First Frame Studio

Delhi Real Estate – Are we witnessing a revival?

1 MIN READNovember 06, 2018
GRI Club India met in October 2018 to discuss real estate opportunities and challenges in the Delhi-NCR market. There appear to be  signs of a tentative revival in the residential real estate market across the Delhi National Capital Region (NCR). 

Property prices in South Delhi have increased by 10% - 15% over the last year and a half, and there is increasing buyer confidence in ready-to-move-into properties. In Gurgaon, the finance and technology hub which lies 32km south-west of New Delhi, prices of industrial plots and residential plots have increased by 50% and by 20% -  30% respectively over the past six to nine months.

Progress in several major transport projects promises to help sustain the revival. In May 2018, Prime Minister Narendra Modi officially opened the Eastern Peripheral Expressway (the ‘KGP’); when the Western Peripheral Expressway (the ‘KMP’) is inaugurated - expected in November 2018 - it will complete the road circumnavigation of Delhi. And in October 2018, test runs were made on a new metro line - the ‘Aqua Line’ - connecting New Delhi with its  satellite city of Noida, lying 25km to the south-east of the capital. 

Developers expected to consolidate

Despite concerns that the market faces a risk of oversupply, amongst other challenges, GRI Club India members are optimistic about the prospects for Delhi NCR’s real estate market in the near future. However, they that predict a wave of consolidation amongst developers, reducing the number from 100+ to just five or six credible developers in the long run. 

Many developers are saddled with high levels of debt, much of it raised from non-banking financial companies (NBFCs), and they need to refinance or realign their capital structures in order to access capital and funding. Faced with limited financing options, one way might be to sell assets or under-construction projects - even stalled and distressed projects - although that would mean recognising and booking lower valuations. 

Mid-level housing is way forward

To date, the real estate industry’s focus has been on land acquisition - and land is now available at prices less than that in 2008. With respect to much of the acquired land, licenses have been obtained, land use changed, and developments charged paid. 

Now is considered to be the moment to get building - not premium or luxury property, a sector which remains very speculative - but mid-level and affordable housing. The industry’s focus is then expected to shift to the critical question of how best to deliver projects - using technology to ensure that construction is done cost-effectively and efficiently, tracking and benchmarking procurement costs, and ultimately maintaining liquidity and market confidence by selling residential units on to buyers.
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