Weak sales drag south Delhi property prices down 2
NEW DELHI: Property prices in the upmarket residential areas of Delhi have dropped by as much as 20%, with slowdown in sales forcing builders to settle for less to cut inventory buildup.
Of the 368 apartments that came into the south Delhi market over the last six months, only about a sixth have been sold, pressuring prices down by 15%-20%, according to Delhi-based property broking firm IndiaHomes.
These apartments are located in Greater Kailash, Vasant Vihar, Defence Colony, New Friends Colony, Panchsheel Park and Gulmohar Park-the chic areas of the national capital where prices had almost doubled in the last three years, rising at 20%-25% annually.
But experts say investors are making an exit as economic activity slows further.
"Investors are out of the market and end-users want to see the finished property before buying," IndiaHomes managing director Samarjit Singh said, adding, "The longer builders hold on to apartments, the bigger will be the dent to their profits, as many of them have borrowed from private financers at rates of up to 30%."
South Delhi, like south Mumbai, has had the reputation of being recession proof, with property prices remaining stable or even increasing during the global financial crisis. However, most builders, who earlier were selling apartments at the drawing-board stage, are now struggling to sell, with economic uncertainty driving away investors. Adding to their woes is hardening of interest rates on loans.
"There has been a steady decline in prices over the past few months, with buyers shying away from what looks like an overpriced market," said a real estate broker in Greater Kailash. "Smaller builders are starting to feel the pressure and are willing to negotiate," he added.
The slowdown in demand is also partly due to homebuyers choosing the newer residential areas in the national capital region over crowded south Delhi.
"It's turned into a buyer's market," said Shveta Jain, head of residential services at property consultancy firm Cushman & Wakefield. "Earlier, it was hard to negotiate with builders. But today they are willing, at least behind the doors," she added.
Mudassir Zaidi, regional director at property advisory firm Knight Frank, said, "We have seen a 10% reduction in sellers' price expectation. Transactions are taking more time to close."
Property rates in Delhi had started climbing a few years ago after the government allowed house owners to build a third floor. While this led to a steady increase in inventory, the growth in demand petered out, especially in the last six to eight months, because of weak economic sentiment and high interest rates.
Rajesh Kumar, a South Delhi-based real estate agent, said his business is down by at least 50% in the last six months.
While builders agree that transactions in south Delhi have come down, they maintain that property prices have not softened.