- Rahul Sabharwal, COO, VBHC Value Homes
India’s very own dream is Housing for All by 2022! While the government announced this mission in 2015, VBHC Value Homes (formerly known as Value and Budget Housing Corporation) was among those ahead of the curve – it started building affordable homes at Rs 9 lakh in 2012 in Mumbai in the belief that quality living should be within everyone’s grasp. Testament to this are its landmark projects in the affordable segment in the metros of Mumbai, NCR, Bengaluru and Chennai. In fact, VBHC has delivered over 4,000 homes across the country in the past seven years – at a run rate of about a thousand homes in the past few years. “We were pioneers and one of the first organised pan-India affordable housing companies,” says Rahul Sabharwal, COO, VBHC Value Homes, as he speaks on the industry and the company’s journey with SERAPHINA D’SOUZA.
How has the government’s vision for affordable housing followed by infrastructure status boosted your activities?
While the government launched its vision about two years ago, the real work has happened only in the last six months, which is now starting to reflect on both the demand and supply sides. On the demand side, we have initiatives such as the Pradhan Mantri Awas Yojana (PMAY). So, on an average, there is a significant 7-10 per cent reduction in cost for buyers. On the supply side, with demonetisation, the cost of land should reduce in the medium term, which is a major aspect in an affordable housing project or any housing project. Second, with the industry getting infrastructure status, it will reduce funding cost – the interest rate interest will reduce and there is potential of reduction in margin money. Third, the entire profit can be exempt from in any affordable housing project now. Thus, the industry is moving in the right direction. As a company, this will start reflecting in our revenues in years to come.
Tell us about different buyer preference patterns across the cities you operate in. Do you see yourself tapping Tier-II or Tier-III markets too?
We have seen a transition over the years; people have started seeing value in smaller properties. In cities such as Bengaluru and Mumbai, people are mostly adaptable to various sizes of homes. For example, until a few years ago, nobody in Bengaluru would buy a studio apartment, but now the preference is starting to change. Similarly, NCR and Chennai markets would look at bigger houses, and things will start to change over a period of time.
We have explored Tier-II and Tier-III markets in the past. But one challenge was that the local competition or sellers were largely unorganised players. Although they build good quality homes, a national developer would have certain basic quality standards to operate with. So, the affordability in some areas became a challenge. However, with RERA and, hence, a lot of consumer awareness coming in, Tier-III and Tier-IV towns are where new opportunity areas will get tapped eventually and become a large segment for players to operate in over a period of time. For us, it’s more of a long-term strategy; our current focus remains the four cities we operate in.
The government is making efforts to ease construction permissions; how are these reflecting in your projects? Are there any incentives specific to affordable housing projects?
The only difference is that profits generated on affordable housing projects – now defined as 60 sq m – are exempt from income tax and have an AHP incentive. We have started seeing slight movement in the past few months; the draft MoEF rules have relaxed the minimum area requirement for application. To make affordable housing successful, we have always laid emphasis on cutting down the time taken for approvals. Once this is done, the holding cost of land will go down and boost affordability to a larger set. Although there is an intention, the reflection on the ground is limited. Our recommendation first is for affordable housing to get single-window clearance. Second, it has to get into a self-regulatory mode, which will help get building plans sanctioned.
What are the key trends in the construction of affordable homes?
There needs to be a focused approach towards designing affordable homes, which means the most important is to look at utilities, replicability, and avoid any dead space because in affordable homes areas are small. We have developed an in-house design team that compares different ratios internally before approving the design. The second important trend is to have a manufacturing approach to ensure things are done on a timely basis because the margins are thin. Third is the use of technology to cut down on every cycle and period time.
Please share some innovations in construction practices in terms of materials and technologies implemented in your projects.
We were one of the first to use formwork technology in India; we used aluminium forms to build. Typical brick and mortar takes 21 days to move floor to floor; with formwork, we complete a floor every seven days. Also, we have been exploring different pilots in terms of finishing activities – painting, tiling, etc – and how we can automate to help crunch time and ensure an effective output. We make use of high-quality steel and cement concrete in our projects. Also, we were Asia’s first EDGE-certified green building. Over the years, we have been able to build a good chain of suppliers and create long-term relationships with vendors; this has worked out well for us. Durand Forms in India, a subsidiary of the US-based Western Forms, supplies the formwork for our projects. Also, we have worked with some of the best names in the country like UltraTech, JSW, Tata Steel, Hindware, Jaguar, Cera, Nitco, Asian Paints, etc. All our procurement is centralised out of Bengaluru. For our upcoming and ongoing projects, we will look at procuring the standard requirement of cement, steel, CP, sanitary, tiles, paints, and the whole gamut of construction.
The company also plans to build premium homes.... Will this be part of your affordable delivery?
That is one segment we are looking at. We have done a mid-tier project in Bengaluru, which has been a roaring success both in terms of sales and quality of construction. This has further boosted another area of opportunity for us to look at and provide value in premium homes. We are in the process of identifying and working out different areas and geographies for this segment.
How do you raise funds for your projects and what are the strategies adopted to get the desired RoI in your projects?
At a project level, we receive funding either in the form of equity from within the company or term loans. Although funding will always be a challenge to a certain extent, we have not faced it to a large extent.. It is critical to ensure that the project does not overrun the budget for the RoI; for affordable housing, project delivery on time and at cost is key.
What are your targets for 2020?
Our focus is to grow and look at both buying and operating, building our own land parcels as well as doing joint developments. We currently have land parcels in Bengaluru, Mumbai, Chennai and the NCR. We are looking at launching new projects in the next three to six months and exploring multiple joint development agreement (JDA) options in Bengaluru, Mumbai and other cities we operate in, apart from our own land. VBHC will be a dramatically different-sized company by 2020.
Year of establishment: July 2009
Top management: Jaithirth (Jerry) Rao and PS Jayakumar
Centre of operation: Bengaluru
No. of employees: 219
Completed projects: Vaibhava and Palmhaven in Bengaluru; Greenglade in Mumbai
Ongoing projects: VBHC Palmheaven 2 and Serene Town in Bengaluru; Greendew, Greenwoods and Hillview in Mumbai; Greenfields in NCR-Delhi; Oragadam in Chennai
Upcoming projects: In Bengaluru and NCR
Turnover: Rs1,612.7 million as on March 31, 2017.
For full version, log on to www.ConstructionWorld.in
To share your building experience, write in at feedback@ConstructionWorld.in