Premium Housing in Gurgaon Enters Correction Phase

By: George Gonigal

Demand goes down, developers cut prices...

Hard-pressed by the falling demand, the higher-end segment of residential real estate in Gurgaon has been undergoing the phase of correction. As per the reports of global consultancy firm DTZ, the prices have already gone down by an average of 10 per cent in the past two quarters, and it is mostly the projects that have kept the prices for their apartments above Rs 1-crore.

Besides, the property markets of Gurgaon are also suffering from the oversupply. The DTZ report confirms that the supply side has far exceeded the demand side and the margins over the sale of property are under pressure. As per industry reports, Gurgaon will add at least 10,000 residential units in the luxury housing segment by 2010, however the demand may continue to remain below expectations.

Meanwhile, the absorption rates for projects with an apartment size between 2,000 and 6,000 sq. ft have slipped down significantly and the developers are reportedly slashing prices in order to create demand.

Fall in investor interest

Besides the end-users, it is mostly the investors who drive the Gurgaon Real Estate markets, and most other parts of the country. On this, the findings of Cushman & Wakefield, a consultancy firm, bring things into perspective. Its reports say that housing properties in Gurgaon have overheated and prices have been touching the roof.

With this, the investors are not seeing the kind of returns that they had secured earlier from the deals, and that's why their interest in buying residential property in Gurgaon is comparatively lower than it was a couple of years ago.

Ultimately, the markets now are primarily driven by the end-user, who is not willing to buy luxury houses. After all the rate of interest on home loans has shot up from 6-7 per cent to 11-12 per cent in the past 3-years, and a buyer thinks twice before borrowing at such rates.

Future Outlook

As for the coming months, the industry experts "feel good". At first, they say that the demand for residential properties in Gurgaon would gradually pick up with festive season in the offing.

Secondly, almost all the major banks like SBI, ICICI, BoB have announced for a cut in interest rates anywhere from 50 to 75 basis points, and they are coming up with quite a variety of lucrative offers as well. Over that the developers are also open on cutting prices of their units for the sake of making a deal and it is turning into a buyer's market, says a group of brokers from Gurgaon.

Perhaps, the combination will drive at least the end users to spur demand and the markets may take spark with positive trends coming back in place, they feel. ?

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