Delhi real estate: Will redevelopment impact prices in Lutyens Bungalow Zone?

Updated: September 30, 2016 4:57:14 PM

The area of interest for most of the stakeholders in the real estate sector will be the 5.13 sq km to be excluded from the Lutyens Bungalow Zone, provided the recommendations of the Delhi Urban Art Commission are accepted and notified.

Delhi real estate: Will redevelopment impact prices in Lutyens Bungalow Zone?The exclusion of around 5.13 sq km from the Lutyens Bungalow Zone (LBZ) will mean that fresh development can come up in these areas, and the guidelines according to the Delhi Master Plan 2021 and the Delhi Building Bylaws 1983 will apply to them. (Indian Express Archive)

Pankaj Anup Toppo, Vice-President – Research, Knight Frank India

Located in the heart of Delhi, the Lutyens Bungalow Zone (LBZ) is one of the costliest pieces of real estate in the country and has always made it to the front pages of national dailies for two main reasons—the record-breaking value of the transactions taking place there and the person moving to this part of Delhi. This time around, the LBZ has been in the news for a different reason. In a recent move, the Delhi Urban Art Commission (DUAC), a body that decides on the development of the city, has advocated the exclusion of eight areas from the present-day LBZ, thereby shrinking its size. If this becomes a reality, real estate in the heart of city will become more affordable, but this area will continue to remain the domain of the rich.

The Lutyens Bungalow Zone
Situated close to the central business district of Connaught Circus and the seat of the Central Government, this area of Delhi is dotted with low-rise buildings and sprawling bungalows. What puts it on the wish list of the rich and famous is its exclusivity. The area of the LBZ has been increased over the years. When Sir Edwin Luytens designed the new capital of British India, the LBZ was spread over an area of 19.12 sq km. In 1988, when the LBZ was first demarcated in independent India, its area covered 25.88 sq km. In 2003, new locations were included in the LBZ and its area expanded to 28.73 sq km.

The proposed Lutyens Bungalow Zone
The Ministry of Urban Development had been receiving representations from various residents of the LBZ for the relaxation of certain norms. The ministry forwarded these representations to the DUAC for examination and to propose the necessary recommendations. After a study on the matter, the DUAC was of the view that the colonies of Sunder Nagar, Golf Links, Jor Bagh, Bengali Market, Panchsheel Marg, Sardar Patel Marg, Mandir Marg, Chanakyapuri, Ashoka Road and Connaught Place will not be part of the revised LBZ, as they were not part of the LBZ envisaged by Sir Edwin Lutyens. As a result of this revision, the LBZ’s area will shrink from 28.73 sq km to 23.60 sq km. This means that once the revised area of LBZ is notified, approximately 5.13 sq km will be freed for real estate development.

The new supply
The exclusion of around 5.13 sq km from the LBZ will mean that fresh development can come up in these areas, and the guidelines according to the Delhi Master Plan 2021 and the Delhi Building Bylaws 1983 will apply to them. Since these areas will still have the locational advantage of being close to the seat of power, they will continue to command a premium. However, capital values in these areas will now be within reach for many more individuals, depending on the number of units that will come up. Most of these areas, especially Golf Links and Jor Bagh, are presently dominated by villas and bungalows. New supply in the form of apartments is expected to come up only after the areas are officially de-notified from the LBZ. This new supply will only materialise if the owner of a bungalow or villa opts for redevelopment. Though the new supply will be more affordable than the current properties in these areas, they will certainly not be cheap. If the prevailing capital values are any indication, the new supply coming up in these areas will be in excess of Rs 15 crore. These will be largely for 3 and 4 BHK apartments with a super built-up area in the range of 2,200–3,000 sq ft.

Conclusion
The area of interest for most of the stakeholders in the real estate sector will be the 5.13 sq km to be excluded from the LBZ, provided the recommendations of the DUAC are accepted and notified. The availability of new areas for development in the heart of the city will lead to fresh supply coming into the market. This supply, if and when it comes, will lead to lowering of capital values in those areas. However, even after the capital values come down from the present levels, the new supply will command a premium, largely on account of its locational advantage.

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