The South Delhi Property Market

Prices of homes in upscale South Delhi have dropped by 20 per cent-35 per cent over the last one year, with developers and cash-strapped investors offering big discounts to dispose off their assets in a slowing economy.

Till about six months ago, discounts on new homes in the area were being offering only by developers facing oversupply. But with the economic situation worsening, this category of sellers has expanded to include cash-strapped investors and businessmen who are keen to sell the high-end apartments they had picked up some years ago.Some people over leveraged themselves by buying multiple properties when the going was good. Now with the market slowing down, they are looking at exiting but are unable to find buyers,They have no option but to reduce their price expectations, hence profits.

The situation offers an opportune time for bargain hunters looking for distress sales.Those, who are in businesses that are in perpetual demand, are the ones lapping up these properties at great discounts.

The slowdown in the economy has pushed investors and end-users out of the market. The ones still around are negotiating hard. The asking price itself has become more reasonable today.Developers are willing to negotiate with buyers, as the market is very slow.

While prices have fallen across residential colonies in South Delhi, the drop is the most in Defence Colony and Vasant Vihar. For instance, a 2,000-sq ft apartment in Defence Colony, available for Rs 9.5-10 crore a year ago, can now be negotiated for anything between Rs 6.5 crore and Rs 8 crore. Similarly, the price of a 2,300-sq ft apartment in Vasant Vihar has dropped to Rs 10-12 crore from Rs 12-14 crore last year.

Inventory levels, too, have risen sharply. Residential areas such as Vasant Vihar, Defence Colony, Greater Kailash, New Friends Colony, Panchsheel Park and Gulmohar Park have about 3,000 unsold apartments, and investors are set to add another 1,000 soon.   Property rates in Delhi had started rising a few years ago after the government allowed construction of a third floor. The following spurt in construction pushed up inventory of homes, but all of it could not be absorbed when economic slowdown took roots. What also impacted prices were regulatory changes such as the ban on power of attorney sales, levy of service tax (this added almost 4 per cent to the cost of apartments), and increase in circle rates.

The slowdown has even forced some builders to abandon housing projects. Builders in South Delhi generally enter into joint development agreements with plot owners. After the construction of three individual floors, one is given to the owner while the developer sells the rest in the market.

Prices could drop more if the economy doesn’t pick up.It is really difficult to find buyers today. High-value properties are taking six months or more to be sold.The number of transactions in south Delhi have halved in the last six to eight months.