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COVID impact: Rentals and property prices likely to see marginal corrections in Delhi-NCR

COVID impact: Rentals and property prices likely to see marginal corrections in Delhi-NCR

COVID impact: Rentals and property prices likely to see marginal corrections in Delhi-NCR
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By Timsy Jaipuria  Jun 5, 2020 6:37:41 PM IST (Updated)

COVID-19 outbreak seems to be a blessing in disguise for those who are waiting to buy a new property in Delhi–National Capital Region.

COVID-19 outbreak seems to be a blessing in disguise for those who are waiting to buy a new property in Delhi–National Capital Region. However, experts said it's too early to assess the quantum of a crash or correction in prices but a 10 percent correction in prices is definitely what one can take benefit of. Coming to rentals, the NCR region does not seem to see much of a change as yet.

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According to a market survey and as per the research of property consultants, the average rentals in established micro markets of Gurgaon, South Delhi and Noida have either remained the same or have even seen a 1-4 percent increase in Q1 2020 as against the corresponding period in 2019.

City-wise Supply (In Units) percentage change

 Cities Name Q1-2020 Q4-2019 %Change (Q4 2019 Vs Q1 2020) Q1-2019 %Change (Q1 2019 vs Q1 2020)
(Source: ANAROCK Research)
Anarock Research said, "In usual times, the rentals usually increase anywhere between 4-8percent on an average in a year. No correction in rents in Aralias, Magnolia, other apartments in Noida as well has been seen as yet." But will this trend continue, well it is too early to say so.
According to Santhosh Kumar, vice chairman at Anarock, a property consultant firm, "It is to early to see an impact of COVID-19 pandemic on rentals/selling price of residential properties in Delhi-NCR region but negotiations are certainly an option today be it for rentals or for sales."
"In secondary market, one may see corrections up to 10 percent in selling price. However, this also depends from case to case and also project to project as not all may be willing to cut down on prices. Similar to the secondary market sales, rentals vary from case to case. For instance, the current asking rents for a 4 BHK of similar sizes at DLF’s Aralias project in Gurgaon are anywhere between Rs 2.5 lakh to Rs 3.2 lakh," Kumar added.

City-wise Absorption (In Units) & Percentage Change

 Cities Name Q1-2020 Q4-2019 %Change (Q4-2019 Vs Q1-2020) Q1-2019 %Change (Q1-2019 Vs Q1-2020)
(Source: ANAROCK Research)
Mani Rangarajan, group chief operating officer,, and too expects a downward correction in rentals in Delhi-NCR markets.
But optimistic Rangarajan said, "While there has been some visible impact on rentals since March when the government announced severe travel restrictions, the adverse impact from coronavirus and the subsequent lockdown would become more prominent as the government eases lockdown restrictions."
"While developments such as work-from-home becomes mainstream, we may see a rise in demand for buying homes in localities that promise a better quality of living rather than more expensive areas. This lockdown has helped consumers realise the value of an owned home from a safety perspective. However, considering the weak economic environment with loss of jobs, some buyers may postpone their decision and weaker demand may result in a fall in rental yields in key markets, including the key cities in the NCR," Rangarajan said.

City-Level Price Trend (INR/Sq.ft.)

 Cities Name Q1-2020 Q4-2019 %Change (Q4-2019 Vs Q1-2020) Q1-2019 %Change (Q1-2019 Vs Q1-2020)
(Source: ANAROCK Research)
"As for property values, prices have not appreciated significantly over the past few years in most markets. Consequently, the current pandemic will not cause any upwards movement in prices over the next few months. As for inventory, our research shows a combined unsold inventory of more than 100,000 units as of March 31, with Gurgaon having the highest share in the unsold inventory," he added.
But, experts do see corrections in selling prices coming for under construction properties which might be good for investors and end users who can wait to shift to their own house.
Santosh Kumar of Anarock added, "well, in the secondary market, one may see corrections up to 10 percent. However, this also depends from case to case and also project to project as not all may be willing to cut down on prices. For instance, the seller may not be willing to reduce rates for a ready property while the seller of an under-construction property may be willing to cut down prices."
"Moreover, only those individuals who are urgently looking to exit the market are making distress sale at reduced prices. But there are also many who are willing to wait for an opportune time. As for the primary market too, there is no single rule that fits all. To overcome issues like inventory pile-up, cost overruns etc. due to COVID infused lockdown, various developers are coming up with innovative offers to sell their inventory. Overall, it largely depends on the seller/builders’ financial health at the moment and their capacity to hold/sell the property," Kumar said.
According to Anarocks January-March, 2020 analysis report, as anticipated, the COVID-19 pandemic had considerable impact on the Indian housing sector. NCR region added approximately 6,190 new units in Q1 of calendar year 2020, a quarterly decrease of 22 percent.
Approximately 64 percent of the new supply in this quarter was in the affordable segment. Last year, the new supply was 8,030 units in the same period. When it comes to sales, during the Q1 of calendar year 2020, NCR region saw a decline of 41 percent in sales of units, as only 8,150 units were sold in Q1 CY2020 as against 13,740 units sold in Q1 CY2019.
Recently, union commerce and industry minister Piyush Goyal advised developers to not to wait for government to bail them out and rather good business sense should prevail and they should consider reducing prices to boost their sale.
CityMicro MarketAvg. 2BHK Monthly Rentals (INR) Q1 2019Avg. 2BHK Monthly Rentals (INR) Q1 2020% Change
NoidaNoida Expressway17,50017,9002%
GurgaonSohna Road24,80025,0001%
GurgaonGolf Course Road27,00027,5002%
South DelhiGreater Kailash32,50032,7501%
South DelhiVasant Kunj27,50027,5000%
(Source: ANAROCK Research)
Agreeing with the minister, Anurag Mathur, chief executive officer, Savills India - an international property consultants, with presence across Indian cities like Mumbai, Delhi, Bengaluru, Chennai, Pune and Hyderabad, said, "In the current scenario, where sales are likely to be sluggish given the weak sentiment and macro-economic environment, it would be prudent for developers to liquidate inventory to be able to retire debt from their books, as minister Goyal pointed out. However, the ability to offer discount will be dependent on various factors such as location of the projects, product positioning, input cost etc., and across the board discount may not be possible for the developer."
On the contrary, Shishir Baijal, chairman and managing director, Knight Frank India feels that reducing prices to rock bottom may not be a viable option for the developers.
Baijal said a collective initiative by government and developers can rather be the way forward for the sector, "Key markets across India are facing uncertainty, and the confidence erosion amongst buyers is visible across all categories of residential real estate. Developers are already dealing with mounting concerns over unsold inventory and liquidity. Most developers are struggling to maintain their margins and may not have too much leeway to cut prices further."
"At some level, the suggestion by the minister Piyush Giyal, to developers to lower prices is valid as it may help reducing inventory, though it may not be the most viable. The crux of the problem lies in dwindling demand that the sector has been experiencing for last few years. Therefore, the main solution will be in creating stable long-term demand by providing adequate boost to economic growth and stability. Any movement on ready reckoner rates, stamp duties and taxes will come as a further relief to help converting latent housing demand to sales. The real estate sector thus needs tangible measures to resurrect demand and ease the concerns for all stakeholders in the sector,” Baijal added.
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