Daybreak - What happens when you bring Rs 2 crore to the Delhi-NCR house hunt?

Episode Date: December 26, 2024

The real-estate market of Delhi-NCR is an anomaly. The Ken spoke to a bunch of potential homebuyers who are looking for premium apartments with budgets of up to 2.5 crore rupees.  Real-estate experts are telling them to give up on their dreams. Lately, the national capital has been facing an acute supply crunch of new housing projects, especially in the mid-premium segment (80 lakh to 2 crore rupees) depending on the city.   Delhi NCR has witnessed the sharpest fall in inventory in this segment in the last few years.   Real-estate prices in turn have shot up far beyond the reach of most buyers. But it’s not like demand for housing has gone down because of these sky high prices.  People are still buying tens of thousands of these mid-premium houses in and around Delhi.   So the obvious question then is: why aren’t more residential housing units being built?  *This episode was first published on 12 Sept 2024

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcast, you've probably heard me. My interruptions, my analogies and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the Sita Ramancah. secret-source stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of

multi-camera shoots in professional studios, laborious editing and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. When 36-year-old Samir Rana started hunting for his dream home, he thought, how hard could this be?

Most would say that Samir is living the dream. He earns a cool $3,000 a month as a software developer in Gurgaon, he makes smart investments, and he even drives a BMW. But despite all of this, lately, he's been feeling rather inadequate financially. And that is because he recently realized that the two-craw budget he had set for himself would not be enough to buy the house of his dreams. Maybe it would be in any other city, but definitely not in Delhi-NCR. His requirements are simple.

He wants a luxe home with a carpet area of about 2,000 square feet. It's been three months since he began house hunting and he has seen. found nothing so far. Now, if Samir were looking for a house in any other posh locality of India's many metro cities, he would have been flooded with choices. But the real estate market of Delhi NCR is an anomaly. As you may have guessed by now, Samir is not alone. The Ken spoke to a bunch of potential home buyers who are looking to buy premium apartments like Samir with budgets of up to 2.5 crore rupees. But real estate experts are telling them to give up on their dreams. You see, the national capital region has been facing an acute supply crunch of new housing

projects, especially in this mid-premium segment. That, by the way, is a cash-over term for houses that are priced between 80-lac rupees and 2-crawl, depending on the city. Delhi NCR has witnessed the sharpest fall in inventory in this segment in the last couple of years. And of course, the unfortunate byproduct of the shortage is that real estate prices have shot up far beyond the reach of most buyers. But the interesting thing is that the demand for housing has not gone down because of these sky high prices. People are still buying tens of thousands of these mid-premium houses in and around Delhi. So the office question then is, why aren't more residential housing units being built? Welcome to Daybreak, a business podcast from the Ken.

I'm your host, Nidhar Sharma, and I don't chase the news cycle. Instead, every day of the week, my colleague Rahal Philipos and I will come to you with one business story that is worth understanding and worth your time. Sharon Gupta and Samir Rana have a few things in common. They both work in software and they live in Delhi. But most importantly, they're both looking for the perfect 2,000 square feet apartment. And just like Samir, Sharon too, has not had much luck. My colleague, the Ken reporter, Ronakumar Gunjin, met him during his house hunt. They visited Kalpitaru Vesta, which is an under-construction housing society in Noida.

At first, it seemed to fit the bill. They were blown away by the temperature-controlled indoor pool, the massive clubhouse, the greenery. But then Sharon saw one of the four BHKs on offer, and it was far from what he had expected. The bedrooms were smaller than he had imagined. The balconies were larger than necessary, and the kitchen was cramped. The final nail in the coffin was the asking price, a whopping 5 crore rupees. That was 150% above his budget. The thing is, the area where he was looking, which is Noida's sector 128, is not even a

posh part of town. It is at least 30 kilometres away from central Delhi. The airport is an hour and a half away. Even the nearest metro station is 5 kilometres away. And yet, the builder was charging nearly 19,000 rupees per square foot. Sharon had seen enough. So he hopped back into his SUV and went to see another prospective apartment. This one was in Godridge Tropical Isle, which is a housing society in Noida's Sector 146. Here too, the price-merewe. made Sharon's heart sink. The flat was even more expensive, six crore rupees for a 4BHK with similar dimensions. You know, a report by Anna Rock found recently that nearly 60% of newly launched housing units in NCR cost more than 2.5 crore rupees. Compare that to cities

