Few launches in the last two years, huge inventory pile-up of unsold units and buyers staying away from the real estate market, have resulted in the correction of prices is some resale and primary markets in the National Capital Region (NCR). While developers have lowered property rates in new launches, a number of secondary markets too, are witnessing a price decline. Data from analyst firm, Ambit Capital Research, suggests that property prices in prime parts of Delhi are down by 20-25 % over the last year and transaction volumes have fallen sharply. The report, ‘Real Estate: The Unwind and its Side Effect,’ said, “Real estate inventory is at its peak in Delhi-NCR (14-16 quarters to sell), largely in the mainstream markets such as Delhi, Gurgaon and Noida, wherein, launches have reduced significantly. The situation in the tier-1 and tier-2 cities is similar.”
A report from international consultants, CBRE, titled, ‘India Residential Market View H1, 2015’ corroborates this trend. It says, cautious buyer sentiment, high mortgage rates and significant unsold inventory, in primary as well as secondary markets, have led to reduced buyer demand. Owing to the subdued demand, new project launches declined marginally by about 3% in the first half of 2015, as compared to the second half of 2014.
Areas witnessing corrections
Within the Delhi-NCR, notable areas that have witnessed corrections have been Gurgaon’s Sohna Road, Golf Course Road and the Greater Noida Expressway. As per the report, some established secondary markets such as New Friends Colony, Chanakyapuri, Golf Links, Shanti Niketan and DLF Phase I, II, III and IV also witnessed corrections.
Currently, Delhi-NCR has the highest levels of unsold inventory on account of lower demand momentum. Gurgaon and Noida have seen inventory levels as high as over 65 and 50 months, respectively. Abhishek Singh Goyat, chairman, Antriksh Group, opines, “This is also because demand from investors has reduced drastically in the last two years, in the NCR. While the investor community is waiting for market recovery, new prospective buyers are waiting for the markets to offer even lower prices.” Some developers incidentally are asking for just 2% as a booking amount.
Others put it differently, for instance, Rajesh Prajapati, CMD, Prajapati Developers, a Mumbai-based developer, believes that “The current scenario has made the market a buyers’ market. It will be easier now to get a good bargain.”
The real estate market in the Delhi-NCR, is likely to remain stagnant for the next 12 months. However, things are likely to change, with continued focus on reforms. Commenting on the trend, Anshuman Magazine, chairman and managing director of CBRE, South Asia Pvt. Ltd., says, “The overall market remains optimistic though as the government continues to focus on rejuvenating infrastructure to support the large-scale affordable housing segment.”
Due to oversupply, the region is also likely to see delays in project delivery in the near future. With poor sales, a large number of projects have been delayed almost indefinitely, citing lack of funding. Buyers with long-term plans, should enter the market now. While they might get a good bargain, they should have the patience to wait for long-term results. “This is the right time to buy,” advises Prajapati.
End-users looking to buy into apartment projects should look at those that have construction underway or are nearing completion. While they have to pay slightly more than they would at the pre-launch stage, the risks associated with delayed delivery or non-completion, are far lower with such properties.
Additionally, developers selling through subvention schemes, would be more than willing to sell at a negotiated rate. If you are patient to wait for some time, festive discounts will pour into the markets, with further reductions in rates. Look for a deal that suits your payment options and budget.