By: Anshuman Magazine, CMD, CBRE South Asia
Track2Realty: Real estate investors as well as developers in the Delhi National Capital Region (NCR) had been cautiously awaiting the results of the recently concluded General Elections to ascertain the future mood of the market. Having been elected with a full majority, the new government will hopefully usher in a stable regime at the center, which will definitely have a positive impact on the real estate sector too.
The initial expectations from the new government include an investor and reform-friendly government, open to global as well as domestic investment opportunities. The current liquidity crisis in the sector has been ongoing for the last couple of years; and having overlapped with the present slowdown, it appears that much more pronounced.
As a result of the wider cash crunch plaguing the sector as a whole, developers in the Delhi NCR have faced quite a few project delays too—including in the Noida and Faridabad areas. Nonetheless, with the economy gradually moving into recovery mode, and the new government ushering in new hope and expectations with it, the quantum of sales may be expected to improve,going forward.
Housing demand in the NCR
Housing demand in the region has remained subdued over the last few quarters. While home buyers have largely shown interest in cost effective suburban markets, prime residential areas have hardly witnessed any new launches in recent times. As home buyers considered the low cost emerging micro-markets along Noida Extension and the Yamuna Expressway, which offered affordable investment options, developers delayed new project launches and focused on clearing up existing vacancy levels.
The cost effective suburban markets of Gurgaon attracted buyer interest too; while demand for builder floor units remained stable in Delhi—across mid-end/high-end as well as premium housing projects. Developers across micro-markets in the region also offered incentives—such as freebies, flexible payment schemes and discounts—to offload existing inventory.
New residential supply
On the supply side, new project launches continued to focus on cost effective options in alternative markets, particularly in Noida Extension and New Gurgaon. Developers largely focused upon luxury housing in Gurgaon during the first half of 2013; while the second half saw new launches, primarily in the high-end and mid-end segments along the Dwarka Expressway and New Gurgaon area. Moreover, even though units in residential projects launched by established developers attracted maximum buyer interest and purchases, developers across segments continued to adopt various strategies to including further discounts and free merchandise to boost sales.
Noida’s housing market was one of the few in the region to have seen continued addition of fresh residential projects over the past year. The Noida Extension micro-market, arguably, saw the maximum addition of housing units in the high-end and mid-end segments over the past couple of quarters. The micro-market has been finding favor due to its comparative affordability and planned development, which has driven developers to launch projects in this region.
Pricing issues
Increasing inventory levels, coupled with challenges such as insufficient demand, inflation and lack of funding—are all likely to put pressure on housing prices in the region in the short to medium term. However, the situation can be marginally ameliorated if new projects are launched at affordable rates. Capital values across most of Delhi’s micro-markets underwent a marginal dip due to rising preferences for apartment units over builder floors in the region (besides cautious buyer sentiments) over the last few quarters.
Investment sentiments
The investment sentiment of most institutional investors about the NCR continues to remain upbeat. The NCR—especially Gurgaon and Noida—has always been one of the strongest residential markets for India, driven by affordable pricing and a multitude of product offerings that are available for buyers.
The relative slowdown in sales in the NCR is a pan-India phenomenon, mostly on account of an upwards spiral in prices, larger unit sizes and higher interest rates for home loans. However, locations such as the Dwarka Expressway and the Noida Expressway still continue to offer affordable tickets to end-users.
The NCR will continue to see increased investments into the housing space due to the strong demand drive in the region, coupled with the fact that Delhi as a metropolitan city does not create any significant housing supply in the mid-market segment, leading to a spillover of such demand into the peripheral locations of Noida and Gurgaon.
