Ahmedabad has an interesting city dynamic – rural in the outskirts and quite urban in the heart of the city. A lot of land available at affordable prices in the outskirts, coupled with higher FSI translates into decent margins for builders even in the low-cost to affordable housing segments. In spite of that, there are hardly any projects coming up in this segment. Like Mumbai, Ahmedabad also faces problems due to excessive migration to urban areas, so demand is not the issue. But demand for housing is more of an aspiration without purchasing power – an empirical proof to our belief at MHFC – Lack of financing is the major cause for the lack of low-cost housing in cities today.
Ahmedabad was one of the first cities Monitor had started experimenting with its social change initiative. It was quite evident that they had made a lot of progress in terms of relationships with builders as well as building a database of prospective customers.
After we landed in the morning, we saw three plots that were shortlisted by developers for starting their projects – each of roughly 2000 flats in the affordable segment (sub 5lakh category). On one of the plots, the builder was in final stages of getting approvals and had a mock apartment built already. We met a couple of prospective customers on site along with DSAs appointed by Monitor, to get a feel of the consumer psyche. Their aspirations were quite different from their counterparts in Mumbai. They wanted the 1BHK flat though it was slightly above their affordability. Their argument – this flat would be a once-in-a-lifetime investment, so they wanted something big enough for their family. When we asked why they would not go for the smaller 1RK today and wait for a couple of years till their salaries increased, they felt, 1BHK would always be a little outside their reach even then, with rising property prices. So it made sense to invest in that today, and live within means to service the higher EMIs – not something we could deny; though I feel they looked at this project as a one-off, not realizing that if this pilot did work, competition would eventually keep a check on both property prices and loan interest rates.
Overall, it was a morally satisfying trip, and I left the city feeling reinforced as far as our belief was concerned – the lack of housing in cities should have a market driven commercially sustainable solution.