Prices of homes in the National Capital Region (NCR) are coming down majorly, especially in the last couple of years, thanks to the way authorities have been able to control the black money. Investors, too, have stayed away from the real estate sector over here and all these factors have contributed to the significant reduction in the aforementioned prices.
Even though the prices have come down by 40% (and even more) in the last couple of years, it has done nothing to improve the realty situation in the region. Since the investors are not showing much interest, it has meant that there are now lots of unsold properties in the area.
Using black money in real estate
The national administration under the Narendra Modi government has made it really tough to use black money in the real estate sector. Unlike the past, people now are not allowed to use unaccounted money in real estate purchases. In fact, it has become well nigh impossible and all this is perhaps taking a severe toll on the overall real estate scene. The dealers are complaining that all this has turned away people from investing in real estate to the extent that they used to do previously. For example, in areas such as Greater Noida, one can only invest a certain amount of cash upfront to book a flat. The remainder of the money has to be provided by net banking and cheque options.
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Once that is done, any and every discrepancy will be noticed by the Income Tax department which, according to the dealers, maintains an eagle’s eye view of proceedings. The laws regulate that in case of every big transaction the PAN number of the concerned person is used. In case of any big transfer, on the other hand, the bank authorities shall ask questions regarding the source of the said amount.
It is not that the situation is any better in the secondary market, where investors are selling the properties. Even in the secondary market the sellers are asking for cheques. Since they know that PAN numbers need to be mentioned for all big transactions, people aren’t being able to use any black money in selling the properties as well.
Benefits for dealers
The situation has been beneficial for dealers since they know they would be able to buy the properties at almost bargain prices. Nowadays, a two bedroom flat in Noida is available in the region of INR 35 lakh, something that was unimaginable even three to four years back. There are a number of schemes to help such investments. Now, as per the subvention schemes, a buyer can pay 5% of the amount right upfront – and the remainder can be paid during the tenure that he possesses it.
What do the reports say?
In a recent report, Jones Lang Lasalle – a real estate consulting firm – has stated that there are around 170,000 unsold properties right now in the NCR – the highest figure of this kind in India at present. With more than one lakh units, Noida tops the list. The other unsold properties are in Delhi, Faridabad and Ghaziabad. Santhosh Kumar, CEO, Operations, Jones Lang Lasalle India says that even though the developers are making various attractive offers it has not proven to be much for the customers. He also points that the trust issue is a major reason behind the flats going unsold. He feels that only when developers are able to focus more on their work and complete things on time will this trust come back.
What are the other things going wrong?
A recent study by ASSOCHAM has found out that there are almost 250,000 unsold properties in the realty market of NCR. This represents almost 35% of the properties being built in this sector. The major reasons behind them being left unsold are delays in litigation and provision of regulatory clearance. Delays in infrastructural projects have also hurt the market quite a lot. In recent times, the ticket prices of properties with one to three bedrooms has come down by 35% in Noida, 25% at some important markets in Delhi and 30% in Gurgaon. There are, however, people like Geetamber Anand, President of Confederation of Real Estate Developers’ Associations of India (CREDAI) and Managing Director and Chairman of AIS Infrastructure, who does not agree to the notion that lakhs of flats are going unsold in NCR.
One thing that needs to be understood in this context is that in spite of such low levels of demand, the residential market remains the biggest component of the realty market in NCR. In fact, they comprise around 70% of the market. Gurgaon takes up almost 33.3% of the market followed by Noida (20%) and Greater Noida (10%). Thanks to all the abovementioned issues, home buyers in NCR are now looking at properties that have been completed and can be used in a short span of time rather than flats that are under construction. However, there are not enough of such properties to meet the huge demand. Most of these homes are in Gurgaon and Delhi. There is sufficient demand in Noida and Greater Noida, but most of the properties here are still stuck in the construction stage. There are more ready-to-move properties in Faridabad and most of them are of the 2BHK and 3BHK variety. In Gurgaon, the supply of under-construction homes is lesser than the demand.
There is plenty of construction going on in Dwarka Expressway, Sohna Road and Golf Course Extension Road. This has added to the number of under-construction properties in Gurgaon. There are not too many flats in the NCR to meet the demand for mid-income housing category (INR 40-60 lakh), whereas the number of high-income houses (INR 60 lakh-1 crore) are more than necessary. Faridabad leads the race in this respect. Meanwhile, Delhi and Gurgaon have seen a shortfall in the supply for high-income housing category.
There are too many homes in Delhi in the ultra-luxury category (INR 2 crore and more) and this has led to a state of high disparity. In Noida, Greater Noida, and Gurgaon there is high demand for the mid-income category, but the supply has not met the demand since the developers are focusing more on the higher value properties.