The Indian real estate market has been facing several ups-and-downs over the past years. This was particularly true from 2012 to late 2013 as property prices yo-yoed up and down, resulting in tremendous confusion. Buyers held back as they waited for the market to stabilize. However, the year 2014 brings good news for buyers. Property rates in some areas in Delhi-NCR have fallen by over 20 percent, according to NDTV. The National Housing Bank’s Residex Index was the first to point out this fact. The Index tracked residential property rates across 26 different cities in India. The Index stated that Delhi was the only metropolitan area where prices fell from January to March 2014.
Reasons for fall in Property Prices in the Delhi-NCR Region
According to The Indian Express, the real estate market across India has been stagnating throughout 2014 due to several reasons:
- Oversupply – Expecting a huge demand for residential real estate, developers pushed through several projects in late 2013 through early 2014. As a result, the market filled up with a huge variety of high-end properties. However, buyers didn’t line up to snap up these properties and the result is a glut of luxurious estates in the Delhi-NCR region. Builders were left with a mountain of new homes. Conservative estimates suggest that these properties will take about three years to sell. To compensate for the supply, builders are now delaying new launches and focusing on completing and selling properties to ensure cash flow. To ensure sales, builders are also offering various freebies and discounts to push through sales. Some builders, like the Unitech Group Projects in Delhi-NCR are waiving the PLC (Preferential Location Charge), or they are offering to pay the stamp duty charge on the property, according to Business Today. Others are even offering kitchen fittings, AC units, special offers, and even cars in some extreme cases.
- High prices – Developers purchased land at expensive rates, which naturally translated to high property prices. On average, property rates in South Delhi range from Rs. 65,000-148,000 per square meter. But buyers are looking for affordable properties that cost anywhere from Rs. 25,000 to about Rs. 35,000 per square meter. There are very few properties in this price range and buyer interest shifted to other locations in order to find affordable properties.
- Low absorption levels – The NCR region continues to see a low absorption rate. In fact, the absorption rate for NCR was the highest at 37 percent. The unsold inventory in the NCR region stood at 167,000 units at the end of June 2014. This inventory has risen at a compounded annual growth rate of 15 percent over the last three years. This low absorption rate has also increased the amount of time required to sell the current glut of homes.
Against this backdrop, builders have been trying to move their properties quickly by advertising properties, promoting freebies and lowering their rates.
For Buyers – Good or Bad?
For buyers, this is a great time to buy. The oversupply of homes has led to an automatic price correction in the real estate market. Property prices have been fluctuating in the Delhi-NCR region and might drop later this year.
As a result, buyers have the pick of the market and they can find affordable properties anywhere along the city outskirts. They can also negotiate with builders and get discounts on the price as well. As the holiday season approaches, buyers can expect more serious incentives, discounts, and offers from builders trying to sell.
Buyers also have other factors working for them. For example, a stable and progressive central government has bolstered the sentiments of large investors. A reliable annual budget with several standard operating procedures for the real estate market has resulted in an increased interest in the property market. The central government has also proposed measures to improve land and infrastructure development in the NCR area, which could increase property rates by late 2014 and through 2015.
Another critical factor that could help buyers find affordable property is the home loan sector. For the last three years, the home loan market had remained stagnant with high interest rates. Salaries didn’t increase and this put serious brakes on real estate investment. However, with a steadily improving GDP, finance minister Arun Jaitley predicts a sustained growth of 7 percent over the next few years.
To Buy or Not To Buy?
For potential buyers like yourself, this is an excellent time to find a property in the Delhi-NCR region. However, it is still a buyer-beware market. To ensure maximum gains, you will have to research the builder, the area, current market rates, and more in order to make an informed decision. Provided you’ve done your research correctly, you should have no problem finding an affordable property to buy or invest in.