Mid-Segment Property Is New Investor's Dream: SARE Homes' Relia

While there is no lack of those looking for grand homes, majority of buyers in India are looking for homes in the mid-segment. This is also the segment which investors have been eying to increase their profit margins. With new laws in place, this housing segment is going to turn even more profitable, says Vineet Relia, managing director of  SARE Homes, which has its footprint in seven residential townships in India. In an interview with Sneha Sharon Mammen, Relia shares his views on the arrival of new laws and their impact on the sector. Edited excerpts.

Q: Tell us something about how you see the mid-segment housing flourishing in India, especially Chennai.

Relia: Today, mid-segment properties offer an international lifestyle for healthy and self-sufficient community living, at a combative price. In the current age, the mid-segment housing has become the buzzword in the residential real estate sector with the end-users seeking for an upgraded lifestyle. It has been noticed that this segment is capturing higher demand among consumers as they can buy premium amenities at a competitive price.

It is needless to add that pricing has been an important factor for the investor in the property market. These investors are likely targeting the middle-income group and the small-run businessmen to whom aspirational luxurious amenities could be provided at affordable rates.

With the increase in demand, the mid-segment property sector has witnessed a strong revival in Chennai. According to latest report on India's residential market, during the first half of the year, with more than 45 per cent share of the total sales among major cities, the southern market of Chennai led the housing sales in the country. This demand for homes was intensified more on the mid-end and affordable segment of the city.

Q: What took mid-segment housing to the centerstage?

Relia: Anticipating the demand of this segment, an estimated 27,000-28,000 mid-segment units have been launched every year from 2011 onwards. On an average, among the total units launched in each year, 50 per cent come under the mid-segment. The aggravated demand also exceeds the supply of such units. It is worth noticing that with the increasing demand, the mid-segment properties are having faster velocity.

Q: Has the government's focus been encouraging?

Relia: It is noticeable that the mid-segment residential housing has also been receiving special attention from the government. The union minister of housing has provided the guideline for the implementation of schemes for middle-income group segment under the Credit-Linked Subsidy Scheme (CLSS). The CLSS is implemented this year (2017) for a period of one year under which two different middle-income groups are divided as MIG-1 and MIG-II. The middle-class homebuyers are also provided interest subsidy on housing loans taken in 2017 under the scheme of the PMAY. The PMAY- linked loans can be availed of from any lending institution such as commercial banks, housing finance companies, regional rural banks, state cooperative banks, urban cooperative banks and non-banking financial companies (NBFCs). Easier access to bank loans along with the interest subsidy on housing loans has been catching the investor's interest towards mid-segment properties.

Q: What is your opinion of the newly introduced Goods and Services Tax (GST) and real estate law? What impact do you think they will have on the sector?

Relia: With the arrival of the GST, the residential segment would have multi-edged positive impacts as it is making the system more streamlined and systematically abolishing multiple taxations. By the way of a common indirect tax structure, the real estate sector will be beneficiating with the integrated national market.

The Real Estate Regulatory Act on the other hand would drive the investors more towards the lower end of the market. In Chennai, for instance, the overall cost of real estate projects are expected to go up, which may result in an increase of the price of real estate projects, too.

Fortunately, the government's collaboration towards mid–segment properties with the interest subsidy on housing loans and rising price of the projects have provided a fillip to investors. By creating a conductive environment, the government has given an opportunity to developers to enter this sector. These players had earlier stayed away due to low margins. With such increasing demand for mid-segment property for potential end-users, in the coming time the segment would likely be the new investor's dream.