The NCR Property Market

Urban areas in and around Delhi account for a stunning 40% of unsold real estate in India’s top eight cities.The NCR has a total of 303.48 million sq ft (or about 303,000 apartments) of unsold real estate.At the current pace of sales, this stock of housing requires another 53 months to be completely sold off. In comparison, for the Mumbai region, the figure is about 48 months, while it is the lowest for Bangalore at 19 months. For the top eight cities combined, the 765 million sq ft of unsold space will require at least 35 months to be sold.

But it’s not just the size of the unsold `inventory’ that makes Delhi the worst off among the real estate markets of larger cities. 56% of the unsold real estate in NCR is in areas which are currently uninhabitable. In other words, while the apartments have come up, the other essential infrastructure -roads, sewage systems, or water connections -have not.In comparison, the Mumbai Metropolitan Region (MMR) has 168 million sq ft (168,000 apartments) and Bangalore has 113 million sq ft (113,000 apartments) of unsold space of which just 2% of the inventory is in undeveloped areas in each region.

Over the last few years, a number of scams and project related issues have cropped up across the NCR.While project delays are a big issue, cases against developers such as the one where the Competition Commission of India slapped a fine of Rs630 crore on DLF for unfair trade practices in a few of its Gurgaon projects, or environmental concerns such as those around development near the Okhla Bird Sanctuary are other problems customers have had to face.

While the real estate market in every city has its share of speculators -investors who don’t really want to live in the flats they buy and essentially see them as an investment they can flip quickly to other buyers -the NCR has far more than its fair share.In the NCR, well over 50% of those who buy property think of it as a short-term investment, pushing builders to launch hundreds of projects over the last few years without so much as a thought to the main premise of real estate–location.

The prevalence of investors is compounding the problem as they are also selling their inventory, undercutting developers on price as they do not have the holding capacity.When the economy was riding high, these investor-buyers flipped properties at ease within six months of buying them -thus making a killing and raising prices. But the same market is now gasping for breath as actual buyers started to pull back in an uncertain market.

There is a log-jam in the NCR because the trust deficit about the builder community here is the worst compared to other cities. Buyers now prefer buying apartments in completed projects or in ones that are at a very late stage of construction. In locations where social infrastructure is in place and the price too is compelling, home sales are still robust.