Market shows a positive outlook as sales have picked up in the fourth quarter of 2011-12, says global consultancy firm Knight Frank in its latest report on residential real estate market in the National Capital Region of Delhi. According to the report, Delhi’s residential market might see some appreciation in capital value, despite the slowdown in the economy. However, it says, prices in the suburban micromarkets of the NCR are expected to remain stable over the next few quarters.
Despite the launch of a large number of new projects in the NCR, the report, on the basis of an analysis of long-term sales velocity, says that unsold inventory will be absorbed two quarters ahead of the completion of a project. Consumer sentiments are likely to improve, especially after the RBI slashed its repo rates, which might lead to reduction in the interest rates.
At the same time, projects in Noida Extension are also expected to resume construction work in the near future, subject to approval from the National Capital Region Planning Board (NCRPB). The decision of Haryana Development Authority to introduce a self-certification system, which will reduce the time for approval of building plans, is another piece of good news. This is likely to prove advantageous for developers.
However, developers are still facing liquidity crunch; construction costs have gone up too. These factors might restrict developers from launching multiple projects.
According to the report, the NCR did not see a steep fall in project launches during the last year despite the global economic slowdown. Ghaziabad contributed to nearly 34% of the number of project launches in financial year (FY) 2012, followed by Gurgaon and Noida. According to reports, nearly 86,000 residential units entered the market in FY 2012. These were equally distributed over the micromarkets of Gurgaon, Noida, Greater Noida and Ghaziabad.
As of March 2012, according to the report, nearly 5,00,000 units are under various stages of construction in the NCR market. About 50% of the forthcoming supply in the NCR market is expected to be ready for possession by 2013, as a bulk of these projects were launched towards the end of 2009 and early 2010.
Nearly 57% of the forthcoming supply falls in Noida and Greater Noida. Gurgaon constitutes nearly 19% of the supply. An additional 94,000 units are slated to enter this market by 2015.
About 78% of the unsold apartments are concentrated in Noida and Greater Noida, due to the start of a number of big projects here, including Noida Extension, which generated a controversy over land acquisition, the report says. Noida and Greater Noida were favourable destinations for developers as both locations have very good connectivity with Delhi and land was being made available by the government at cheaper rates. Even though these locations have a demand for housing from the IT-ITeS companies and residents of east Delhi and parts of eastern Uttar Pradesh, the appetite for absorption of such huge supply is still questionable, the report says.
Gurgaon also shows a vacancy level as high as 39%, since a bulk of the projects has been further added to the Dwarka Expressway in FY 2012. Also, the average ticket size in Gurgaon is high, compared to other micromarkets. In a great measure, employees working with various companies in Cyber City, Golf Course Road and Udyog Vihar contribute to the demand in Gurgaon. Most of the end users want to buy properties that are ready-to-occupy within a year or two, the report says.
Sales have shown an upward trend in January-March 2012, as customer confidence seems to have been restored. The report says Faridabad and Ghaziabad have shown negative growth in sales, as both these cities do not have enough commercial developments to support residential demand. Even though most of the affordable projects with a ticket size less than Rs 25 lakh are here, vacancy levels are high, showing a mismatch between the supply and buyer preference.
Nearly 66% of the absorption has been in the affordable and mid-segment housing with a ticket size less than Rs 25 lakh and between Rs 25-50 lakh. Based on the average sales velocity of FY 2012, the unsold inventory in all the markets will take nearly four quarters to be fully absorbed.
On the price front, the NCR has fared well, compared to other metro cities and hasn’t seen a drop in prices, the report says. The NCR market is unique as investors also play an important role. Even though buyer were cautious and waiting for interest rates to dip, investors had no inhibitions in buying, which kept the prices stable even after speculation of correction.