In a major relief for NCR developers / home buyers, the Environment Ministry has approved the draft notification of an eco-sensitive zone around Okhla Bird Sanctuary. As a quick recap: In 2013, the National Green Tribunal had halted construction activity within the vicinity of 10km around this bird sanctuary thus affecting real estate and urban infrastructure projects in Noida and NCR. As a result a lot of the completed apartments (almost 30,000) and other projects could not be handed over to customers. Sales too had declined as customers weren’t sure about the timing of the final approval – if at all. This notification should allow project handovers to commence and will likely result in improved sales traction in NCR – one of the slowest property markets in India.
We note that in Gurgaon, Dwarka Expressway construction also recently got the green light thus allowing for project construction to resume likely allowing for some improvement over time in the secondary market. We note that the market is down 20-25% in terms of pricing and volumes are almost 70-80% below 2010 levels, thus making it one of the most affordable markets in the country. As the secondary market improves, we think it will be reflected over time in the primary sales of developers.
We note that the ruling will essentially allow developers to handover existing projects to customers and likely improve secondary market sales between investors and end users. However, primary sales will take time to pick up as the market will first work through the absorption of these completed units. Nonetheless, in the medium term, this is positive for pricing as eventually when customers start taking possession of projects, prices in the surrounding vicinity will start to rise given improved economic activity and thus eventually incentivize developers to launch new projects.
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