If the sale of over 600,000 application forms for the 5,020 apartments on offer by the Delhi Development Authority is any indication, private developers in the national capital region are in for tougher times ahead, as investors are betting on their chances for higher returns from the cheaper DDA flats.
On an average, a DDA flat is on offer at half the price of apartments being developed by private developers.
"Customers are calling us to find out the resale value of DDA flats, which they may be alloted. The profit that a customer will make on the resale would range between Rs 35 lakh and 50 lakh for a three-bedroom apartment of 1,614 square feet in the west Delhi locality of Pitampura", said a property broker based in the area.
The resale value of a 900 sq feet DDA apartment in Pitampura is pegged at between Rs 60 lakhs (Rs 6 million) and Rs 65 lakhs (Rs 6.5 million).
Last month, the DDA announced a housing scheme in which it has put on offer 5,020 one-, two- and three-bedroom apartments all over Delhi.
The last time DDA had put flats on sale was in 2006, when it sold nearly 3,818 apartments across the city.
The fresh supply of apartments from DDA is equivalent to the total number of apartments offered by the top five private developers in the current year.
The DDA apartments are coming into the market at a time when private developers are finding it tough to sell the apartments due to buyers baulking at the interest cost on home loans, which range above 13 per cent.
In addition, the situation will become tougher if the expected supply of nearly 1,200 cooperative group housing society apartments in various pockets of Delhi, primarily the western locality of Dwarka, comes into the market. According to some reports, the long delayed allotment process may happen by the end of this year.
In the three-bedroom apartment category, DDA is offering 625 apartments at an average price of Rs 3,170 per sq ft.
In the two-bedroom category, as many as 889 apartments are on sale at an average price of Rs 2,909 per sq ft.
In contrast, the average per sq ft price offered by private developers ranges between Rs 3,500 and Rs 5,000 for mid-end apartments.
At this price, DDA apartments are cheaper than those of a private developer, especially in the mid-end segment, a broker pointed out. Of course, buyers do not get the same facilities or quality in DDA apartments that private developers offer in theirs.
"The mid-end segment market will certainly shift towards the DDA apartments since they are available at a much lower cost with high resale value. But the premium segment will remain unaffected as the customer for this segment will never go for DDA flats," said Shveta Jain, associate director residential, Cushman and Wakefield.
There is another plus point that may attract buyers to DDA apartments -- its apartments are ready for delivery. The authority charges a registration amount of around Rs 1,50,000 from applicants, with assured possession in around three months after the draw of lots is conducted (around Diwali this year for the latest offer).
The delivery period of private properties is much higher at an average of 36 months from launch, with buyers required to either pay upfront or given the option of staggered payments.
