Why Are Property Rates Falling In Delhi?

When we speak of property markets of the four major cities of India, national capital Delhi is quite different from the other three when it comes to price trends. Property rates in Bengaluru, Chennai and Mumbai have been rising. According to recently released data by the National Housing Board (NHB) , from Rs 16,984 per square foot in the first quarter (June quarter or Q1) of the financial year 2012-13 (FY13) , rates peaked to Rs 21,225 in the same quarter of FY16. By the quarter ending March 2017, prices reached Rs 21,692 per sqft.

Similarly, in the June quarter of FY13, average property prices in Bengaluru stood at Rs 4,973 per sqft. In the same quarter of FY16, prices shot up to RS 6,584 per sqft.  At Rs 6,488 per sqft in the fourth quarter of FY17, prices have largely remained stable.

In Chennai, property prices in FY13 Q1 stood at Rs 5,318 per sqft. This changed to Rs 6,581 per sqft in the same quarter of FY16. In the March quarter of FY17, prices reached Rs 6,879 per sqft.

By and large, the three cities saw a consistent price growth despite the fact that the period for which the comparison is done has been a tough one. A slowdown that started looming over India's real estate space in early 2014 has given developers a tough time as buyers decided to give a skip to property investments. As a result of the buyers' resistance, property rates were expected to fall across markets. In Delhi, they did.

The NHB data show that when compared to the levels in 2013, property has actually become cheaper in the national capital.

In Q1 of FY13, average prices stood at Rs 10,690 in Delhi. From there on, the fall in prices has been consistent, except the sporadic upward movement witnessed during some quarters. Data show prices hit bottom in Q4 of FY15 to reach at Rs 7,605 per sqft. In the same quarter of FY17, prices may have increased ─ Rs 9,886 per sqft ─ the point that emerges is that those who could not dream to afford a property in Delhi in 2013 can do so now, with prices falling down substantially.

What's behind the fall?

Here are certain factors that can possibly explain the price fall of property in Delhi:

There is no denying the fact that prices have fallen when compared to the previous levels. However, this does not necessarily mean owning a property in Delhi is easy. This contrast is visible when you compare property prices in Noida and Ghaziabad with property rates in Delhi. According to NBH data, rates stood at Rs 5,813 per sqft in Noida and Rs 5,117 per sqft in Ghaziabad in Q4 FY17.

Most properties available for purchase in Delhi are old properties that come with a grand price tag. In the recent years, there have not been many new developments in the city. Many buyers will have issues in buying an “old” property that is going to cost them a bomb. They would rather go looking for new developments in the periphery. Real estate markets of Noida and Ghaziabad, again, come handy.