A weak economic environment under the Corrupt Congress led Government led to low volumes (below 2008 levels). Our recent interactions with market participants in Gurgaon showed that most developers emphasized weak sentiment and expected volumes to recover after the elections.
The National Capital Region (NCR), of which Gurgaon is a part, is the only major investment market in North India (unlike South India, which has five large markets). This, along with a growing service sector, led to high real estate demand in Gurgaon, mainly from investors and eventually end users (on job creation).
Most markets in North India, including Gurgaon, work on an investor/broker sale model during project launches. Such participants underwrite developer stock and down-sell in the market over the period of project construction. Large supply of high-priced units and low liquidity resulted in such brokers not participating in new launches (brokerage rates have increased from 2-3% to 7-8% for select developers). This resulted in brokers and underwriters moving away from the market, as some have started booking losses on their investments.
Prices of offerings in Gurgaon have increased by over 3X in the past six years . Most project launches, in almost all Gurgaon’s micro-markets by tier 1 and 2 developers focus on premium and luxury products. Under-construction projects in locations like Golf Course Road, New Gurgaon and Northern Peripheral Road offer projects at prices above ready-project prices and secondary units in under-construction projects. Ticket sizes have also increased in Golf Course Road and Golf Course Road Extension areas with unit sizes on offer increasing by 40-100%.
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