Delhi-NCR's real estate market: How homebuyers brought the mojo back

Since Ashish Kapoor booked an apartment in a Jaypee Infratech project in Noida more than a decade ago, he has moved from his rented place in South Delhi to a rented apartment in Gurugram, turned 60, and seen his son grow up from being a student to becoming a professional. Throughtout this time, the only thing that has remained constant is his yearning for his own home. There are at least 20,000 others like Kapoor who face this predicament.

The genesis of their problem lies in the 32,700 residential units booked between 2007 and 2011 under various Jaypee Infratech Ltd (JIL) projects, of which over 20,000 remain undelivered even after a decade. A report filed by the interim resolution professional in the Supreme Court says the Jaypee Group had collected at least Rs 13,364 crore from homebuyers in booking amounts and advance payments till it went into insolvency in September 2017. JIL is not the sole offender; there are others like it. Take the case of Amrapali Group, another Noida-based realty major, whose promoters are languishing in jail on charges of duping homebuyers.

A close look at the 2011-15 period throws up a stark picture of real estate firms duping homebuyers, which eroded trust in the once booming market, and by the mid-2010s, brought it to a grinding halt. After that, the Delhi-National Capital Region (Delhi-NCR) market suffered from subdued demand, few new launches, and a lack of price appreciation. But not anymore. The residential real estate market in the Delhi-NCR—particularly the micro-markets of Noida-Greater Noida—is finally looking up as customers make a beeline for homes.

Data from property consultants Knight Frank India shows that sales and new launches have bounced back to pre-2015 levels, after the pandemic receded in 2022. Further, in the first half of 2023, residential sales touched 30,114 units, the highest in 10 years. In the previous two half-yearly periods—January-June 2022 and July-December 2022—the market had recorded sales of 29,359 and 29,101 units, respectively; both higher than any half-yearly period since 2013.

BOTTLED UP DEMAND

As homebuyers have started flocking to the market, developers have upped their game too. Data from Knight Frank shows developers launched 34,507 units in H2 2022, followed by 29,738 units in H1 2023 in Delhi-NCR; these are more than the launches in any such period in nearly a decade. In fact, from the time economic activity started picking up in late-2021, both new launches and sales of residential units have been rising steadily. According to analysts at Knight Frank, the market witnessed steady home-buying demand in H1 2023 due to two factors. First, the pause in the repo rate hike cycle announced in February 2023 brought relief to homebuyers, and second, any new inventory coming to the market from credible developers is being lapped up by interested homebuyers as a lack of ready-to-move-in inventory had bottled up demand.

“The Delhi-NCR real estate sector is revitalised, witnessing triple-digit growth in new property supply. This surge is accommodating demand while providing choices for first-time homebuyers,” says Pradeep Aggarwal, Founder and Chairman of Delhi-based real estate firm Signature Global. “Despite the challenges faced between 2013 and 2020, government initiatives and policy reforms like RERA [Real Estate (Regulation and Development) Act, 2016], have restored investor confidence, aided by the development in infrastructure and affordable housing,” he adds. Apart from the regulations protecting homebuyers’ interests, massive infrastructure development in the region is also playing a crucial role in the recent boom. For instance, enhanced connectivity in the region has elevated micro-markets like Dwarka Expressway, New Gurugram and Sohna Road.

This has led to a 6 per cent year-on-year increase in home prices in Delhi-NCR between April and June 2023, with Gurugram recording a remarkable 12 per cent YoY surge during the period. “Housing prices in Delhi-NCR have risen consistently, with a 59 per cent increase recorded along the Dwarka Expressway due to improved infrastructure. Golf Course Road in Gurugram—another micro-market that has witnessed huge improvement in road infrastructure—recorded a 42 per cent YoY rise, overtaking Delhi as the region’s highest property value market,” says Aggarwal. “The Delhi-NCR real estate market is marked by resilience, growth and shifting dynamics. The industry adapts to middle-class aspirations, guided by demand and supply dynamics, infrastructure, and investor sentiment,” he adds.

The trend is similar, if not more pronounced, in another part of the NCR—the Noida-Greater Noida circuit. According to Amit Modi, Director of Country Group and Governing Council Member of industry body CREDAI’s western UP chapter, post-Covid-19, consumers have realised the necessity of owning their homes. “Those who already had a home have felt the need for bigger homes with better facilities, work-from-home features, and one-of-its-kind amenities that improve their lifestyles,” he says.

