For real estate players and developers, if North India is the country’s crown, then Delhi-NCR (national capital region) is the jewel on it. Dotted with malls, swanky glass and steel façade and high-rises, some of which promise a glimpse of the skyline, the region is a realtor’s delight.
While real estate players across the country are battling slowdown in sales and inventory pile-up, Delhi-NCR has largely remained immune. Even during slowdown, the region has not witnessed a price correction either in commercial or residential segment. Prices continue to gallop as investors feel that property is an investment that cannot go wrong.
Almost all major real estate developers have a presence in the region. These include DLF, Unitech, Tata Realty, Parsvnath, Raheja, and Supertech. In the next couple of years, NCR will boast an 82-floor high rise, a well-developed Formula One Racing Track, a World Trade Centre and numerous sporting venues.
HOUSING SHORTFALL
The NCR is one of the biggest retail and real estate markets comprising nearly 27 per cent of the overall stock amongst the metros. The region has an interesting mix of retail development between the five micro-markets of Delhi, Noida, Gurgaon, Faridabad and Ghaziabad which have evolved over the years.
Shortage of housing units is expected to touch 27-30 million by 2013 and for this, huge amount is required to carry on the development.
With more people moving to cities, demand for affordable housing will outgrow the rest of the sector. If infrastructure and policy hiccups are taken care of, many more developers will like to have a share of the affordable housing pie, says Brotin Banerjee, Managing Director and Chief Executive Officer, Tata Housing.
Developers are banking on the untapped demand in the mid-segment housing bracket and low interest rates launched new projects.
The NCR residential market is flush with a large supply pipeline, majority of which is expected to become ready for possession in two-three years. Samir Jasuja, Founder and CEO, PropEquity, says: “ In order to afford a home in NCR, the annual household income of a family needs to be in the range of Rs 8-47 lakh in Gurgaon, Rs 5-32 lakh in Noida, Rs 4-19 lakh in Ghaziabad and Rs 3-37 lakh in Faridabad.” Largely targeting mid-income echelons in Delhi, Uttar Pradesh, Haryana and Punjab, majority of these projects are mostly in unexplored outskirts of suburbs and cater to the untapped budget housing demand.
Gaurav Pandey, SVP & Head – Research and Consulting, says: “Micro-markets of NH-24 Bypass, Crossing Republik, RajNagar Ext (Ghaziabad) and Greater Faridabad (Faridabad) region are comparatively cheaper; and an average buyer can afford a 4 BHK there. However, these markets have their fair share of concerns. For instance, Greater Faridabad region has internal infrastructure problems, Crossing Republik has a proposed dumping ground.”
YEAR 2013 (Y2K+ 13)
Industry players, analysts and Government are hoping that 2013 will be better than 2012. With residential prices breaching all affordability limits in major metros, offtake in real estate sector remained largely subdued in 2012.
After being in near comatose state, industry points out that the outlook for the next year will largely revolve around economic improvement.
Major listed realty players are swimming in debt and piling inventory. Transaction size remained smaller this year despite prices remaining stagnant unlike the previous two years where most of the cities witnessed a steep price rise.
One of the biggest hitches that cash-strapped developers faced was in getting approvals. They point that obtaining the 55-odd permissions to begin construction of a project can take as long as two years. During this time, the cost of acquisition or even just holding the land for a project rises.
Sanjay Dutt, Executive Managing Director, South Asia, Cushman and Wakefield notes, “…Given that most aspects of development such as construction cost, development cost, time taken for approval and debt all have been on an upward tangent developers have not been able to lower cost .”
CORRECTION AHEAD?
But the RBI instructing scheduled banks to not allow a rollover of loans given to real estate developers into next financial year will mean that developers will see an urgency to dispose of their unsold inventory to raise funds to pay back their loans. This holds the potential for a major correction in residential prices in the NCR region.
The average property price in the 10 small cities taken is pegged at Rs 2,200-2,500 for a sq. ft. This is comparable with Pune among the large markets, which has property prices in the range of Rs 3,000-3,500/sq. ft. Even when prices rose by 25-30 per cent in the large cities in fiscal years 2010 and 2011, the small cities saw increases of only 10-12 per cent, the report said. In 2011, Jaipur had the largest number of home sales.
FDI IN RETAIL: A BLESSING FOR REALTORS
FDI in retail will be the key driver in pushing demand for retail real estate space – with a large number of modern retailers entering the market, there is going to be increasing demand for commercial real estate space in metros and tier II cities. Lalit Kumar Jain, President – National – CREDAI, said, the Finance Ministry and the RBI needs to work together to strengthen the demand and supply side by a special housing development policy.
Taj Estates 