Despite being the capital of the second largest populated country, the real estate industry in Delhi has been grappling with challenges of high inventory and delay in projects by some of leading players. Prajakta Karnik speaks to industry veterans about the prevailing challenges of the Delhi-NCR real estate market.

Like any other top metropolitan cities, the real estate industry has been seriously impacted in the Delhi-NCR region as well. Policy decisions including demonetisation, RERA and GST, among others had had a negative impact on the industry.

According to rating agency Icra, despite being the second largest real estate market after Mumbai, NCR has unsold stock of around 222 million sqft across 1.7 lakh units, as on December 2020, spread over three key micro markets that is Faridabad, Gurgaon and Noida.

Noida is the largest micro-market, contributing to around 66% of the inventory, followed by Gurgaon at 22% and Faridabad at 3%. The balance inventory is spread across various areas of NCR, including Delhi.

“Sentiment of homebuyers in the Noida region has also been impacted severely by the delays in projects by some of the big developers, including Amrapali, Jaypee, Logix, Three Cs, Supertech etc. Some of these groups are undergoing insolvency proceedings, which has resulted in their exit from the market,” the agency noted.

To add to the woes of the industry, the second wave of the Covid pandemic has not only delayed execution due to the restrictions imposed but has also impacted the homebuyer sentiment further.

“Delhi NCR is facing the same problems as developers in other metros are facing. Due to the lockdown-type situation, the sentiments are getting affected. The government has to come out with packages that can take care of the unlikely situation similar to the last year. However, the sector needs an extension of project completion deadlines on an immediate basis,” Mohit Goel, CEO, Omaxe said.

According to Mahi Agarwal, Sector Head and Assistant Vice President, Icra, revival of consumer sentiment will remain key for ensuring timely liquidation of the high unsold inventory, which would, in turn, support the adequacy of operating cash flows to meet debt obligations for real estate developers.

“The government has been taking steps to boost the overall realty sentiment given the increasing instances of project delays, and measures like the creation of the SWAMIH fund and resolution through forums such as NCLT under the IBC and the RERA have addressed key buyer grievances and aided project completions. The prevailing low home loan interest rates have also been supporting overall housing demand. In addition, timely development of upcoming/proposed infrastructure projects would also support connectivity to peripheral areas and thus increase the marketability of projects which are non-saleable at present,” she noted.

Speaking about the initiatives taken by the Central government like the setting up of SWAMIH fund, Mudassir Zaidi, Executive Director – North, Knight Frank India said this fund has certainly helped many projects which were at an advance stage to restart construction and thereby ensuring that many buyers get the possession of their apartments.

“However, the stringent criteria of the fund has certainly slowed the pace of deployment as NOCs from the existing lenders for ceding first charge is a difficult condition to meet. The overall quantum of the fund is large, however, many such funds will be required to get the sector out of the long term systemic issues that it is facing,” he said.

On the prevailing circle rates in Delhi NCR, Manoj Gaur, CMD, Gaurs Group and Vice President – North, CREDAI National said the increase in circle rate would undoubtedly dampen demand, steadily increasing since the fourth quarter of 2020.

“The demand may get affected as the increased stamp duty would be passed on to the homebuyers due to the upward revisions. Slashed stamp duty charges in Maharashtra have had a positive effect on the property markets of Mumbai and Pune, indicating that the state government’s decisions had a direct impact on the sector. The government should be implementing policies such as stamp duty reductions to increase transactions and increase state revenue collections,” he added.

Echoing similar views, Nayan Raheja, Executive Director, Raheja Developers noted that increased tax sops for home purchases should be considered by the government, as this would have a positive impact on the overall economy. “To create a win-win situation for all parties concerned, other states should follow Maharashtra and Karnataka’s lead and reduce stamp duty,” he added.

According to data by property portal PropTiger, during the January-March 2021 quarter, builders sold a total of 66,176 homes in the primary market, a time marked with several state governments, including Maharashtra and Delhi, announcing stamp duty and circle rate reductions to boost buyer sentiment and by effect housing sales.

When compared to Q1CY20, however, home sales in the markets covered in the analysis showed a decline of 5% from 69,555 units, something that can be termed marginal, considering that the January-March period in 2020 was the last quarter before the pandemic spread started in India, forcing the government to announce a nation-wide lockdown late in March 2020 that brought economic activity in the country to a standstill.

In NCR, the total unit sales registerd in Q1 2020 was 5411, which increased y-o-y by 14% to 6188 in Q1 2021. However, when compared with Q4 of 2020, the increase in sales has been only 2% from 6065 units.

The overall annunal price growth reported as on March 2021 was 3%, however, the price rise in Delhi was by 1%.

“The Maharashtra government’s decision to temporarily lower stamp duty on property registrations helped mitigate the steep decline in sales for the Mumbai and Pune markets that contribute the most to the national stock of unsold homes. The state government should have continued with the benefit of reduced rates to keep the sales momentum going. We also expect states like UP and Haryana to announce stamp duty and circle rate reductions in order to provide support to crucial housing markets of Noida and Gurugram in the national capital region,” Mani Rangarajan, Group COO,, and said.

While the inventory overhang is a concern, the region’s real estate is faced with the challenge of stressed projects. According to property consultant Anarock, Delhi-NCR market has maximum stuck housing units at 1.9 lakh, worth nearly Rs 1.2 trillion, that were delayed by at least seven years,

A total of 1,90,120 housing units, worth Rs 1,19,291 crore, were stuck in the Delhi-NCR as of 2020-end. These flats were launched in 2013 and before.

While some of the developers of these stuck projects are dragged to NCLT, industry players feel it is time for the private players to step up.

“Realtors can team up with a private equity firm to form an Alternate Investment Fund (AIF) to receive essential assistance in managing assets, and the developer can assist in project identification, development monitoring, and inventory sales and marketing. Both will participate in fundraising events. Raising, allocating, and maintaining the fund will not yield the desired results unless adequate processes are in place to track remaining construction, efficiently market it, and sell inventories. Such an initiative seems to be wise because it takes into account all of the stakeholders. The investor can make good money, the developer can make a profit, and the homebuyer can finally take possession,” Kushagr Ansal, Director, Ansal Housing & President, CREDAI Haryana said.

He further noted that an even-handed, homogeneous approach will not be needed for a problem like stressed real estate. “Rather, infusing more liquidity into the market, incentivizing developer funding, and recapitalizing NBFCs and HFCs would necessitate a multi-layered strategy. For projects that are approaching completion and can be sold, easy credit options and need-based funding should be conceived,” Ansal added.

While it is still too early to assess the impact of the second wave of Covid, the Delhi NCR real estate market will have to show resilience.

As Goel sums up, “the positives that have emerged from the 2020 crisis will serve as the foundation for the real estate sector’s development in the coming months. The demand for larger homes within an accessible, hygienic, and green complex with amenities such as healthcare, daily necessities, and everyday rejuvenation within walking distance would drive demand.”