National Capital Region fails to buck the slowdown

Vinod Behl

The disruption caused by Real Estate Regulation Act and Goods & Service Tax (GST) badly hit NCR realty market that was already reeling under the onslaught of demonetisation, with new launches, sales and prices seeing sharp contraction. 

According to Knight Frank India report, new project launches registered a sharp decline of 73 per cent in H1, 2017 vis a vis H1, 2016, compared to 41 per cent decline at the national level. With prices correcting by 20 per cent over the past one-and-a-half years and affordable homes, particularly ready-to-occupy units picking up sales, it has been an end-user market, holding little or no prospects for investors especially as market has been giving negative returns.

The plight of NCR real estate, particularly of the residential segment, may well be gauged from the dismal industry statistics. According to Liases Foras research, the region tops the list of 43 cities with delayed projects. Every third developing residential unit in the NCR, is delayed by more than two years. Over 2 lakh houses would be delayed by more than 2 years in Noida, Greater Noida and Gurgaon. 

According to industry statistics, at the end of September, 2017, there were 6.85 lakh unsold units across 7 major cities, with NCR topping with 2 lakh unsold units. As per Knight Frank, NCR has current unsold inventory of  about 1.80 lakh units with Noida & Greater Noida topping with close to 96,000 unsold inventory, followed by Gurugram with over 47,000 unsold units. Noida/ Greater Noida’s performance with regard to new launches was also dismal. 

In all, barely 4,800 units were launched in NCR in  H1, 2017 and out of these majority (82 percent) were in Gurugram.

Amidst this dismal scenario of residential realty, affordable housing, however,  provided the silver lining. According to Knight Frank, 70 per cent of new launches in January- June 2017, were in the below Rs 25 lakh price tag, compared to 8 per cent in 2016 during the same period. The share of affordable segment launches in NCR, according to Anarock Property Consultants rose from 21 per cent in 2012 to 71 per cent in  Q3, 2017. 

While Noida/Greater Noida/Ghaziabad market has largely been an affordable market that further got benefited from affordable housing push by the Centre, the noticeable trend was of Gurugram market moving from luxury/premium housing market to affordable and affordable premium market, with 1-3 BHK units available between Rs 15- 60 lakh price range. Not a single unit costing Rs 2 crore plus or between Rs 1-2 crore was launched in H1, 2017. Haryana Government’s Affordable Housing Policy  has particularly given a leg up to affordable units in the Millenium City. Under this policy, initially 300 acres of land was specially earmarked for affordable housing and now 500 acre more has been allocated.

While the residential market faced rough weather in NCR, office market remained upbeat in 2017 with increased investor activity, sustained leasing demand from tech companies and growing leasing interest from various occupiers from segments like manufacturing, logistics, warehousing, cowork spaces. According to Cusman & Wakefield,  Delhi NCR market saw 39 per cent higher net absorption @ 2.4 msf in H1, 2017 from corresponding period last year. The market is expected to remain on track , with sustained demand from occupiers in short to medium term. And though worst will not be over in the new year, yet realty in NCR is expected to clearly move towards revival.

Going forward, capital values and rents will remain stagnant or see some corrections.  

Favourable eco system in the form of government’s policy measures like infrastructure status to affordable housing, tax incentives to developers and buyers, together with interest subsidy under Pradhan Mantri Awas Yojana (PMAY)  has encouraged developers to go in for affordable housing.

The faster sale of affordable units is another motivating factor. Delhi NCR builders are likely to construct about one lakh affordable homes in the next three years. Signature Global plans to launch 30,000 units next year while Supertech has announced the construction of 25,000 units over next 3 years. Raheja Developers and Gaursons together have a target to launch 20,000 units in NCR in a couple of years.