But Sanjay Dutt, MD and CEO of Tata Realty & Infrastructure, which owns Tata Housing Development Company, says the market has moved beyond the after-effects of the pandemic. “Factors like the continued surge in job opportunities and the emergence of new pockets of growth in the Noida-Greater Noida region due to the infrastructure development in the area, are driving the market,” he says.

Santosh Agarwal, Executive Director and CFO of Alpha Corp Development, concurs. He says, the infra push in the region extends to the creation of industrial parks, and technology centres that attract multinational corporations and start-ups. “This has created a robust job market and increased the demand for residential properties near these hubs.”

THE NOIDA factor

While developers are optimistic about demand in the region, there’s a problem that’s been brewing for long. Data from Knight Frank shows, Noida and Greater Noida’s share in the NCR’s total sales has been falling sequentially since H2 2019. From 71 per cent in H2 2019, its share had declined to 42 per cent in H1 2022, before shrinking further to 32 per cent in H1 2023. The non-availability of ready-to-move-in inventory in the key micro-markets of Noida and Greater Noida, coupled with a dearth of new launches, are the key reasons being cited. The lack of new residential inventory from credible developers has created a vacuum of preferred projects for homebuyers, which has adversely impacted sales. Sample this: Noida and Greater Noida’s cumulative share in NCR’s new launches halved in H1 2023 from 26 per cent in H1 2022.

As a result, the market that used to have one of the largest inventories of unsold units in the country is now recording the steepest fall. Research from Anarock Property Consultants shows that unsold inventory in the Delhi-NCR market fell 21 per cent, from 141,250 units in 2022-end, to 110,990 units by the end of June 2023. This, coupled with the rising demand for homes, has resulted in a significant jump in prices in recent years. Per data from online property listing portal 99acres.com, average prices in Gurugram and Noida have surged over 20 per cent between 2018 and early 2023, while for Greater Noida the rise has been 17.6 per cent. Signature’s Aggarwal says the massive gap in supply and demand—to the tune of a ratio of 1:3 in the middle-income and affordable segments—is driving prices upwards.

To ride this tide of rising demand and surging prices, leading players like Tata Housing from Mumbai, and Bengaluru-based Prestige Estates Projects are also betting big on Delhi-NCR. Mumbai-based Tata Housing, for instance, is coming up with nine new projects worth Rs 11,000 crore, of which a significant portion is marked for the NCR market. Separately, Prestige’s Chairman and MD Irfan Razack says they’re also entering the NCR market through a project in Sector 150, Noida.

the way ahead

The NCR market may have revived thanks to the development boom in certain pockets, but challenges remain. Learning from past experience, players are treading with caution. “The potential for downturns exists; past lessons inform caution. Future growth hinges on stable policies, infrastructure [development], and market adaptability,” says Aggarwal of Signature.

His concerns are not unfounded. Mudassir Zaidi, Executive Director-North at Knight Frank India, says the downturn that began about a decade ago has some important lessons. Due to the lack of sufficient regulations, developers were able to divert funds into other projects. “But this stretched them too thin.” And when one key project got stuck, other projects stalled too. “Then banks stopped lending to them, and they had to borrow from NBFCs that charged interest rates as high as 24 per cent per annum, resulting in more financial distress. It was like a vicious cycle,” he explains.

The implementation of RERA and demonetisation in 2016, followed by the introduction of GST in 2017, had a crippling effect on the sector. Other factors—the farmers’ protests, and a halt on construction activities in NCR due to government orders—were also delaying deliveries. “The outbreak of the Covid-19 pandemic also put a break on construction activities, further lengthening delays,” says Modi of Country Group.

While the past has been gloomy, developers and experts are optimistic about the future of the second largest residential market in the country. According to analysts at Knight Frank, while the NCR market does have challenges, its revival is under construction. With a multitude of large-scale infrastructure development projects such as the Noida International Airport in Jewar, a multimodal logistics park along the Yamuna Expressway, and the expansion of the metro link between Noida and Greater Noida underway, the market is all set for a revival, they emphasise.

So is this the end of woes for real estate firms in the Delhi-NCR? Property developers certainly seem to think so. 

@arndutt

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