Investors' Confidence in the North Market

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The moderator of the session, Vivek Soin, CEO - Westcourt enquired the reasons for low confidence of not only retail but also institutional investors. “Compared to Bangalore and Mumbai in last few years Delhi has witnessed less institutional investment activity,” he stated. Mentioning it as a small blip Deepak Kapoor,Director - Gulshan Homz clarified, “Everyone is talking about trust deficit and prices going down by as much as 20-30%. But firstly the entire industry cannot be painted with the same brush and secondly price depreciation could be max 2-3% as the operating costs are high & profit margins are very thin. Demand is there but the wait & watch approach of buyers is killing the market. For office spaces, the absorption has increased in last two years in Noida and Gurgaon but very limited supply of large floor plates is the main reason for low investment in this segment.” Nishant Singhal, Promoter and Director - Strategy at Investors Clinic said, “Consumer wants a good quality property at right price with timely delivery but, in last five years, developers have failed on all three points. But other than developers, the delay in government clearances and approvals of new and ready projects are to be blamed too. North market is lagging behind because of the presence of more flippers & investors than end-user and extra time taken for approvals. Project delivery track record is better in South maybe cause of smaller size of projects and being a more matured market.”He added that given the shortage of 20 million homes, the real estate demand will never go down and 10-15% correction has already happened in NCR in last 12-18 months. Peush Jain, Executive Director, Advisory & Transaction Services for CBRE South Asia Pvt. Ltd. summarizing the office segment trend said that most of the companies were moving their corporate offices to Noida and Gurgaon cause of limited supply in Delhi. “There is a huge pent up demand from both end user and corporate side and even rentals are going up. Compliance issue in Delhi is one of the reasons for low institutional interest in Delhi NCR market. Also, integration of residential & commercial development is required for work-life balance.” Adding to it, Architect Charanjit Singh Shah, Founder & Principal – Creative Group commented that Gurgaon just 35 year old is choking whereas Chandigarh more than 60years old is still a green city. “Fragmented approach of real estate player is leading to unorganized urban growth. Individual projects are very green and well planned but how they connect to the city as a whole should be addressed. Developers need to integrate the part to the whole for a sustainable city. For instance, the master planning of Industrial city of Jamshedpur that has 20 million tonne of steel going out 20 million tonne of raw material coming and has more than eight lakh people living in 64sqkm is such that it still remains a green town.” He expressed that optimizing cost is what is required for boosting investor confidence. Manoj Kumar, Managing Director, Mani Real Estate concurred, “Land cost should reduce to drive affordable housing growth as that is the need of the time. Currently 30% of the housing demand is in lower and middle income group which will go as high as 60-70% by 2020. To support the urban expansion, infrastructure connectivity becomes a necessity to promote low income housing mostly located on outskirts.”Concluding the discussion, Soin was of the view that it’s the flippers who are feeling the investors’ confidence is down. On the contrary, right now real estate is available at replacement cost so it’s the right time to invest. As he said, “Demand supply mismatch is the main reason for piling inventories and next decade belongs to low income housing.”