of private developers in Housing for All by 2022?

A. If we speak about the Housing for All 2022 Mission, the role of private developers is going to be the biggest. The reason being that most developers are struggling with premium housing. And today 95 percent of the population today wants low cost housing or the economic weaker section requires EWS flats. Earlier, most developers were concentrating on premium housing because that was the segment that was doing well. Those people are now thinking of entering the affordable housing segment, it is a business and ultimately businessmen would have to enter this segment. Even in other industries such as aviation, at one point in time high cost airlines were the most sought after, right now it is the low cost airlines that are the most popular.

Even in the manufacturing segment, it is the small car segment that is still selling. If we talk of urbanized areas, the average household income is between Rs 6 lakh to Rs 12 lakh and if the total cost of the house is Rs 25 lakh, the EMI will be around Rs 14,000 to Rs 15,000 per month. Similarly, if we talk of houses, the EMI per month should match the rent of the house. The point I am trying to make here is that if a person is residing in a rented accommodation, an apartment worth Rs 25 lakh will suit him the most. Haryana’s affordable housing policy has fulfilled this gap.

Q. Tell us about your company's plans for this year?

A. Our company has delivered 13,000 units to buyers. This year we would be launching over 7,000 units this year. Demand for housing is massive, so much so that if we are launching 100 flats, buyers are four to five times mores. Housing for All by 2022 for both buyers and developers is a great opportunity.

Q. What are the challenges that the affordable housing sector is facing today?

A. In affordable housing, the biggest challenge is price of the land. Land prices are too high. The government has tried its best but majority of land is still in the possession of farmers or corporates. The government should look at unused land parcels, especially those with PSUs. They have several chunks of land which they can provide land for affordable housing. If this happens, prices will stop at a point.

The second challenge is GST. The GST Council recently took a decision that affordable housing be taxed at the rate of 1 percent. No doubt this is a great decision as buying a house now would be much more easier but the GST input credit that one would get earlier has now been thrust on the developer. The impact of this decision is that the GST rate is either unviable for builders or he would try and pass it on to the homebuyer. In all the items being used for construction today – steel, cement, contractors – GST is being paid at the rate of 12 percent to 28 percent. If the government decides to impose a GST of 1 percent on affordable housing or in single digits, it will be a big relief for all of us.

Q. DDA has recently decided to open up its land parcels for private developers. Do you think it is a good move and would your company be interested in participating in this opportunity?

A. DDA is planning to auction land. When you auction land, you are increasing prices. And the biggest challenge faced by affordable housing is land price. If they can fix the land price, all developers who meet the eligibility criteria or developers whose delivery record is good, would be interested. If this is taken care of, I feel it would be possible to do affordable housing there. Rest depends on land parcel and the fine print of the policy.

vandana.ramnani@nw18.com

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First Published on Sep 18, 2019 01:52 pm
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