What kind of hardware problems is a cheap Android phone likely to have? For development and application purposes an organisation I am with is considering buying a cheap Android handset here in India (this is the handset).  

But what kind of problems can one anticipate in such a phone?  Most of what I can find on the net is just references to a "short life" - which does not tell us what kind of problems would actually occur - and lack of access to Google Play (on the software end).  

I should note that this is a rather peculiar use case in that it's mainly going to be an SMS gateway and at most a very low demand server for SMS (possibly for Web too - there is a discussion on our situation in this SO question).  But we are interested in this question in general as well. 

Edit: For reference, most such cheap handsets in India - and I suppose in most of the world - are made using licensed designs of low end Chinese phones.
My answer for you is twofold; there are innate downsides to off-brand devices but - most importantly - your use case (development and application purposes) might make off-brand Android phones a poor choice.

This is from my experience with the phones (I have a lot, having lived in Asia for years, and seeing a lot here in the States)

First, the general issues. Cheap, off-brand phones like that can actually perform quite well - but those good phones can be few and far between. Often, you'll face issues with any/all of the following:


Screen quality - This is generally the first place no-brand manufacturers cut corners. Many, if not most, of the devices will have low resolution and poor color reproduction.
Battery - This is the next big issue with these. There are many reasons that cheaper design, development, and manufacturing generally mean poor battery life. From the chips used, to the battery technology used, to the radios (In your case, dual-SIM is a known battery-drainer).
Local Support - Your Mileage May Vary™. Many, if not most, no-brand devices are quad-band GSM-devices - worldphones!! But many are not, and almost all are poorly documented. It may claim to be a worldphone, but who knows for sure?
Slowness - These things are cheap. Good NAND is expensive, good SOCs can be expensive. Most off-brand phones are much slower than the big-name phones from HTC, LG, Motorola, etc...
Customer Support - Almost universally non-existent when dealing with these things.
Long-term Manufacturer Support - You're almost guaranteed to never see an update to the Android OS on these phones.
Community Support - The devices are, unfortunately, almost never supported by the hacking/modding/Open-Source communities. Phones from big names almost all have communities for modding/roms/help built around them.


That doesn't seem so bad, right? You'll be developing software for your organization. You don't care about watching movies - so screen quality doesn't matter - and it'll always be plugged into a dev machine - so battery doesn't matter either. You probably expected slowness too. You probably don't care about those issues!

Let me tell you why you might want to care.


Screen - It's likely to be an old, depracated screen resolution. If you're going to be developing applications to publish then it could be a problem making your app compatible with standard screen sizes. (Your SO question implies you're not, so this might be a nonissue).
Slowness - You mention that this will be a low-demand server and SMS gateway. Slowness may be a downside for you. The phone you linked is VERY SLOW.
Long-term Manufacturer Support - This thing runs Android 2.3.6. That's ancient. Even though that version is still used on many Android phones today, it could be very limiting for you with its old API.
Community Support - It's very likely that you'll need to use ADB, perhaps get root, and a plethora of other generally-simple tasks that could be made difficult by the way the phone is engineered. Usually, there's a community to ask for help when things like this get in the way. Not so for this phone.


TL,DR: You will probably be able to make a workable solution with the phone you linked. There are some very significant unknowns - hiccups you may run into with your project, and hiccups you may run into with the phone - that might be bad with this phone, or they might be no problem. If it was me, I suggest this little phrase: 

If you have to ask, "is this phone going to work?" then you should probably consider a different phone. Get a device that you know will work. Nexus phones are made for this situation. And big-name phones, while not as much as a Nexus, will probably be a better solution than the phone you linked.

I realize the price of Nexus phones in India is expensive, but I would say it's worth the added cost.