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Buying property in Delhi? Read this first

By Ashutosh Limaye
Last updated on: May 31, 2015 11:59 IST
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What are the upcoming locations and pull factors that determine housing prices in these two metros? What does this means for a buyer?

Ashutosh Limaye, National Director -- Research, JLL India, informs potential buyers about the market dynamics.

Delhi

Image:The 165 kms long Yamuna Expressway which reduces travel time between Agra and Noida. Photograph: Courtesy, Jaypee Infratech

Residential prices in established locations of South and Central Delhi such as Vasant Vihar, Defence Colony, Jor Bagh and Golf Links saw a decline of 15-20 per cent in 2013 and stabilised at those levels in 2014.

A correction in prices was also observed in areas like Westend, Shantiniketan, Prithviraj, Aurangzeb Road and Amrita Shergill Marg, but in a lower range of 10-15 per cent.

Unlike the slide observed in areas of Delhi, areas in Gurgaon and Noida saw prices remain stable at Rs 6,500-17,000 per sq ft and Rs 5,500-8,000 per sq ft respectively in 2013. These areas remained stable at the above prices throughout 2014.

As developers remain under pressure due to excess inventory in Gurgaon and Noida, buyers and investors can expect significant discounts from developers here. In contrast to the negative market dynamics in areas of Delhi and stagnant prices in Gurgaon and Noida, upcoming investment locations in National Capital Region (NCR) like Neemrana, Sohna and Delhi's-J and L zones saw an increase of 15-35 per cent over the same time period.

The only exception to the appreciation observed in these locations was Yamuna Expressway, which remained stable. However, low land prices and development potential continue to help Yamuna Expressway remain an attractive destination for investors.

Upcoming locations and pull factors

There are sound fundamentals behind why these emerging locations beat the negative trend and saw very good price appreciation.

While Neemrana has massive industrial development along with good connectivity through the NH-8, Sohna promises the next wave of industrial and residential growth in Gurgaon. Delhi's J-zone has the location advantage of South Delhi and the L-zone is in an area adjoining the upcoming Dwarka-Gurgaon Expressway.

These are, however, locations primarily lucrative for investors or those looking for farmhouses. They do not currently have adequate social infrastructure, and some of them have yet to see any semblance of the good infrastructure visible in the well-established areas. Thorough due diligence is a must for buyers making land purchases in these locations, particularly in Delhi's J and L zones. The latter have highly speculative valuations. Additionally, in the L zone, there is uncertainty about land reservations/demarcations.

What this means for buyers

Overall, the Delhi NCR market is under stress, which means that valuations remain attractive for end users. This also points to opportunities for distress sales and bargain buys for investors/buyers.

Developers will be under greater duress by the festive period later this year, during which buyers/investors can expect good bargains.

However, buyers should think ahead of the curve.

If interest rates were to come down further, they would be well-advised to make purchases by availing of loans at lower interest rates as in such a scenario, developers will not offer a similar quantum of discounts as they are currently doing.

Smart buyers with deeper pockets can also purchase property directly from investors, in projects where the latter price their offerings lower than the developer.

Importantly, buyers should not fall in the trap of waiting too long. If a project meets all their requirements, it is prudent to proceed with the purchase, as it does not take long for reversals to take place in the real estate market.

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Ashutosh Limaye