Taking Stock of the Real Estate Market in Delhi and NCR
The National Capital Region comprises Delhi, New Delhi, cities surrounding them in Haryana, Uttar Pradesh and Rajasthan. Its compass includes the Haryana Sub-Region with Faridabad and Gurgaon, which are the two most prominent districts here, with a lot of promise. Then there is the UP sub-region that includes Ghaziabad, the Rajasthan sub-region and now UP wants Aligarh, Mathura and Agra to be included in the NCR region. The National Capital Region is the country’s largest residential property market.
NCR is an attempt to combine promising areas and satellite towns into one powerful unit. In terms of its real estate market, NCR has seen a rise demand and a subsequent rise in property prices. From 2012 to 2014, there has been an appreciation of 24.9 per cent in the price of prime residential land. Emerging markets in NCR, despite losing out to huge markets like Mumbai or Bengaluru, has seen a steady year-on-year increase of 13.8 per cent in residential land value and 16.3 per cent increase in office land (2011 to 2013), which is a good and steady figure as land values go. In fact, Delhi’s prices are so high that residents are looking for alternatives and the emerging markets in NCR have outperformed key areas like Saket and Connaught Place. This can be attributed to increase in demand in prime locations and subsequently inadequate land to meet this demand, which has pushed up the rentals and capital value in these new satellite cities and emerging markets even further.
At the end of 2014, however, NCR saw a fall in sales of houses, by about 43 per cent. NCR, which had recorded a sale of 71,421 units in 2013, saw a slump to 40,575 units, a figure was the lowest in 10 years. Prices on the other hand rose by 3 per cent, according to Knight Frank property consultants in India. But when factoring in inflation, the price is stable, despite reports that the market was recovering. By any comparison, 3 per cent is not a healthy enough appreciation in housing prices and while there is no major problem in sight, it will take some time for the health of the NCR real estate market to improve. The transaction volumes are too low. Having said this, the micro-markets like Greater Noida have performed fairly well and have recovered fairly well, perhaps in expectation of key policy makeovers and new governance.
Decline in prices, problem of oversupply
According to the report, new projects and launches declined by 24 per cent, from 95,678 units in 2013 to 73,143 units in 2014. With a huge backlog of 1.9 lakh units unsold, the backlog could take developers years to clear and the oversupply is a worrying fact. The performance by NCR has been its worst in years. Many reasons are attributed to such a bad performance. For one, 2015 is a year of recovery from the lack of reforms by the Congress government and this revival has come later than expected. High interest rates continue to bring down morale and sentiment among home buyers and investors.
NCR behind other markets
The report says that the Delhi-NCR market saw a sale of 28,500 units in the first half of 2014 and 12,075 units in the second half of 2014. Greater Noida accounted for maximum housing sales in Delhi-NCR in 2014 at 17,235 units. This was followed by Ghaziabad at 8,090 units, Gurgaon at 7,933 units and Noida 6,467 units respectively.
When compared to booming markets like Bengaluru, Pune, Chennai and Hyderabad, NCR has performed very insufficiently. While Bengaluru saw a 13 per cent slump in project launches, NCR saw a 24 per cent fall. The IT and ITeS sectors in the former markets are strong. In terms of sales volume, Chennai saw only a 10 per cent decline and Mumbai a 9 per cent decline. Bengaluru performed very well with only a 3 per cent decline in sales, but NCR saw a whopping 43 per cent decrease in sales.
To come out of this slump, real estate experts say that the NCR developers should see more affordable housing projects and better funding modalities.
The proposed Metro extension to Ghaziabad and NCR cities could improve the scenario. The six-lane elevated highway, touted as the longest elevated highway in the country, will also help the area.
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