1. The road so far: Down but not out, all Gurgaon needs is a little push

The road so far: Down but not out, all Gurgaon needs is a little push

The city of Gurgaon has for long been a bellwether of the rapid growth in the country over the years, thanks to the presence of multiple multinational corporations.

By: | Published: January 9, 2016 1:34 PM
Gurgaon_rapid_metro L The city of Gurgaon has for long been a bellwether of the rapid growth in the country over the years, thanks to the presence of multiple multinational corporations.

Gurgaon is an important realty market of the country, and especially in the National Capital Region (NCR). That said, Gurgaon was not unaffected by the slump that hit the country’s realty sector. Sales dwindled, new launches decreased, prices came down and the overall sentiment nosedived in the year 2015.

The city of Gurgaon has for long been a bellwether of the rapid growth in the country over the years, thanks to the presence of multiple multinational corporations. This factor has for long attracted countless expatriates and NRIs, and resulted in Gurgaon’s realty boom over the past decade-and-a-half. However, the past couple of years have been tough for Gurgaon’s real estate market.

Overall, NCR has witnessed country’s highest unsold inventory figures at almost 1,70,000 units. Gurgaon’s contribution to this burden is only around 22,000 unsold units, but this is still uncomfortably high. Another source of worry is that almost 30 per cent of this unsold inventory is under construction, and located in perfectly inhabitable sectors.

The primary reason for this scenario has been a slowing economy over the years, as well as sky-rocketing prices. Buyers were waiting for prices to come down, while investors who bought properties in the previous boom cycle of 2009-10 did not want to commit more money with no clear returns. With the liquidity crisis brought on by high unsold inventories, developers began offering freebies, discounts and all kinds of schemes to lure buyers.

The impact has been a visible and significant decline in prices by approximately 25 per cent over 2014. However, this has proved insufficient to catalyse a new demand boom. In other words, while Gurgaon’s realty market favoured developers in the period 2010-12, it is now clearly a buyers’ market. Nevertheless, most buyers still see this market’s prices as unattractive.

On the positive side, Gurgaon has seen the maximum number of new launches within NCR, and that too in the affordable housing category under the Haryana government’s Affordable Housing Policy 2013. These dwellings are priced at under Rs 25 lakh — which is where demand may come in over the short to medium term. The demand for properties priced beyond Rs 3 crore has been on a steady decline, and projects that were launched way back in 2009-10 catering to this premium segment constitute a large part of the unsold inventory. In fact, some of these projects have not even been completed, thanks to the liquidity crisis. This has resulted in new launches being down by around 30-35 per cent on a year-on-year basis.

Birds’ Eye View Of 2016

Despite the not insignificant challenges ahead, the future of Gurgaon’s real estate market is positive and hopeful. With a projected GDP growth of around 7.5 per cent, a once again robust economy will generate income for more and more people and most likely boost demand. Gurgaon is the hub of the service industry in NCR, and surrounding areas are becoming increasingly important in the manufacturing sector. The government’s ‘Make In India’ initiative will ensure more industries, and this will directly result in increased housing demand.

Secondly, the RBI’s recent rate cuts will start having an impact on bank’s lending rates somewhere by Q2 of FY 2016-17, resulting in lower home loan rates and greater demand. Also, the government’s initiatives of easing FDI in real estate will improve liquidity, meaning that developers will have more leg room for offering good deals to buyers.

Another important influencing factor is the Smart Cities project, for which Gurgaon is a strong contender. Its inclusion in this scheme will be a boon for its real estate sector.

Is it all wishful thinking? On the contrary — there is strong logic involved. The country’s economic slowdown has troughed out, and the only way is up. The government has woken up to the fact that the real estate sector needs real help, and is making very favourable policy decisions.

For a city like Gurgaon that needs only a small amount of stimulus to get up and running again, the winds of change are blowing strong. The changes will not happen overnight, but 2016 will bring visible progress on the ground. As a result, real estate pricing trends in Gurgaon will also begin picking up again.

  1. No Comments.

Go to Top