Cost factor

Cost factor

Cost factor
Effective cost What would be the ideal cost of a budget home? Prashanth G N asks an expert.
One million affordable homes across urban India in 10 years. 

That’s the vision and dream of Jaithirth (Jerry) Rao, a technology entrepreneur. 
The man who founded and became CEO of the software services major Mphasis, and sold a high stake to global technology major EDS in 2008, is deep into the budget housing venture as founder and chairman of the Value and Budget Housing Corporation (VBHC) he launched in 2010. 

When Deccan Herald asked Rao whether he had altered his vision and dream given the change in economic conditions and the massive inflation over the last four years, the former Citibank employee said: “It will probably take longer, but it’s good to have high ambitions.” 
And what about the money to fund his dreams?

Says Rao, “Our financial model is robust. We will not enter high-end, but we will do some medium level projects.”  

Rao’s model rests on a particular technology that he has chosen to use in constructing budget homes. 

Rao decided to ship lightweight aluminium beams from Kansas, USA, and use them, employing a cast-on-site technique that gives flats a durable structure. 

He did away with the use of concrete. So for VBHC’s first project, Vaibhava Anekal, this reduced the per sq ft cost of homes by Rs 35-40, and construction time by more than one-fourth, giving VBHC the economies of scale and the speed of a manufacturing business.

It was in 2010 that Rao launched Vaibhava Anekal with a plan to build close to 1,800 homes priced at around Rs 8-10 lakh each. 

The project, says Rao, has been a success. Following the positive response to his first project, Rao has launched two other projects. 
VHBC now operates in the Rs 15-30 lakh bracket. Says Rao, “There is no serious national player in the sub-Rs 30 lakh category. We are filling in the gap by offering affordable homes under Rs 30 lakh.”

VBHC is also launching projects in Rajasthan, Chennai, Mumbai and NCR, Delhi.

How confident is Rao about affordable housing (priced around Rs 15-30 lakh) doing well in Bangalore and across India?

 “Among all the markets in India, Bangalore has emerged the best. Affordable housing will do very well in Bangalore because it has a strong, aspiring middle-class. That feature distinguishes Bangalore from other locations. We will continue to work with other cities too, but if you ask me which has been the best so far, it’s Bangalore,” he says.

But, has the affordable market taken off nationally? 
“Affordable housing has not yet taken off on a national scale. But it is poised to do so. It will definitely go national soon”.
But, isn’t even the Rs 15-30 lakh bracket too much for a budget house? 
“Four years ago, you could still talk about homes for less that Rs 10 lakh. But now, it is increasingly getting difficult to hang on to the Rs 10 lakh figure. The affordable now would be Rs 15 lakh and above,” he says and adds that he doesn’t have any particular income bracket in mind while planning projects. 
“I guess it’s for the banks to settle income and loan ratios. We don’t plan keeping in mind incomes. Anybody who gets a loan can come to us. There are no restrictions.” 
So, what would be an affordable price five to 10 years down the line? “It depends on inflation and hence difficult to predict,” says Rao.