The Indian EXPRESS, New Delhi, Saturday, July 29, 2006

Supply of new property in Gurgaon will increase once its new masterplan is notified. Prices should be affordable

Sanjay Kr Singh

Ideally, you should have bought a plot or apartment in Gurgaon in the mid or late nineties. If you woke up to Gurgaon’s potential after 2002-03, prices were already rising and soon skyrocketed beyond the affordability level of many buyers.

Now, you might get a second shot at owning a property in Gurgaon. a new integrated masterplan for Gurgaon and Manesar was published on July 11, 2006. Haryana Urban development Authority (HUDA) has allowed one month for the public to file its objections, after which the masterplan will be notified.

Where as the old masterplan encompassed an area of 9,881 hectares, the new one covers 33,726 hectares (3.4 times the previous area). To the existing 57 sectors. 58 new sectors have been added. These will be developed by 2021. and are expected to house a population of 37 lakh.

High rates

Presently, the price of built up property in Gurgaon could be above Rs 6,000 per sq ft in a super premium project like Sahara Grace on MG Road. In DLF Phase V. the price in apartments like Carlton and Wellington is around Rs 3,900 per sq ft. Rates fall as you go southward to Sohna Road. Where the prevailing rate is Rs 2,700-2,800 per sq ft.

For plots. The price ranges from Rs 25,000-60,000 per sq yd. Property prices have risen by at least 25 per cent over the last one year. According to HS Anand, director of Mariner Welfare Society (a housing society for members of the Merchant Navy) located in Sector 56, Gurgaon, there has been some correction in the price of plots to the extent of 15 per cent. “Deals are not taking place at above Rs 50,000 per sq yd.” he says.

Investors hold a large percentage of properties in Gurgaon. their percentage is higher in plots, though they have also put in money in group housing projects that are presently under construction. According to Sunder Lal, Senior Advisor, Sahar Infrastructure and Housing, at present prices are not moving up and investors are holding on to their investments. “If the market doesn’t begin to move up in a few months, the weaker investors might want to offload their holdings. That could trigger a correction,” he says.

More supply

For buyers, the new masterplan means an opportunity to buy property in Gurgaon at more moderate prices. Says pradeep Mishra of Sainik Estate, a local property consultancy: “Earlier, end users didn’t have options, so they had to purchase property at prices ranging from Rs 2,500-7,000 per sq ft. Now with the coming of the masterplan, buyers will have more options. More availability will definitely result in some moderation in prices.”

Key sectors

If you plan to buy in the new sectors of Gurgaon, studying the masterplan could give you an idea of which sectors are likely to emerge as prime. Says Sunder Lal of Sahara Infrastaructure and Housing, which owns a large land bank in one of the newly demarcated sectors: “Proximity to Delhi will determine prices in the case of plots. For built up property, the quality of development and the builder’s reputation will also affect prices.”

Applying the comparative evidence method – where you take into account the prices prevailing in the already developed sectors in the neighbourhood – will help you determine what the rates are likely to be in the newly demarcated sectors once they are developed. (See table: High prices presently).

Sectors like 111, 112, 113 and 114 are close to Delhi border and will surely emerge as prime sectors (just as areas around MG Road in present day Gurgaon are regarded as prime). If you are looking for high end property that will appreciate rapidly, these are the areas you should target.

Several residential sectors have been demarcated in the area between Gurgaon and the industrial sectors of Manesar. Some of these sectors are also close to the area earmarketing for Special Economic Zones (SEZ), and to Garhi Harsuru, where Reliannce’s SEZ will come up. These sectors are 76, 77, 78, 81, 82, 83, 84, 85, 86, 97A, 86P, 88, 92 and 93. Given Reliance’s plan to set up industry over 25,000 acres, and even an airport, these sectors too hold a lot of potential. If you are looking for affordable housing, these are the areas to scout. A third lot of residential sectors has been demarcated near Sohna Road. These are 58, 59, 60, 61, 62, 63, 65, 67, 68, 69 and 70. These sectors are also close to a new road that will connect Sohna Road to Faridabad.

The prevailing rate of builtup property in sectors 56 and 57, which is around Rs 2,800-3,100 per sq ft. can be taken as benchmark for prices in these new sectors.

Connectivity

Another factor that will determine pricing in the new sectors is connectivity. Sectors along NH-8, such as 76, 77, 78, 80, 81, 82 and 83 wll command a good price. The masterplan provides for the construction of a new road from Delhi (Brijwasan to NH-8, Sectors such as 113, 112, 114, 111, 108, 107, 106, 105, 102, 99, 84 and 83. which lie along this road, will command a good price.

Developers return

For developers, too, the new masterplan opens up opportunities. For the last couple of years. Very few group housing projects were being launched in Gurgaon as all the land in the residential zone (called R-zone) of the previous masterplan had got exhausted. Hence, many developers moved to tier II cities like Chandigarh. Jaipur, and Ludhiana. Says Rajeev Behl of Realtech group. “When builders from the NCR moved out, their investors too moved with them.”

Now, a huge area is opening up for development – 14,380 hectares for residential. 1,199 hectares for commercial. 7,023 hectares for industrial development, and 1,460 hectares for Special Economic Zones (SEZs). Says Behl, “With 35,500 acres becoming available for development, both developers and investors will move back to Gurgaon.”

Scramble for land

Developers have been expecting the new masterplan for some time. Many big builders have already purchased land in the new areas. The reason: land that falls in the R-zone of the mastaerplan (and for which licence has been obtained) can cost as much as three to seven times more than agricultural land.

But, as S K Sayal, CEO of Alpha G Corp says, “Buying land in advance is a high-risk, high reward strategy. The land you have bought might not fall in thr R-zone.” Sometimes there is the danger that the land you have purchased might be taken over by the government because a highway or some other pubic utility has to be developed on it.

Soaring prices

But builders who waited to purchase land after the new masterplan was published might find that land prices have soared far too high. In Ghata and Medhawas areas near sectors 55 and 56, prices have risen to Rs 2.5 crore per acre. In Dhankot area near the railway line, land is selling for Rs 1.5 crore per acre. In Shikohpur on the left of NH-8, it is selling at Rs 1.75-2 crore per acre. And in sectors near Manesar industrial area, the current price is Rs 1.25-1.5 crore per acre.

Anand of Mariner Welfare Society informed that with the coming of the mastaerplan a lot of land would become available. But more supply has not resulted in lower prices. “The price of land is quite inelastic in this area. Once a deal has been struck at a certain price, word spreads, and farmers don’t part with their land for a lower price,” he says.

The chief expences in developing a residential project are cost of land: approval and licensing fees: construction cost: advertising, marketing and broker age fees: and contingency (unforeseen or miscellaneous) expenses.

According to Anand, if the developer buys land at Rs 2 crore per acre, then after paying all the duties to the government and spending money on developing infrastructure on his land, the land will cost him Rs 20,000-22,000 per sq yd. which means that the price to the buyer will be higher. If he is developoing group housing, then the land component will cost Rs 600-650 per sq ft, which means he wn’t be able to sell the project for less than Rs 2,000 per sq ft. “Two to three years later, when a lot of supply has come in, these prices may not be sustainable,” says Anand.

Builders who bought land at agricultural rates will enjoy higher margins, and more pricing flexibility.

Finally, given the predominance of investors in the Gurgaon market and the large amount of space under construction, the existing sectors could see a price correction closer to the time when these projects are ready for delivery. Mean while, the enw masterplan is good new for end users. As Kunal Banerji, VP, Ansal API says. “With more supply prices will definitely get more competitive.”