Calibrated supply, strong sales boost realty in Gurugram, investors back in play

Driven by strong sales but limited supply, property prices in many micro-markets across the National Capital Region (NCR), including Gurugram, have risen by 15 to 20% in the past six months.

A report released by Motilal Oswal on Tuesday said increase in prices and rise in sale momentum has also brought investors back into the market with almost 20 to 30% absorption being investor driven. In the emerging micro-market of Gururgam, which includes the Dwarka expressway, southern peripheral road and Golf Course extension road, the investors are playing an even more important role and buying almost 40 to 50% of the housing stock, the report said.

The report observed that in Gurugram, the supply in certain micro-markets is largely dominated by plots and independent floors with limited supply of high-rise housing projects.

It said companies are launching projects in a calibrated manner with release of not more than 50% of total inventory at one go, enabling better sense of demand without over-committing to supply. Further, land prices have doubled over the last two years, making projects economically unviable for most players, limiting the supply from developers with limited land reserves.

City-based developers and real estate experts said the realty market has gained strength in the past six to nine months with increased sales and rise in prices helping them liquidate stock. A key reason for this recovery is the strong check on new launches, which has ensured limited supply, said experts.

Vinod Behl, city-based real estate expert, said the completion of key infrastructure projects in Gurugram such as Sohna elevated road, the Delhi-Mumbai expressway stretch near Sohna, and the near completion of Dwarka expressway and connecting roads in Delhi, have given more confidence to buyers and investors. “The developers have also calibrated new launches to liquidate inventory and tailored new launches according to the needs of homebuyers,” he said.

According to the report, the average prices of property on Golf course extension road has risen from 13,000 per square feet (PSF) to 16,000 PSF while prices on Dwarka expressway have risen from 12,000 PSF to 15,000 PSF. The report said supply continues to remain constrained across Delhi-NCR.

The premium segment remains largely unaffected by the interest rate hike and prices have increased 15-20% across micro-markets in the last six months. According to a report released by the Confederation of Real Estate Developers’ Associations of India (Credai), reasearch firms Colliers and Liases Foras, the property prices in Delhi-NCR rose by 10% in the first six months of 2022.

“Since the beginning of the year, there has been sustained sales growth across major Indian metropolises, including NCR, which saw a sizeable jump in demand for luxury homes. In the past two years, the housing market in Gurugram has emerged as a hot real estate investment destination with annual price growth reaching record highs,” said Aakash Ohri, group executive director and chief business officer, DLF Ltd.

The report also said Gurugram continues to undergo certain infrastructure development cycles, which are bringing certain far-off markets closer to the commercial hub, driving demand and pricing in those markets. It cited Sohna elevated road, Central Peripheral road, Dwarka expressway, and Golf Course extension road as key infrastructure projects boosting the realty secgtor in the city.

Ashwani Kumar, managing director, Pyramid Infratech, said 2022 has been a year of price hikes in the real estate sector in every aspect, whether it is the raw material costs, Repo rate hikes or overall project prices. All these factors brought a temporary halt to project sales. “Despite all these issues, the market has remained robust and apartments are in great demand and expected to remain so in the next 2 years. The affordable segment has also shown great demand,” he said.

Kamaljit Singh, vice president, Bestech, said while demand has been robust and sales have been strong, his key concern is the sharp rise in bank interest rates, which have risen from 7% to 9% in the past nine months. “Ready to move in property has been sold out. We recently launched a project and buyers showed keen interest. The prices are rising and this has also brought the investors back into the market,” he said.

The report also said that the Deen Dayal housing scheme launched by the state government has gained a lot of traction for plotted/floors development in Gurugram as it allows registry of group plotted housing scheme with basic amenities in area as small as 5 acres.

Surinder Singh, managing director, GLS, said despite increase in input costs, sales have shown strong growth and end users are buying apartments, flats and plots. “The increase in interest rate has till now not affected buyers’ sentiment and we are hoping for an even stronger 2023. The premium, affordable, and plotted categories all have buyers, only the product should be good and located right,” he said.

A home buyer who bought a house in sector 95 A in November said he bought the apartment because it was ready to move in and despite the increase in price, he paid a premium to buy it. “The prices are rising, no doubt, the interest rate has increased but still a ready to move in home is a good buy both for end use or investment,” he said.