like Bangalore and Pune, where less than 5% of new units crossed that price range. It is the same story across mid-premium properties in Delhi. Ronuk met another buyer, a man named Naman Malotra. He was hit with a similar price tag at an under-construction project by the builder Soba in Gurgao's sector 108. Naman was understandably frustrated by the whole experience and he had a simple question. What gave builders in Delhi the confidence to jack up prices like this? Stay tuned to find out.

The thing is, buying a home in the national. capital region is not for the faint-hearted. And I'm not saying this just because of the real estate prices that we are seeing today. This has been going on for decades. Defaults from over-leverage builders, decade-long dealies, and in some extreme cases, you pay for a house that never gets built. The most high-profile cases have involved known local builders like JP, Supertech and Armapali. They have seen tens of thousands of undelivered units. Just imagine, all those people, people who must have invested lakhs and lakhs of rupees, some cases even crores of rupees years ago and their homes still have not seen the light of day.

Now, in most major cities, nine out of ten projects are typically developed by local builders. But in Delhi, a lot of these local builders are now tied up in serious lawsuits. And as a result of this, the national capital supply of new real estate, particularly in the mid-premium segment has fallen drastically. So, of course, this was an opportunity for outsiders to enter the picture. Builders like Kalpitaru, Godridge, Soba and Tata have been taking on more and more projects in the national capital. And they're all from outside Delhi.

But the thing is, with all the local builders out of the picture, there is a serious lack of competition, which means that these outside builders have a free pass to charge whatever they want, which is why real estate prices have more than doubled in the recent past. And prices are not going to come down any time soon. At least that's what two senior officials at the Greater Noida Authority which auctions lands to builders had to see. Last month, the highest bidders for three land parcels in Greater Noida were the two non-Dellie-based brands, Codridge and Shoba. This was a new record. It is the most expensive land ever sold across all auctions in Greater Noida. There's also another new player in town. A new generation of local builders have also entered the scene now. And like

the outsiders, they are going all out with premiumisation. More on that in the next segment. Remember Sharon? We spoke about how he was looking for a home in Noida a little while ago and how everything was out of budget for him. In fact, two to three times more than his budget. Well, even after a string of disappointments, he continued to hunt for his dream home. So what happens when you bring two crore rupees to the Delhi NCR house hunt? After consulting with his broker friends and watching several YouTube videos, he was convinced that he had to avoid projects developed by non-NCR builders. But this left him with only a hundred hundred years. But this left him with only a handful of options, one of which was S-K-A Destiny 1. It is built by a relatively new local builder

and is located right at the eastern edge of NCR. Like Sharon, a lot of middle-class buyers are now seeking out lesser-known developers. And in their search for affordability, they are quickly realizing that nothing is truly affordable. Ronek visited four more under-construction projects in the area by local builders like Elite X, Spring Elmas, Irish Platinum and Fusion the Brook. Most buyers there knew little about these builders, past projects or the possession status of older units. Their focus was simply to find a flat in the 1.5 to 2 crore rupees range. But these flats are not a lot cheaper than the ones constructed by outside builders. Although not as high as Godridge or Soba, but there wasn't a single

single 4BHK under 2 crore rupees. A 2,000 square feet flat that costs 6 crores at Godridge now costs well over 2.5 crores with local developers. And they're all using the same language as these other big builders. Throwing around words like luxury, premium, laid-back lifestyle, you get the drift. It is a trend here in India and I'm sure you've seen it in your city as well. More so in NCR. One real estate agent told us that it is a great way for

builders to ruthlessly jack up prices. Unfortunately, Sharon eventually decided to pause his hunt. Most real estate agents in the capital say that the prices will stay inflated. Houses are not going to get any cheaper. But if Delhi's elite are struggling to purchase their dream home, where does that leave everybody else?