Rental market improves, but property prices drop by 1%
Buyers go in for mid-income housing of 40 lakh to 60 lakh in Noida-Greater Noida in April-June quarter, says a report
The good news for the property market this year in Delhi NCR is that the rental market has improved slightly, says a quarterly report by 99acres titled Insite. Downward trends, however continued with a 1% drop in the April-June quarter this year compared to the JanuaryMarch quarter.
The report said residential apartments continued to dominate the market, being the highest supplied property type in Delhi NCR. However, t he demand- supply gap i n this format persisted despite apartments capturing 60% of the total market share.
The mid- income housing category (₹40 lakh to ₹ 60 lakh) was most preferred in NoidaGreater Noida, followed by Gurgaon. However, supply in both the zones fell short as most new launches focused on high ticket prices.
The city’s inventory comprises mostly of large sized houses, especially those configured as 3BHK and 4BHK units. While the availability of 3BHK units sufficiently met market requirements, 4BHK units remained oversupplied. Delhi and Gurgaon had the maximum inventory of 4BHK units.
Nine out of ten homebuyers in Delhi NCR prefer ready properties to under- construction homes, due to the inordinate delay in project deliveries. Availability of ready properties remains insufficient for the city’s appetite. After Delhi, Gurgaon had the largest share of ready-to-occupy homes.
Commenting on the report, Narasimha Jayakumar, chief business officer, 99acres, says, “The numerous government policies and infrastructure e n h a n c e m e n t s a r e ye t t o make a mark on Delhi NCR’s property landscape. However, improved road and metro connectivity between Noida and Gurgaon, and high rate of office space absorption have given a fillip to rental sentiments. Reduction of disparity in the demand- supply equation can further improve the real estate story of Delhi NCR.”
Price trend analysis
Property prices in Delhi (AprilJune 2016 vs January- March 2016 quarter) remained stubbornly high despite increasing unsold inventory. The average value of apartments fell by 2%.
In Alaknanda, capital values increased from ₹ 13,835 per sq ft to ₹ 14,060 and in Vasundhara ₹ ₹ Enclave they increased from ₹ 9,800 to ₹ 9,867. Builder floors were more popular than society apartments. More than half of the localities tracked for the survey saw an average increase of 3% in capital rates of builder floors, with Lajpat Nagar III, South Extension I and Sarvpriya Vihar clocking the highest growth of 4% to 6% each.
Increase in inventory and stalled infrastructure projects impacted market sentiment in Noida and Greater Noida. Capital values fell by an insignificant 1%. Only one- fifth of the localities tracked for the survey in Noida recorded an increase in property prices, amongst which Sector 82 saw an increase of 4%. Prices in Sector 150 increased by 3% over the last quarter. Land values in Greater Noida remained flat and plot prices in Noida stagnated in the April- June 2016 quarter, despite a spike of 14.19% in residential land allotment rates. Market sentiment improved slightly in Ghaziabad. Property prices in certain pockets of Ghaziabad, especially Abhay Khand, Ahinsa Khand II and Mohan Nagar, increased by 2% to 5% quarter on quarter. Government initiatives on the infrastructure front failed to turn the fortunes of Gurgaon’s realty market, which saw a downtrend of 1%. Only 20% of the tracked l ocalities in the Millennium City reported growth in prices. The New Gurgaon market, especially Sector 95, saw a growth of 4% quarter on quarter.
Builder floors posted a quarterly decline of 2% in average values in the April- June quarter.
Though the rental market has been lacklustre, certain parts of Delhi – Dwarka and the western region – posted decent growth of 3% and 2%, respectively. Rents of apar t ments i n Dwarka remained robust, with sectors 7, 9, 10, 11 and 12 witnessing a yearly surge of 8%, each. High rate of office space absorption, combined with seamless connectivity with Gurgaon via the Dwarka Expressway and comparative affordability, fuelled rental growth in the sub-city. Replicating last quarter’s performance, rental values of builder floors in south Delhi remained stable as a result of high reputation index. New Friends Colony, Defence Colony, C R Park, Malviya Nagar and Greater Kailash II, all belonging to south Delhi, topped the rental charts of Delhi with a jump of 4% to 5% each, in rental values over the last one year. The rentals market in Noida succumbed to the pressure of soaring supply and l imited demand and recorded no change in average capital rates in the last one year. While Noida witnessed rents of apartments either plateauing or dipping YoY in 75% of the established sectors, the Greater Noida market recorded an average annual dip of 1%. Unlike the last quarter, builder floors in Noida performed well in Q2 2016, clocking an average rental growth of 4%. While rental rates in 60% of t he t racked l ocalities witnessed decent growth, Sectors 20, 26, 27 and 31 saw values surging by 6%- 8%, each. Not only are all these sectors strategically located within a radius of 5-km from Metro stations in Sector 18 and Botanical Gardens, shopping centres and medical care units; some of these localities are also witnessing redevelopment of old properties. Ghaziabad continues losing traction to the neighbouring city of Noida, which offers more attractive options along with sturdier infrastructure. The rental graph remained flat here.
Once again, the established locales of Kaushambi and Ahinsa Khand II in Indirapuram were the frontrunners, recording 4% rental growth, each. These localities benefitted from low rentals, good connectivity and proximity to the office and commercial hubs of Noida.
Infusing some cheer into the otherwise bleak real estate scenario of Delhi NCR, Gurgaon’s rental market posted an annual rise of 3% during April- Jun 2016, after descending by 2% in January-March 2016.
The 40% increase in Delhi NCR in office space absorption in H1 2016 was good news for Millennium City. Unlike the fragmented residential market, the commercial and office arena exhibited steady investment, thus translating into a spike in demand for rental properties.
Builder f l oors sur passed apartments to clock 5% rise in rental rates YoY.
Sectors 52, 23 and DLF City Phase III led the race in Gurgaon with a rental jump of 13%, 12% and 11%, respectively, in Apr- Jun 2016. The promise of improved connectivity via metro and proximity to workplace propelled rental demand in these locales.