Despite massive four page advertisements by realtors, discounts on property and promises of assured rerturns, ostensibly to mark the auspicious Navratras, there is little evidence that buyers and investors have regained confidence in the property market of Delhi-NCR, and particularly Gurgaon. Although there is strong hope among builders that their offerings will be picked up by buyers, it seems that there is little action taking place on the ground. In fact a report by rating agency ICRA alarming states that NCR has an unsold inventory of about 19 million square feet (28% of the total area under development), with the Millennium City itself ‘contributing’ almost 12 million square feet! The key reason is that, along with the continuing slowdown in demand, the supply (from the many under construction projects being completed) has been high. Real estate experts say that some builders may have decided not to sell at lower rates, still hoping for the boom days to return. Sanjay Sharma, MD, Qubrex opines that the real estate sector is unlikely to see a revival in the near future, because there is lack of trust in the market. "The developers have not been able to regain the trust of the buyers, and unless this happens the market in Gurgaon is unlikely to see any revival," says Sharma. He adds that some builders might be able to sell their property by pandering to the greed of some investors/buyers, by offering assured return schemes or part payment bookings. However, this will not help, as a large number of potential buyers is ‘stuck’ in the market. And any pick up is only going to take place in certain micro-markets like Golf Course Extension Road (Southern Peripheral Road) and along Sohna Road. Dwarka Expressway (Northern Peripheral Road), which was described as the fastest growth area two years ago, is at a standstill. The ICRA report says that there has not been much recent addition to the area under development (which stood at 66.11 million square feet at the end of March 2014); there have hardly been any new launches; the focus is on selling current stock.
In a market where there are few buyers of new property, and there are investors who want to exit even at a loss, people with cash in their pocket are at a big advantage. Anish Raghava, CEO, Not Just Flats, a Gurgaon-based realty company, opines that in the last six months such people have begun to look at ‘special deals’. "There are very few buyers for fresh bookings and soft launches, as the price difference between newly launched projects and those under construction is not much. So buyers prefer to buy something that exists," says Raghava. Another reason why people are now ‘playing safe’, is because a slew of builders have failed to deliver houses – on time, and as promised - to buyers. There have been regular protests against even top builders in the City, for their failure to deliver property even after four to five years of delay. Sanjiv Kumar, a broker, says that buyers have been forced to approach courts, consumer forums and even the police, to force builders to deliver on their promises. The continuing high (artificial) rate of property in Gurgaon, with no real correction having taken place in prices - is also a reason for there being just a few buyers in the market, avers Kumar.
However, ‘holding capacities’ are being severely tested. Kumar says he has tried every trick in the trade to get buyers interested – but to little avail. Even freebies such as bikes, vacations, gold coins, and modular kitchens are not cutting much ice. Affordable housing could have been an alternative to look at, but no one seems interested. Ashutosh Limaye, Head, Research, JLL seems to be a little optimistic. He says that while sales in the last 2 years have remained static, even during the festival season, the sentiment is more positive this time. Pradeep Agarwal, Executive Director, Microtek Infrastructure, opines that the building of quality infrastructure and the completion of key road projects will ensure that Gurgaon remains a worthwhile real estate destination. He believes that the recovery of the economy, a decisive government at the centre and a reduction in interest rates would be key for the revival of the real estate sector in the NCR. Some experts believe that this is the right time to buy property, by putting cash on the table and driving a hard bargain, as input costs are rising. Market reports say that some Private Equity funds have invested almost Rs 6,000 crores in the real estate segment, particularly in residential real estate – with the hope of a killing.
The problem of liquidity being faced by many developers is also likely to ease in the next couple of months, with the launch of Real Estate Investment Trusts (REITs). Pankaj Tomar, a Gurgaon-based consultant, says that getting loans from banks has been difficult for a majority of the builders, as there are not many banks ready to offer them loans. REITs will help in attracting foreign and local \ investments in the real estate sector. REITs will also allow individual investors to put small amounts in diverse real estate projects. The finance ministry has announced a number of incentives for this instrument, with the hope that it will reduce the pressure on the banking system. SEBI is likely to notify the new norms on REITs soon. Sharma of Qubrex says that instead of giving more funds to developers, the government should strictly monitoring the projects and ensure that money collected from buyers is not diverted to the purchase of more land and creation of further land banks, which results in the entire business cycle getting stuck.
With major infrastructure projects like the KMP expressway, SPR and NPR still far from completion, the euphoria of owning property along these roads has also vanished in thin air. Meanwhile, the surrealism of real estate in this City just seems to prolong. The same story: no demand, too much supply…no price correction, seems to continue ad nauseam. There are just too many crorepatis here – a lakh plus at last count….
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