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India's Tata Group on Wednesday launched a low-cost housing project near Mumbai, joining a spate of Indian developers that have moved to the affordable housing segment, as demand dries up for more expensive homes.

Tata Housing Development Co, an unlisted group firm with a turnover of Rs 100 crore, said it was planning a 1,200-unit township at Boisar on the outskirts of Mumbai, and will sell apartments at prices ranging between Rs 390,000 and Rs 670,000.

In the first phase, it will develop 1,000 units and sell these in association with State Bank of India, it said. The company will hold a lottery to allot flats and will sell application forms at Rs 200 each. The flats will be delivered in about two years.

"The idea is to understand that opportunity lies at the bottom of the pyramid," Managing Director Brotin Banerjee told reporters."This is the safest bet as there is a huge shortage at this end of the market."

Demand for homes in India has slumped more than half from a year ago after prices more than doubled and the central bank hiked interest rates to calm inflation.

Developers such as Housing Development & Infrastructure, Puravankara Projects and Omaxe  have launched less expensive houses to revive cashflows.

Banerjee said costs are being kept low by reducing construction cost to about Rs 700 a sq ft, and by sharing returns with the land owners.

The apartment size will range between 283 sq ft to 465 sq ft each.

The company aims to build up to 15,000 low-cost homes over the next 3-4 years across several cities including Mumbai, Delhi and Bangalore, he said.

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