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Residential property price correction in Delhi-NCR: A brief look ahead of festive season

Over the last two quarters, the residential property market in South Delhi has shown only marginal appreciation in capital values and rentals. This could have more to do with the recent upward revision in circle rates in various zones than anything else. Supply and demand dynamics in South Delhi have been more or less constant, and the revision in circle rates has resulted in larger cheque amounts and lower potential for offloading cash in real estate transactions. This has, in fact, acted as a check on the anticipated price appreciation in South Delhi.

South Delhi residential markets such as Saket, GK-1, GK-2, Green Park and Hauz Khas have not shown much price fluctuations over the last two years. The average pricing seen in Q1- 2011 does not differ visibly from the current averages. Currently, residential property price points in South Delhi are in the range of Rs 24,000-32,000/sq.ft.

In Gurgaon, almost all major micro-markets have witnessed significant variations over the 2011 levels. Super-luxury residential price points have definitely corrected, currently being in the range of Rs 23,000-28,000/sq.ft. as compared to the Rs 30000-35000/sq.ft. range two years back. Premium or luxury projects in Gurgaon are currently priced between Rs 12,000-17,000/sq.ft.

On Golf Course Road, normal apartments are currently priced in the range of Rs. 12000-16000/sq.ft. as compared to the price range of Rs. 8000-9000/sq.ft. two years ago. On MG Road, the current prices for residential apartments range from Rs 10,000-12,000/sq.ft as against an average of Rs 8,000-9,000/sq. ft. in 2011.

Residential apartments on Golf Course Extension, which has a huge upcoming supply, are currently priced in the range of Rs 8,000-13,000/sq.ft., while the corresponding figures two years back were Rs 6,000-9,000/sq. ft. The current prices for apartments on Sohna Road range from Rs 9,000-9,500/sq.ft., while the prices for comparable properties in same location at beginning of 2011 were in the range of Rs 7,000-7,500/sq.ft.

Apart from the traditional high-demand residential micro-markets, other locations that are emerging as promising destinations are the Southern Periphery and Dwarka Expressway. Today, the Southern Periphery has properties priced in the range of Rs 6,000-7,000/sq.ft. as against the price levels of Rs 4,500-5,500/sq.ft. a couple of years back. Prices for properties on Dwarka Expressway are currently selling at rates ranging from Rs 6,000-8,000/sq.ft. – this represents an appreciation of over 50 per cent over the corresponding 2011 levels.

The Gurgaon residential market has currently stabilized, and there is no scope for any significant appreciation in the near term. Gurgaon has transformed to being an end-user driven market from an investor-driven market – short-term speculators on the lookout for immediate capital gains have ceased to exist in this market. On the other hand, the Southern Periphery essentially remains a hotbed as at the current price points, as it has the highest magnitude of affordable options. The proposed widening of Golf Course Road, the construction of the underpass and the proposed expressway will boost connectivity is further going to improve significantly. This will help improve sales to some extent.

Developers in the NCR region have been hit adversely due to the drop in residential prices at a time when they are running high inventory levels. Residential sales have picked up only marginally over the last three quarters. Against this backdrop, boosting sales in the top-most priority for developers who will use all means to cash in on the festive season. In this period, buyers can expect serious incentives and discounts. If the various offers currently being put out on the market do not elicit the required response, developers will be forced to reconsider their pricing.

(The writer is CEO, Operations, Jones Lang Lasalle India)

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