Delhi-NCR real estate in 2013: A recap

In 2013, the national capital region (NCR) witnessed many ups and downs. Several factors such as policy changes, introduction of new real estate bill, economic slowdown, etc. had their influence on the property market.

Residential segment

In the very beginning of 2013, Delhi-NCR’s real estate started feeling the heat of increased construction costs owing to hike in brick costs. Despite of the weak buyer sentiments, the market witnessed stable demand for properties during the first half of the year. Rental values in the housing segment remained stable in Q1 while capital values witnessed marginal growth of about 5 to 8 percent quarter on quarter.

The residential segment witnessed slowdown in Q2 of 2013 owing to prevailing market scenario. Both the capital values and rental values observed gradual decrease. Around 14,000 new housing units were added during the quarter, which was about 30% higher than the supply during the previous quarter.

In the third quarter, investors and buyers had been shifting their focus from already established areas including Gurgaon and Noida to the emerging markets like Bhiwadi and Greater Noida. The new supply of units in Greater Noida almost doubled in this quarter compared to that of Q3 of 2012.

As a result of festival cheer, the fourth quarter witnessed pretty good sales in NCR. Many buyers invested in real estate as they consider auspicious to make property purchasing at the time of Diwali and Navratri festivals.

Project delays highest in NCR

Amidst increasing pressures to reduce prices and rising costs of construction materials and labour, developers had no other way than to delay many projects. In Delhi-NCR, only 21,371 residential units had been delivered until July this year, out of the promised 91,558 residential units. This shows that there is only 23 percent delivery rate, which is hardly impressive.

Affordable housing in demand

Projects in affordable housing segment witnessed rising demand across NCR. Many developers have come up with and are planning to launch affordable residential projects. The areas which are comparatively affordable witnessed better absorption rate than those which offer properties with high price tags.

Besides developers, few authorities have also shown interest in this segment. The Greater Noida Industrial Development Authority (GNIDA) proposed to develop 10,000 affordable flats near Sports City while the Yamuna Expressway Industrial Development Authority (YEIDA) planned to develop 5,000 affordable flats in Sector 10.

Major changes in 2013

Inclusion of three new districts to NCR

The National Capital Region Planning Board (NCRPB) gave green signal to the inclusion of three more districts -­ Bhiwani, Mahendragarh and Bharatpur -­ to the NCR. The move is likely to bring in more affordable residential projects to the NCR.

Delhi Rent Act:

On the lines of creating ground for new rental law, the Union cabinet planned to repeal the Delhi Rent Act of 1995 (DRA) and withdraw the Delhi Rent (amendment) Bill of 1997. The Delhi rent amendment bill still lies pending before the Rajya Sabha even though 18 years have passed by after it was proposed.

Repo rate corrections by RBI:

Many changes have been made with regard to providing bank credit to real estate sector such as frequent repo rate cuts, relaxing ECB norms and others. For the first time, the Reserve Bank of India (RBI) had cut the repo rates thrice in a single year. It had cut the rate by 25 basis points each time in January, March and May 2013. The Cash Reserve Ratio (CRR) for scheduled banks was also reduced in January by 0.25 percent in order to increase liquidity in the system.

However, the RBI later increased repo rate twice in September and November which had added to the slowdown of the realty market. The banks were left with no other way than to pass on the increased rates to borrowers through higher interest rates.

Revised IT/ITES-SEZ norms:

On a move to stimulate commercial real estate in India, the Government has done away with the mandatory requirement of 10 hectares of minimum land area for setting up an IT or ITES special economic zone (SEZ). It has set built-up area requirements to be met by SEZ developers. As per the new rule, 100,000 sq. M minimum area is sufficient for setting up an IT SEZ across the seven major cities, 50,000 square metres for Category B cities and 25,000 square metres for the remaining cities. With this reform, an SEZ can now come up on a small chunk of land with 7 acres too.

Farmhouse policy amendment

The Delhi Development Authority (DDA) made few amendments to the farmhouse policy. Earlier, the minimum plot area required to build a farmhouse was 2.5 acre, but as per the new rule, the limit has been reduced to one acre. After the introduction of one-acre farmhouse concept, flats in some of the plush areas in Delhi have been facing strong competition.

The DDA gave its nod to 27 villages identified as ‘low-density residential area’ (LDRA), where one-acre farmhouses can be developed.

Rise in FAR

The DDA relaxed the floor area ratio (FAR) of housing and hospitals in the city, on a move to meet the housing requirements of the growing population. It increased the FAR of buildings from 150 to 225 which will give space for more apartments.

Hike in circle rates:

The circle rates were increased by 25 percent in Noida, Greater Noida and by 20 percent in Ghaziabad from August 1, 2013. This had also influenced the property transactions in these micro-markets.

GPA-based property transactions:

Delhi government cancelled the ban on property transactions based on General Power of Attorney (GPA). The move will support sale and purchase of properties in several unauthorised areas which lack clear titles.