Shriram Group Entering Lowbudget Homes In Coimbatore

The real estate arm of the Chennaibased Shriram Group has finalised plans to enter the market for lowbudget homes aimed at middle-income groups, the latest property developer to try and tap into the socalled affordable housing segment as demand for real estate slumps in a slowing economy. Bangalore-headquartered Shriram Properties will invest Rs 500 crore over three years to build some 4,000 apartments in Bangalore, Chennai, Kolkata, Coimbatore and Visakhapatnam, cities where the company already has a significant presence, managing director M Murali said. New-Delhi based Omaxe and Bangalorebased Golden Gate, Provident Housing & Infrastructure, Mantri Developers, Ozone Group and Vakil Housing have all outlined plans in recent months to develop affordable housing projects.

“Our projects will offer value-formoney homes, with prices starting at Rs 13.5 lakh for homes measuring between 650 sq ft and 1,400 sq ft,” Mr Murali said. “The company hopes to drive down costs by acquiring land on the outskirts of cities and using modern construction techniques. It also expects to benefit from discounts on bulk purchases of construction materials,” executive director SS Asokan said. Advertising and marketing costs will be kept to the barest minimum: the company does not plan to spend on advertising or creating glossy brochures. Instead, it will rely on personal recommendations by the more than 25,000 employees of the Shriram Group and its existing customers.

“We already have bookings for about 200 apartments from existing customers and through personal recommendations; the sales team has set itself a target of selling 800 apartments by March. The central bank allowing the classification of home loans up to Rs 20 lakh as part of priority sector lending will definitely help us,” Mr Murali observed. The Reserve Bank announced on Saturday that banks could classify housing loans of up to Rs 20 lakh as “priority sector” advances, part of a slew of measures announced to increase the flow of funds to the real estate sector.

About 90% of the funds required for Shriram’s masshousing projects will come via sales advances, the company said. The rest will be invested by equity partners Walton St Capital and Starwood, who together own a 20% stake in Shriram Properties. “Funding is not a problem. The land for the projects has been acquired and fully paid for. Our equity partners will meet the working capital requirement, which is about Rs 50 crore. Further, we also have the option of diluting equity in the entities that implement these projects,” Mr Asokan said.

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