Rising Interest Rates and New DDA Flats Spark Concern Among Delhi NCR Real Estate Investors
Increasing interest rates, a dwindling pool of prospective homebuyers, and the anticipated influx of new DDA flats have triggered what appears to be the initial stages of anxiety among real estate investors in Delhi and its surrounding areas. A significant number of these investors are now apprehensive about retaining their properties and are resorting to returning them to developers or urging real estate agents to expedite sales.
Industry analysts, however, suggest that end-users exercise patience and refrain from rushing into property purchases at this juncture. They recommend waiting until the festive season concludes, anticipating a potential substantial price adjustment thereafter.
An HDFC executive commented, “A rising home loan rate has badly dampened consumer sentiments. July was bad and August will be worse. The latest round of loan rate hike would sink in over the next few weeks and its impact on home buyers could be visible by the end of this month.
The executive explained that inquiries regarding home loans have plummeted by 35-40% in Dwarka, one of Delhi's largest residential colonies, known for its extensive supply of apartments. Dwarka, which has experienced a nearly fourfold increase in property prices over the past five years, is currently witnessing a decline in transactions. According to property brokers, in addition to the escalating borrowing costs, the anticipation of DDA housing allotments is also contributing to buyers' reluctance to engage in the market. The DDA is projected to allocate 5,500 one, two, and three-bedroom apartments throughout Delhi in the coming months.
Shrinking Buyer Pool Creates Unease Among Investors
The shrinking pool of buyers has instilled a sense of unease among investors in Delhi, Gurgaon, Noida, and Ghaziabad. Many investors, apprehensive of a potential market downturn in the ensuing months, are seeking to divest their holdings while securing the profits they have already accrued. Some investors are returning properties to developers, exercising an option to sell back at a predetermined rate. In situations where investors perceive that their property's market value may not exceed the agreed-upon price, they opt to sell it back to the developer. A Ghaziabad-based developer recently repurchased over 25 apartments through such arrangements.
Price Stability in Delhi, Corrections in Suburbs; Deeper Correction Anticipated
Despite these early indications of apprehension among investors, property prices in Delhi have remained relatively stable, while suburban areas have experienced a 10-15% correction. Experts foresee the possibility of a more pronounced correction in the future. Knight Frank India chairman Pranay Vakil stated, “What we are seeing today is only the tip of the iceberg. We may see a deeper correction in November”. He advises end-users to adopt a wait-and-see approach, as developers are inclined to maintain current prices until the festive season. Vakil further elaborated, “Developers are banking on festive season to lift sales. But if it fails, they will have no option but to cut prices to sell”.