Why Delhi-NCR’s Realty Market Is Facing A Slowdown

Delhi-NCR is one of the most sought-after real estate markets in the country. However, recent reports suggest that the region is facing a slowdown. Let’s find out why.

Delhi and the surrounding National Capital Region have some of the best residential projects in the country. During the first quarter of this year, real estate experts said that property sale had declined by 43 percent and the prices rose by 3 percent. A recent survey showed that as many as 1,70,000 flats in Delhi, Noida, and Gurgaon are lying vacant. This huge inventory pile up is a huge concern for builders who are finding it tough to attract buyers and investors. Here are few reasons that have triggered this situation.

Lack of Infrastructure

According to real estate experts, around 60 percent of unsold apartments are situated in areas that don’t have property infrastructure. Delay in getting clearance from authorities and litigations have created a hindrance in the sale of many properties in these areas.

High Rate of Interest

Real estate experts suggest that base lending rates of banks continue to be in double digits, which has turned off buyers. Even though there have been three rate cuts during the current fiscal year, the lending rates of banks haven’t come down significantly. The slowly recovering economy has impacted property sales adversely.

Analysts also say that property prices in India are very high and unreasonable. Experts opine that the real estate market may fail in stock markets.

Delay in Launching New Projects

Recent reports indicate that the demand for residential properties in Delhi-NCR have fallen by 30 to 35 percent over the last decade. This is another reason for the huge inventory pile up. Since sales have been sluggish, investors don’t have enough cash to invest in current projects. As a result, many upcoming projects have been delayed. Builders, due to the pressure of unsold inventory, have stopped 30 to 35 percent of new launches abruptly.

In Noida, nearly 1,67,000 flats remain unsold. This figure also encompasses 30 percent of under construction apartments.

High Property Prices

Due to the pile up of unsold inventory, a recent price correction was done for flats located in Delhi, Noida, and Gurgaon. The price of 1, 2, and 3 BHK apartments in Noida was revised by 30 percent. In Delhi and Gurgaon, the prices were revised by 15 percent and 25 percent respectively.

Despite the correction in prices, the cost of apartments continued to be high. Around 90,000 flats are under construction in Delhi-NCR. The dearth of buyers for existing projects will cause a delay in delivering these flats.

According to CommonFloor, the average selling price of a property in Sector-56 area of Gurgaon is INR 8,935 per square feet. If you want to rent a 2BHK apartment in this area, you have to shell out INR 28,661 per month.

According to the same website, the average selling price of a property in Saket, Delhi, is INR 11,455 per square feet. This is a huge amount and not many Indians are willing to pay such a high price. The rent of a 2 BHK apartment in this area is INR 45,538 per month. This is again an impossible rental amount for a majority of the Indian population.

Due to the skyrocketing prices, there are very takers for apartments in Delhi-NCR.

Developers Are under Huge Debts

The fact that many key real estate developers are under huge debts has not helped in improving buyer’s sentiments. The developers have poor valuation in the stock markets, which has cast a negative impact on their balance sheets. This has not gone unnoticed by the buyers.

Although Delhi-NCR is facing a slowdown, not all hope has been lost. Some real estate experts suggest that the Indian real estate market will get a boost in the coming years. Due to the formation of a stable government at the centre and a reviving economy, the country’s real estate market is expected to grow at a rate of 30 percent in future. Real estate developers are also waking up to the fact that people are moving towards affordable housing and as a result the builders are taking steps to introduce affordable yet quality homes. These developments indicate that Delhi-NCR’s real estate market have chances of revival.

Source : Commonfloor.com