New Delhi's new residential launches plummet 88% in 2020

Only 1,452 new units were launched last year.

According to Cushman & Wakefield, the city recorded launch of 3,728 units in Q4 in Gurugram under the Haryana Affordable Housing Scheme in sectors 76, 95, 37D, surpassing the number of launches cumulatively for the first three quarters in this category. This segment, which has got a huge thrust from the government, saw 7,349 units launched during the year.

The quarter also saw the launch of 88 independent floors by DLF in DLF City Phase 3, all of which were sold out in a micro-market with limited supply. Two well known developers are also planning to launch their high-end segment projects across Noida and Gurugram, with one of them expected to launch upon completion.

Here’s more from Cushman & Wakefield:

Customer preference for ready-to-move projects is making some developers with access to finance change their strategy to launch after completion; this model also helps developers to command a price premium. Some developers also launched plots (225 units) during the quarter in the micro-markets of Golf Course Extension Road and Dwarka Expressway, with a growing market demand for this residential format.

Developers with no or limited land holdings in the city have increasingly resorted to joint development agreements (JDA) to expand their presence in Delhi NCR, with more such plans being announced by some large developers in the subsequent quarters. The operational capability and execution track record of reputed developers in a JDA aids in building customer confidence while putting a check on execution delays in a city with a large number of stalled projects.

On an annual basis, Delhi NCR saw an 88% decline in new launches which stood at 1,452 units at the end of 2020 signaling the developers’ focus on execution and offloading of their under- construction inventory. Noida Expressway constituted 35% of the annual launches, while Golf Course Extension Road, Southern Peripheral Road and Dwarka Expressway recorded launch activity within Gurugram.

Central bank interventions to revive stalled projects and aid homebuyers

In continuation of the government measures to resolve problems of execution delays in the sector, the RBI has allowed commercial banks to restructure loans to real estate developers on project basis. This measure under the COVID-19 resolution framework will aid projects in Delhi NCR that are stuck due to liquidity issues and in turn also benefit the buyers of such projects. This scheme, among the other measures announced by RBI to boost the sector, is applicable on loans that have no defaults as of March 1, 2020.

Further, the government-backed stress fund (SWAMIH) for providing last-mile funding to stalled projects in the affordable and mid-income category continues to deploy funds to revive such projects. These measures will play a significant role in changing buyer sentiments towards the overall sector and particularly stressed assets.

Market prices stabilizing; schemes and incentives continue to be offered for serious buyers

Sales activity improved during the fourth quarter as the current festive season is quite opportune for home purchase. Even though developers did not introduce any change in headline prices, sweetening of deals with 5 – 8% discounts and incentives is attracting more end-use buyers to close purchase decisions. Banks transmitting the reduction in repo rate by RBI is evident from the low interest rates on home loans, another factor that is drawing homebuyers.

Limited period schemes with developers sharing a part of the interest rate burden of homebuyers, stamp duty & maintenance charge waiver on select projects and assured penalty on delays from developer were among some of the festive period offers by developers to induce sale of their projects. Improved sales activity as a result of various measures coupled with limited new launches by developers is lightening the pile of unsold inventory in the city.

Increasing of the permitted differential between circle rate and agreement value of property to 20% from 10% currently will also help in reducing the tax liability of buyers with tax being applicable on lower of the two rates. This measure by the central government to boost housing sales is applicable on property upto INR 2 crores till June 30, 2021. Rental demand in the city remained under pressure with continuation of remote working and many migrants having moved back to their hometowns, and the 5 – 7% softening in rents observed earlier prevailed across all major submarkets for both mid and high-end segments.