Photo: Prakhar Pandey
The law of averages – apart from the still under par ‘sentiment’ and the supply glut ‘reality' - seems to have caught up with Gurgaon, which has been a darling of Real Estate investors for over a decade. A sector that was touted as ‘core’, and too essential and too big to fail, seems to have finally belied its promise. While the Real Estate industry today is facing multiple challenges, the most important of these is of how it can ensure the ‘honourable’ exit of thousands of investors (and builders), who it seems are still waiting to make a killing when they exit. Hope (achhe din) seems to spring eternal; holding capacities, though, will reach a breaking point soon. Today there is little or no active buying of residential housing (except in the secondary market), and brokers lament that while earlier they used to get five to ten queries a day, they now do not get as many in a month! Commercial property went bust earlier.
The problems of the Millennium City have further been compounded by the fact that neighbouring Delhi, where Real Estate was earlier effectively controlled mainly by DDA, is getting second wind. Thousands of acres of agricultural land are likely to be converted into prime Real Estate, with the help of private players. DDA also plans to build many more apartments and houses – it just tendered one big batch, and is preparing for the next within a year. Real Estate analysts opine that although the Capital’s residential projects and clientele seem quite different from those in Gurgaon, DDA’s projects, especially those in and around Dwarka (a Gurgaon suburb), could make the middle class consider Delhi as a better option – at least to live in...unless the prices in Gurgaon get down and real – fast. Sanjiv Kumar, a Real Estate consultant, says that despite a 10 to 15 per cent correction in prices of property on the Northern Peripheral Road (Dwarka Expressway) in Gurgaon, there is still little demand. "There was hope that the new BJP governments (State & Centre) would bring in policies and plans to revive realty, but it seems things will take some time to work out," he muses. Kumar also apprehends that while Haryana has not been able to get its act together in building the physical and social infrastructure even in key cities like Gurgaon, Delhi (and even NOIDA) authorities are known to plan and set up adequate requirements in advance. Further, the long delays caused by Gurgaon builders on their projects, their failure to complete any project in totality, the constant fights between apartment owners and builders, and the continued insensitivity of the Administration, has also taken the sheen off the realty sector in the City. Compare this with Delhi, where the government and the DDA have come out with a plan to create more residential and commercial space at all price points and, realising that they would not be able to do so by using the traditional acquisition methods, have preferred to go with private participation and a land pooling arrangement. A number of path-breaking decisions have been taken under the Delhi Master Plan 2021, which include greater participation of the private sector in the assembly and development of land and the development of urban infrastructure, and the encouragement of Land Pooling on a large scale. Ramesh Menon of Certes Realty, who has been working both in Gurgaon and Delhi, asserts that the Land Pooling policy that has been introduced in the national capital will be a game changer. Menon asserts that this Policy makes an investment in land in Delhi one of the biggest real estate opportunities in the country. Those who purchase land in Delhi, directly from a current land owner/farmer, over the coming few months, could soon surrender their fragmented agricultural land to the land pooling agency, and in return get a rectangular piece of land that could be converted for designated development. The Delhi agency would retain a certain percentage of the land for the development of social and physical infrastructure. The current glut in Gurgaon, Menon points out, is also because a large number of investors, who earlier regularly hunted for deals in the City, are buying land and properties in Delhi. Lately there has been decent speculative buying of agricultural land beyond Dwarka, especially in West Delhi.
