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When the paint­‐chipped, breaking down bungalow at 38 Amrita Shergil Marg in New Delhi went up for public auction, the real estate world took notice. Delhiites considered it a bargain. The bid that won was eventually placed at $29 million, a low price considering that nearby properties are selling at anywhere between $40 million to $70 million.

The bungalow at 38 Amrita Shergil Marg is among those built nearly a century ago during the period of the Raj before 1947 when the British still ruled India. The prices of these properties now are among the highest in the world, including New York, Tokyo, and London. There are a fixed number of these properties in the city and they are mostly owned by industrialists or politicians. (The American embassy owns a few.) The sale and purchase of these properties happens through word of mouth and often in deals where cash exchanges hands under the table so that tax may be avoided by the players involved.

For the rich, buying and selling property in Delhi is increasingly popular, with the real estate sector contributing to almost 25 percent of the city’s gross domestic product, according to the Economic Survey of Delhi 2012­‐2103.

For the middle classes, the news is mostly a mixed bag. To address the country’s acute urban housing shortage, Finance Minister Chidambaram proposed attractive cuts and tax benefits for home ownership in his 2013 budget. He also announced a dedicated fund of Rs 2,000­‐crore ($2 billion) for building dwelling units in urban pockets as well as funds for rural housing. This, along with the infrastructure investment that he’s proposed, is a step by the government to solve the current housing shortage in the country. Expressing the goal of a “slum free India,” the Finance Minister promised that the urban dwelling funds would be set up by the National Housing Bank and would be known as the Urban Housing Fund. The goal is to have it fill the gap of an estimated 18.78 million houses.

What was not addressed, however, was how the delay in project approvals, soaring costs and low demand from buyers is putting a halt on new project launches in the Delhi and surrounding regions. The outskirts of Delhi known as the NCR (National Capital Region) have been a big investment opportunity for residents of the city. Delhi has also been home of the most impressive suburban development in the country. There’s been a surge of sub-­‐cities around Delhi, such as Dwarka, Rohini, and Narela. The outsourcing hub Gurgaon and Noida in the opposite direction, both of which are home to several big companies, have attracted big investments from residents over the last decade.

But property launches in this region dropped by 35 percent last year, according to PropEquity, a real estate research, data, and analytics company. This is partially due to the high interest rates offered by banks at the moment, and partially due to a liquidity crunch that real estate firms seem to be facing because of caution being undertaken by banks.

However, industry insiders are sure this is a temporary blip and demand will pick up as soon as interest rates go down and the economy picks up again.

Mridu Khullar Relph

 

 

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