The bubble across Delhi-NCR property market is quite visible. It’s no more a question of whether but when that the market will correct or crash. The question today across the built environment of real estate in this part of the world is that how serious is the crisis ahead. Prima facie, no one would like to admit this unpleasant reality, not at least those who have skin in the game of real estate. Ravi Sinha tries to read the pulse of the property market of Delhi-NCR.
Advocates of real estate may argue that my assumption is wrong or half-baked; I am just speculating. They would like you to believe that prices never crash in real estate. Real estate is real asset and not only holds its value but appreciates over time. But wait! Real estate crash is never like a stock market crash, because there is no Sensex of property market. Had there been a Sensex of property, lower circuit might have been more often than you can even imagine. Real estate market would not have been so speculative in that case.
Real estate price correction/crash is actually of a different nature; it’s more of a time correction. What is time correction? Time correction is when the property prices are stagnant over a prolonged period of time. It has happened in India too after global financial crisis in 2008. Similar trend was visible in the 3-4 years prior to global pandemic in 2020. When other asset classes are appreciating in comparison to real estate, and inflation is decreasing the value of property, then it is no less than a crash.
If you look at the opportunity cost of money, you are at a huge loss. Even with a sharp recovery after prolonged spell of stagnation, real estate appreciation in many cases have not even beaten the inflation rate. It is hnece no wonder that a CRISIL report claims the average returns of Indian real estate in the last 20 years have been a meager 6%.
The second indication of price correction & crash is secondary market distress sale. It, of course, affects the primary market sale as well, even though developers with cartel of investors try best to hold the prices & inventory. The property registration data would never reveal what is a fresh sale and what is a distress sale. More importantly, the data of industry stakeholders in real estate is always questionable.
The critical issue here is whether the developers are understanding. It doesn’t appear so, especially when I look at the high-end launches across the NCR market that has absolutely no correlation with economy or job market. Even the most affordable market in perception, Greater Noida West, is witness to launches in the range of INR 2.5 crore onwards.
If one takes a closer look of the area, say 10 km radius of Gaur City Mall, one can notice that neither big corporates have moved in the neighbourhood nor high-paying jobs have been created. And yet, no decent house seems to be available below INR 1.5 crore. How is that possible? Who is fuelling this demand? Are investors on prowl across the NCR market now?
The question is whether these builders are not understanding this emerging market reality? Are they all fools? No! At best, they are clever by half and over-smart to invite investors and leave scope for margin of under writing. That’s why so many pre-launch offers, and that too at 30% less than the launch price. Pressure is on their sales representatives. They are making random calls to one and all. For them, No is not no. Repetitive calls are made and new schemes are being offered. One so-called large in volume game but low in quality developer of Greater Noida West is trying best to sell at INR 2.5 crore and above.
The developers, with all innocence on their faces, would like you to believe that the price hike & costly properties are a result of hike in input cost. Really? Are property prices rising in proportion to input cost hike? If so, why are you building apartment of the sizes as large as 1800-2000 sq feet? Now don’t tell me everyone wants a bigger home. Wish list has to have some corelation with the affordability as well. Are developers that innocent to not understand this simple economics?
A few exceptional players in the very same Greater Noida West market have better understanding of market pulse. They are better launching studio apartments that is doing well, as it fits into budget of large universe of the buyers.
Normally, the three markets are critical for the Indian ecoonmy and property – Delhi-NCR, Bengaluru and Mumbai? Why so? It’s because these three zones are creating maximum jobs and are witness to more migration. Today, Mumbai and Bangalore markets are already in time correction zone. But Delhi-NCR is defying the broader economic trend. And hence, focus is more on the Delhi NCR where even the developers of Bengaluru have started launching projects.
Luxury property launches have to have some corelaion with the job growth and wage growth of the region. Or else, it is the tipping point of cfrash. DLF Chairman Rajiv Singh has earlier rightly pointed out that the developers should play safe with the speculators in the market. It’s is a different matter that no one is listening and even the developers with established identity of affordable homes are launching luxury across the NCR region.
What should you do? Stay away from any speculation in the property market. Never get tempted with any offer that sounds too good to be true. NCR property market is sitting on a probable time correction that could last for many years.
Call me pessimistic, or a negative journalist as you call me, but my apprehensions are firmly grounded. And I would be happy to be proven wrong this time, not for any builder or broker but for or the sake of the common man, who has already invested his hard-earned money into buying a house and is under triple burden of home loan EMI, stagnant wage and rising inflation.
What do you think?
Ravi Sinha
X : RaviTrack2Media
Ravi Sinha is a journalist with over two decades of cross-discipline media exposure. He is the CEO of real estate thinktank group Track2Realty. He has been writing extensively on the real estate sector for more than a decade now. Evaluation of real estate brand performance is his core domain expertise and he has immense insight into consumers’ psychograph. He has conceptualised Track2Realty BrandXReport as India’s 1st & only objective & non-paid brand rating journal that is industry-accepted benchmark of brand equity & ranking of the Indian real estate companies.
Track2Realty is an independent media group managed by a consortium of journalists. Starting as the first e-newspaper in the Indian real estate sector in 2011, the group has today evolved as a think-tank on the sector with specialized research reports and rating & ranking. We are editorially independent and free from commercial bias and/or influenced by investors or shareholders. Our editorial team has no clash of interest in practicing high quality journalism that is free, frank & fearless.
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