While builders across NCR, and Gurgaon struggle with rising input costs, high interest rates and a general slowdown in the economy, the brokers maintain that the problem is self-made, because none of the developers has ensured a balance between end users and investors. It is said that almost 70 per cent of the property on the NPR (Dwarka Expressway) has been bought by speculators, who are now feeling the heat as prices have started to fall – after remaining static for a while. And yet there are no buyers in the market. Some of the developers are finding it difficult to even pay the monthly salaries to their staff. Some projects have even been cancelled. However, even now they do not want to reduce their property prices to realistic levels in order to get higher liquidity. Instead, some of the builders have announced assured return schemes to lure investors who have cash. Analysts warn that investing in such instruments could be harmful in the long run, as there are not ‘genuine’ financial instruments. There is also a suppressed against many builders, because even large developers have started reneging on promises made to their buyers - and even their trusted brokers. In one such instance, a broker who underwrote almost 10 lakh square feet of commercial space, found himself in a tight corner after the developer refused to pay the penalty for delay that was promised at the time of sale. When asked why prices have not come down or come down a little only, despite the slowdown, Sanjay Sharma of Qubrex says that Indians are historically known not to sell their property at a discounted price – though that should really apply to one’s primary house, and not ‘investments’. Another factor he cites is the role of ‘black money’ in property deals, which allows the buyers to keep their cash safely parked, with the hope that the investment will give a return in the long run - as real estate industry is seen as a cyclical market. What is holding back the revival of Real Estate is also the fact that ‘New’ Gurgaon, which was touted as the hot Real Estate destination, still does not have adequate civic and social infrastructure. Even the ‘developed’ parts of the City suffer from shortage of water and power. Menon points out that the lack of public transportation and law and order issues are now almost forcing companies to leave the City, and some large concerns have already left for Singapore and other cities because of regulatory issues. "Domestically also, unless the Haryana government and the City Administration get their act together and engineer a revival of Gurgaon, we stand to lose to Delhi and NOIDA; and with the Metro reaching Faridabad, that city will soon compete with us," he says. In fact southern states like Kerala are now competing with Gurgaon for the much vaunted IT jobs. Sharma of Qubrex says that for realty to recover in the Millennium City, we will need to ensure one lakh good quality local jobs. "With companies not expanding in Gurgaon, and factories moving out, it would be difficult to fill the large offices and apartment complexes," he warns.
On the other hand Delhi is beginning to find its pace. Experts says that the perception that Delhi is going to be the next boom market is fast gaining acceptance. The positive here is that the majority of developers are already tested, and have the required expertise and funds. Conversely, in the Millennium City, apart from a few large developers, anyone with a few acres of land and political connections has turned ‘coloniser’. Menon says that the infrastructure development in Delhi is likely to be of top quality and time bound, as DDA has already issued a global RFP calling for master planning and development. The recent announcement that Delhi will have three smart cities has also added to the sheen, and boosted the morale of the realty players there. Delhi realty has also shown better resilience during the slowdown. The population of Delhi is expected to rise to 19.9 million in 2016, and 23 millions by 2021 - with density expected to rise to 225 persons per hectare (as per the MPD 2021). Amit Sharma, who invests in both Gurgaon and Delhi Real Estate, says that Delhi is holding steady because it has a number of micro-markets that are witnessing development; and, more importantly, the City is an end-user market where 80 per cent of buyers will live in the property that they own. He predicts that areas like Dwarka, Najafgarh and the surroundings are going to give a tough competition to Gurgaon, because of the improved connectivity through the Dwarka Expressway and the proposed Metro line. Sanjay Sharma asks that if quality Real Estate with good infrastructure and better security is made available at more affordable prices in Delhi, who will want to reside in Gurgaon?
The problem of the prolonged slowdown is staring everyone in the face, particularly on Dwarka Expressway, which is touted to be the closest to Delhi. Projects sold at fancy rates by big developers today have no buyers - even at 25% discounted rates. Positive developments in nearly Delhi have now become an equally big challenge. Stay in Delhi, work on Gurgaon could become very feasible – even attractive. The key challenge to Gurgaon could come from West Delhi and Northern parts of Delhi, which have huge agricultural land spread from Dwarka, to Najafgarh and upwards to Bawana (almost touching Rohini). Land development under PPP mode is about to start here. The Dwarka sub-city could pose a major challenge, because it is very close to Gurgaon and has a well planned road network spread across its sectors and adjoining locations. It connects well to NH8, Outer Ring Road, Najafgarh Road, Pankha Road and the Rewari Railway line. However, the most important development could be the Dwarka Expressway and proposed Metro line, which would connect Dwarka very effectively to Gurgaon. If these two key developments happen soon, then there is all likelihood that many apartment buyers might prefer to stay in Delhi, because the national capital is far more physically and socially developed, and secure. Sharma says that a Delhi address has always been more preferable. The key to redemption for Gurgaon, says Menon, lies in the State reassuring industry and corporates that Gurgaon will always remain an investor friendly city. Sharma of Qubrex says that Real Estate developers in the City must also change their image, starting with their dealings with customers and home owners. Urban experts opine that a city is shaped both by government policy and market forces, though this relationship is complex. Gurgaon has benefitted from both for long, especially till a few years ago. Just when both seemed to be deserting it, the change in govt. might just be what Gurgaonites ordered. Over to CM Khattar and the new Administration. They may not (and may be should not) help Gurgaon boom (once again), but they can help avoid the (imminent) bust.
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