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New Delhi’s Charm
Gurgaon’s latest developments are becoming the hotspot for foreign investors
| Text : Ajay Shamdasani | Photo : www.thinkstockphotos.com |
Despite being relatively unheard-of until the late 1990s, the Delhi suburb of Gurgaon is a vital part of the National Capital Region (NCR) and has undergone a construction and development boom in the past decade. Myriad business process outsourcing and knowledge process outsourcing multinationals corporation (MNCs)” have chosen to locate operations there as General Electric did in 1997 – thus making the city the world’s call centre capital.
Many company have located their regional headquarters in Gurgaon over Delhi or Munbai, and the suburb regarded as one of the best towns to live and work in India, and has the nation’s third highest per capita income. Despite claims of an overheating property market, Gurgaon remains one of India’s most lucrative residential real-estate investment hotspots.
Demand for residential property continued to be strong from 2000 until the financial tsunami. According to Santhosh Kumar, CEO for operations for Jones Lang LaSalle Meghraj, between 2007 and 2008, the market was rife with speculators who wanted to flip properties for fast profits.
“This market overheated and saw sharp corrections amid the global recession and dwindling job security among MNC employees. Prices fell by 15 to 30 percent for most developments,”
says Anshuman Magazine, chairman and managing director of CBRE India.
According to Magazine, Gurgaon’s long-term fundamentals held steady during the recession because while transaction volume dropped, prices did not fall as much as elsewhere and the suburbs remains very desirable for corporations, families and investors alike. “By some accounts, transaction volume fell 30 to 40 percent between 2009 and early this year.”
Demand for quality housing has fallen due to limited supply for reasonably priced middle-class homes because most new projects were primarily high-end developments. Accordingly, developers have responded to recessionary pressures and launched more affordable middle-class apartments. According to Jones Lang LsSalle, with economic growth returning, there has been more development of retail and commercial property, with 40 million sq. ft. of the latter to be available by 2012, up from 22 million sq. ft. currently.
Gurgaon’s hottest areas and developments are currently DLF Phase I-V, Golf Course Road, MG Road National Highway 8, Nirvana Country, Sushant Lok and Sohna Road, with rates in all of the above rising. Residential and commercial property of varying quality is all sought after. The upturn and greater MNC demand have prompted some developers to refocus on top-tier housing, as seen by recent housing releases.
Although there are concerns about Gurgaon’s residential prices overheating once more, the city’s livability and access to jobs in the growing outsourcing and IT sectors make it a satellite town with robust growth prospects. Gurgaon’s housing prices are justifiable by its prime location and modern infrastructure – an expressway, proximity to the airport, and a metro station to open soon – and the city is perhaps only comparable to South Delhi and Noida, where housing is costlier, says Magazine.
“In terms of locational value and overall desirability and demand, South Delhi is the only area that comes to mind. Pricing there is, however, also higher,” says Kumar. Magazine concurs: “Near Delhi values are much higher; you can’t compare them because a Gurgaon apartment might typically fetch 3,000 to 4,000 rupees (US$66 to US$88) per sq. ft. – in Delhi you won’t get anything for twice that amount.”
Nevertheless, Gurgaon housing is not cheap and those with small budgets should look to either the city’s “newer, non-central sectors”
where prices are lower in keeping with the slower pace of overall development,” says Kumar. “They can consider Faridabad, the outer parts of Noida, Indrapuram and Ghaziabad, which also present a good bouquet of investment (and home-owning) opportunities in the NCR. However, a property in Gurgaon distinguishes itself for expatriates who value the proximity of the airport and the higher degrees of development there, and will invariably be the first option.”
While Noida, Dwarka, Rohini and Vasant compete with Gurgaon to some extent, “they are not substitutes for it,” says Magazine. “The perception is that Gurgaon has grown a little too quickly, but because of ample land, there is more room to grow. It’s too crowded and traffic can sometime be a problem. I would look at Greater Noida because many software and IT companies are also there, there’s lots of housing, it’s well planned, has an expressway and will get a metro in five to six years,” he says.
While budget is a crucial factor, Magazine stresses that location should not be overlooked because “many non-resident Indians [NRIs] go to where families are in South Delhi or Faridabad” and they are willing to pay a premium for that. It is also worth noting that banks are often willing to lend 80 to 90 percent of a property’s value to homebuyers.
Both Kumar and Magazine agree Gurgaon remains a safe long-term investment. Over-bullish valuations have diminished, and the city’s growth is tied to broader macro-economic gains.
“Any property investment in Gurgaon that is made for a horizon of five years or above will definitely fetch satisfactory returns,” says Kumar. Similarly, Magazine contends that with Gurgaon’s ample supply and plenty of money pouring in, corporations keep coming and the metro station around the corner. “If you’re investing in the city in the next two to three years, you can’t go wrong and can expect appreciation of 10 to 15 percent, but not the 50 percent in six months some saw from 2006 to 2008.”
While most demand is locally based, more NRIs are investing in Gurgaon and other Delhi suburbs “as a cheaper way to enter the NCR and have amenities like large malls, multiplexes and a higher grade of apartment of 5,000 sq. ft. or above with a pool, gym and large walking area within a gated community,” says Magazine.
Foreigners currently cannot buy property in India if they do not fall into the NRI or ‘Persons of Indian Origin’ categories. “Goa is an exception to this, but there are numerous procedures to follow and approvals to obtain even there,” says Kumar.
PREVAILING RESIDENTIAL RATES* IN THE PROMINENT AREAS OF GURGAON
| LOCATION |
Rates (per sq ft) |
Remarks |
| Golf Course Road |
Rs 6,000-10,200 per sq ft |
Rates refer to under-construction premium
apartments like Magnolias, Belaire, Park
Place and Verandas |
| Golf Course Road Ext road |
Rs 4,200-5,000 per sq ft |
New Launches of developers like Pioneer
Urban, BPTP and IREO |
| Sohna Road |
Rs 3,200-4,500 per sq ft |
New Launches of developers like Tulip,
Unitech and BPTP |
| In and around M.G. Road |
Rs 4,500- 5,500 per sq ft |
Resale rate |
| DLF Phase V |
Rs 6,000 and above per sq ft |
Prevailing rate |
*(Quoted rates refer to basic selling price and do not include extra costs)
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