Tata's at it again, this time with ultra low cost housing targeted at people in lower income pool. Tata Housing announced the low cost township to be built at Boisar, 100 KM from Mumbai in next 24 months. The price range for houses is INR 400,000 to INR 670,000.
What this move from Tata does is change the entire landscape of Indian Real Estate Market. Until now, no one targeted the lower income population. According to a World Bank report published in 2005, 456 million Indians (42% of the total Indian population) were living under the global poverty line, implying that a third of the global poor resided in India. Along with this, the increasing urbanization of India, with projections of 600 million urban residents by 2030, presents a lucrative market for low cost housing.
The housing shortage in India is around 20 million, of which 50% is urban; of this, 70% - 80% is in the low-income segment. As per the conclusions of the Working Committee of the 11th Plan (2007-12), the total shortage of dwelling units at the beginning of the Eleventh Plan period in 2007 was 24.7 million. "It is estimated that more than 70 per cent of the shortage of dwelling units are for middle and low income brackets," says the report.
Low cost housing segment offers profit margins between10% - 15% and it’s a high volume game. With the booming housing finance market, which has gone from a INR 100 Billion industry barely five years ago to one that is touching INR 1 Trillion, Tata may very well change the picture of housing markets in India and give many established players a run for their money.