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Prices likely to rise by 2014

Though the impact of the recently increased land allotment rates may not be visible in the short term, property costs look set to rise by the third quarter of 2014

realestate Updated: Jun 06, 2013 20:56 IST

With the Noida, Greater Noida and Yamuna Expresssway authorities announcing a substantial hike in land allotment prices, one wonders how expensive it will be now to buy land. Also, will this move have a major impact on the 2,00,000 units currently under various stages of construction in Noida and Greater Noida?

The announcement will have a notional impact on prices, say real estate experts. The increase will not just be limited to the recent hike. Developers will see this as an opportunity to add to the additional expenses the increased construction and financing costs (with inflation factored in). There is also the likelihood of an increase in prices of new launches in the future, provided new parcels are allotted.

Even if there is a clear visible pipeline of stock in the market, prices will go up for the new round of allotments. According to research done by Knight Frank, nearly 5.20 lakh residential units are under various stages of construction in the NCR market, almost 50% of which is expected to be ready for possession by the end of 2014. Quite a number of projects launched in 2010 have seen execution delays, pushing the completion dates to 2014 and early 2015. Nearly 58% of the under-construction units are in Noida and Greater Noida. Gurgaon has nearly 24% of such units.

“The existing supply pipeline and the new allotment price by the Noida Authority, that too at a higher rate, will create a challenging situation for the developers and this may not be very encouraging for the market, at least in the short to mid-term,” says Anckur Srivasttava of GenReal.

Even though there is no political flux in the market, as was the case before the state elections last year, the market is expected to remain soft till the third quarter of 2014, he adds.

This also means that the next 12 months could be the right time for investment. Once the general elections are over, prices are bound to go up, experts say.

While there will be no correction in the market, buyers may get some discounts in the secondary market as new stock comes up. Prices in the secondary market will also catch up with the primary market in the next 12 months. By then, new projects announced on new land bought at higher prices will be launched at higher prices. These will also make old projects more saleable as they would be ready for possession.

According to Anil Sharma, president CREDAI NCR, the increase in land allotment rates will have a notional impact on prices. New plots, if available, will be few and far between. This scarcity is bound to push up prices. It must be remembered that there have been few allotments in Noida due to the master plan norms.

Geetamber Anand, president-elect, CREDAI, is of the view that this is a retrograde step and will push up prices of both the old and the new stock.

There will be pressure on prices, higher input cost will translate to higher cost of the project. Till the market remains soft, developers may try and absorb the impact for some time but once it improves, the immediate reaction would be to increase prices.

It will offer them an opportunity to cover the losses that they may have incurred in the old stock due to rise in raw material and labour costs, says Mudassir Zaidi, regional director, north, for Knight Frank. Also, the increase in prices will depend on the location, with a greater impact on areas relatively closer to the Capital compared to say, Greater Noida.