Why investors in the NCR are renting rather than selling their properties

A number of real estate investors in the NCR, are now preferring to rent out their apartments in order to earn returns, instead of selling. We examine the factors that have fuelled this trend and what it means for the rental housing segment

Delhi-NCR’s rental market is now witnessing a new source of supply of apartments. Investors, who have been the primary buyers of apartments, are now stuck with excess inventory and are willing to rent out their apartments.

The oversupplied real estate market of the National Capital Region (NCR) now has high levels of unsold inventory. The market that boomed till 2008, witnessed many investors coming into these projects, providing the much-needed liquidity. However, as the market slumped in the subsequent years, the same investors have now been forced to put their ready units in completed projects on rent.

Surabhi Arora, senior associate director – research, Colliers International, says “There is a mismatch between the expectations of buyers and sellers in this segment, where the buyers are looking for deep discounts, while sellers are in a holding mode. Thus, the market is not witnessing much transactions. Investors are in a wait-and-watch mode currently and are not willing to give deep discounts. While exit is an issue with projects that are under construction or delayed, it is not as much of a problem in a completed project. Nevertheless, renting is one of the options, if somebody is not satisfied with the ROI achieved and have the holding capacity.”

See also: The best places to stay on rent in Delhi-NCR

Investors have also been hit by delays in the completion of projects. One such investor, who wishes to remain anonymous, explains how “Almost all the projects where I had invested in 2008, are running behind schedule. Due to this, my interest outflow on all the loans have gone up. In the absence of any buyer and favourable prices, I have not been able to exit. Now, when I get the possession, I will rent out the units.” The investor revealed that he had put in substantial amounts in projects in Dwarka Expressway and Noida Expressway.

 

Rental market scenario in the NCR

Markets are under pressure, on account of delayed projects, subdued business sentiments and oversupply.

While overall rents are stable in Gurugram, markets such as Noida and Ghaziabad, are reeling under pressure, because of huge supply in the peripheral micro-markets such as Noida Extension and Noida Expressway. Even the newly-developed sectors of Noida, such as Sectors 70 to 78, have been affected. “Rentals have already come down by around 15% to 20% and we anticipate that it will largely remain stable in these micro-markets,” adds Arora.

 

Rental rates in newly-developed destinations

Micro-markets City Configuration available Rental range (in Rs per month)
Sectors 70-78 Noida 2-4 BHK 13,000-15,000
Completed projects of Greater Noida West (Noida Extension) Greater Noida 2 BHK onwards 7,500-15,000
Dwarka Expressway Gurugram 2-4 BHK 12,000-15,000
Noida-Greater Noida Expressway Noida 2-4 BHK 12,000-18,000
Crossings Republik Ghaziabad Mostly 2-3 BHK 10,000-12,000
Vaishali and Vasundhara Ghaziabad 2-3 BHK 10,000-20,000

 

The above trend chart is indicative

 

What it means for buyers and investors?

The overall market tends to favour buyers. Buyers and those looking for rental apartments, can negotiate hard to get reasonable prices. Investors who can hold on to their stock, can put these units on rent. On the other hand, those who require immediate money, should consider selling their units with some loss. “If the project is delayed without any hope of completion, you can also think of seeking legal recourse for exiting the project,” adds Rajiv Mehrotra of Sunshine Properties. With the infusion of funds from private equity firms, more projects will near completion, resulting in increased supply. This may also result in property prices coming down.

 

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