Pandemic Hits Lutyens’ Delhi As Distress Property Sales Surge
The pandemic’s been so bad for India’s property market that even the nation’s most elite neighbourhood known for its proximity to the corridors of power is engulfed in the crisis.
Delhi’s Lutyens Bungalow Zone, an address that gives bragging rights even among the nation’s wealthy, has seen a surge in properties out in the market on distress sale. The price tag, even after a discount, ranges from Rs 200 crore to Rs 600 crore.
“In a never-before scenario, around 20 to 25 bungalows of mixed sizes between 375 square yards to more than an acre are currently available for sale," said Mohit Minocha, founder of SouthDelhiFloors.com. The crisis, he said, created by Covid-19 has played a significant role in increasing the availability of houses and reducing prices.
Designed in the early 1900s by British architects Edwin Landseer Lutyens and Herbert Baker when India’s capital was moved to Delhi, the area spans 23.60 square kilometres on the slopes of Raisina Hill, part of the Aravalli Range, the world’s oldest fold mountain. It’s a landscape of neoclassical architecture inspired by the Palace of Versailles and L'Enfant’s plan for Washington, with Mughal and Buddhist influences. This heritage zone includes Parliament House, Rashtrapati Bhawan, India Gate, Supreme Court, Prime Minister’s Office and central ministries. Alongside, according to New Delhi Municipal Council's website, are government-owned and private bungalows covering nearly a third of the area. Since new construction is not allowed, prices rarely fall.
“Due to the limited availability of private properties in Lutyens and its ultra-premium feel, it’s a great chance to benefit from current availability and slightly lower prices,” Minocha said, adding that the property rates have fallen by 5-10%. The price, he said, will rebound pretty fast when the situation normalises.
According to Samir Jasuja, founder, PropEquity, Covid-19 is not the sole reason. After properties of Rana Kapoor, Yes Bank Ltd.’s founder no longer in control of the lender, in Lutyens zone came under the scanner of the Enforcement Directorate, many more bungalows came out for sale. “After the Rana Kapoor episode, many high net worth individuals who are in debt are aggressively trying to sell their properties,” he said. “So, there are a lot of distressed properties out for sale.”
Savills India, however, said it will be misleading to blame Covid-19 or even believe that Luytens zone is witnessing distress sales. The supply is not unprecedented and properties have been coming in the market for many years, according to Shveta Jain, head and managing director, residential services, Savills India.
“In LBZ, there are few private homes and very few come with clear titles. Most of them have multiple owners and are inherited properties. So, they are not easily sold. For bigger bungalows, it usually takes a year or two for the deal to happen,” she said. “So just referring to numbers can be misleading because you can’t see them just in terms of numbers but how many can be actually sold.”
Still, Delhi-National Capital Region, Chennai and Kolkata were among the real estate markets worst hit by the pandemic with new launches and sales collapsing to near-zero in April-June period, according to a report by Knight Frank India. In the first half of 2020, the report said, weighted average prices fell across most cities—NCR, Pune and Chennai led with the biggest year-on-year decline at 5.8%, 5.4% and 5.5%, respectively.
According to brokers and developers, in South Delhi, another luxury market in the national capital, things have started improving. “We have seen some ready-to-move-in properties going for sale with even no discount and some selling for 4-6% discount that can be negotiated hard on the table,” said Minocha.
South Delhi’s luxury market is more or less stable with negotiations on single-digit discounts happening behind closed doors, said Rajeev Chanana, managing director at Aarcon, a Delhi-based developer. “We aren’t seeing any drastic price corrections like 20-30% as claimed by some market experts.”
The market will normalise soon with supply-chain logistics and manpower getting back to normal, he said.
According to Aakash Goyal, managing director at Metro Buildtech, a lot of window shopping happened before the lockdown but now only genuine buyers are out in the market.
“There is no price correction but slight flexibility with payment schedule is being offered as we also understand that the cash flows are restricted,” said Goyal. While the number of transactions haven’t come back to the pre-Covid level but he sees the market returning to normal in a month.
Anarock Property Consultants, however, sees demand only in the second half with the festival season starting October. "It is anticipated that the vaccine against Covid-19 will be available by then or the masses will have developed immunity to combat the threat posed to their health and so the situation may start to improve."
Property consultants anticipate a fall in prices till then.
“There is a bit of more supply in South and Central Delhi than the demand,” said Jain. “The transactions that are happening now are still pre-Covid ones. Once, the new deals start happening, we will actually see what kind of impact Covid has had on the prices.”
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Jain expects a decline of 5-7% as there is no urgency for anyone to buy and there is room for discounting. The only hurdle are circle rates or minimum prices used to calculate taxes. In places where prices have fallen below the circle rates, Jain said there has been a lull in transactions.