Revival in the offing for NCR

Dec 22 2012, 09:39 IST
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SummaryAfter an indifferent year as GDP nosedived, demand has returned and valuations improved.

Rohit Chaudhary, a software engineer working in Noida, bought a three-bedroom flat on the Greater Noida Expressway a couple of years back. For the last four months, he has been trying to sell it to meet a financial exigency. Despite trying his level best, he has not been able to find a buyer with a reasonable offer for his property.

Rohit is one of the many middle-income buyers who have invested in the real estate sector over the last three years, either in the form of land or flats around the National Capital Region, which, apart from Delhi, include Noida, Greater Noida, Ghaziabad, Gurgaon and Faridabad.

A sharp spurt in buyers targeting these areas had in the recent years pushed up the property prices, ultimately tapering off demand forthe area.

One of the major reasons for the fall in demand for property in these markets is the very high property rates prevalent in these areas forcing people to stay away from these properties expecting the prices in the area to correct. Also, there has been a lot of confusion of land acquisition in these areas adding to buying disinterest,Ē said RV Verma, chairman and managing director of National Housing Bank.

A Crisil report on real estate companies released on Friday also says that subdued demand, high construction costs and high interest rates have dented the earnings and return ratios of real estate companies in India over the past two years but projects a revival in the next financial year.

Crisil's analysis of 23 listed real estate companies highlights that earnings declined 21 per cent and 9 per cent y-o-y in FY12 and H1FY13, respectively, RoEs declined from 7.7 per cent in FY10 to 4.7 per cent in H1FY13. The agency blamed subdued demand and high construction costs on top of a high interest cost regime as the reasons behind the soft revenues and margins.

Revival

Some early signs of the decline in demand had started showing up early in 2012. Offtake of flats in the middle-income group segment (flats in the below Rs 60 lakh category), eased off through the first three quarters of the 2012 calendar year.

However, satellite towns, Faridabad and Gurgaon and even Greater Noida did better than Delhi. In Faridabad demand increased by at least 12 per cent. The uptick in the industrial town is due to it being the second cheapest in the region at an average price of Rs 4,000

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