With Noida authority raising land prices by 20-30 per cent, realtors in the fast-growing affordable homes market in the National Capital Region (NCR) are set to raise prices of residential apartments. The developers are already suffering from the double whammy of higher raw material prices and cost of home loans surging due to repeated hike in repo rate. And the latest move by the authorities is now expected to aggravate the situation.
According to leading developers in the region that Business Today spoke to and market experts, the realtors are now left with no choice but to increase prices of residential homes. The Noida-Greater Noida market in the NCR has been offering relatively cheaper homes to the middle income households.
“The land rate hikes announced by the Noida Authority will affect the residential, industrial, group housing as well as IT-ITES property rates. The increase by 20-30 per cent across several categories will most certainly push buyers from the property market as it would not be a plausibly beneficial deal for them. The housing and commercial units of upcoming projects will be sold at high prices, and the burdens will eventually be borne by the buyers,” Deepak Kapoor, Director, Gulshan Group told Business Today.
According to Amit Modi, President of CREDAI Western Uttar Pradesh, the hike in Noida land rates will disenchant buyers from going for investments in land. “The land rates have been increased across several land categories. This will affect the prices of land available for residential, industrial, group housing and commercial. As far as the future projects are concerned, since the predominant cost of the project is the cost of the land, hence it is obvious that the prices of apartments will go high. It will ultimately be passed down to the end-users and will undermine PM's vision for Housing for All,” Modi rued.
Vikas Wadhawan, Group CFO for real estate marketplace and analytics platforms Housing.com, PropTiger.com & Makaan.com feels, the move would significantly raise the land prices in a city where affordability has been the main driver of growth amid the coronavirus pandemic. The market was earlier reeling under instances of developer insolvency cases and project delays but it gained pace after homebuyers flocked the market post-lockdowns.
“Unlike most states, the government of the state (of Uttar Pradesh) has also refused to entertain the demand for circle rate and stamp duty reduction even though many of its peers in the country did so to boost pandemic-hit realty. This move, coupled with recent repo rate hikes in the tune of 140 basis points by the RBI since May and the burgeoning cost of raw materials somewhere deeply impacts the market sentiments which still seem upbeat. Hence the government should be cautious while taking such steps,” he said.
Since early-2020, when COVID pandemic begun, prices of key raw materials like steel, cement, copper and aluminium have risen. As construction activities picked up pace post-lockdown, the war in Ukraine caused massive disruptions to the global supply chain in 2022, further pushing up the prices of these commodities by up to 125 per cent since mid-2021.
As per industry estimates, prices of residential homes have already gone up by 5-8 per cent between late-2020 and now.
Another factor that has made realtors jittery is the consecutive hikes in prime lending rate (repo rate) by the Reserve Bank of India - leading to rise in home loan costs. Record low home loan rates had been a key driver in rapid surge in home purchases in the past few quarters.
Ajay Rakheja, President of commercial real estate at Berkshire Hathaway HomeServices Orenda India said, while after this hike, buyers will have to spend their finances on investing in real estate, it will also help developers in the long run to curb the rise in input costs.
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