Affordable Housing A Distant Dream in Delhi-NCR; Tier 2 Cities Are a Way Forward

Sanjeev Kathuria(Founder, Author & CEO at Torbit Consulting) - June 08, 2024 - - 0 |
Affordable Housing A Distant Dream in Delhi-NCR; Tier 2 Cities Are a Way Forward

The way affordable residential real estate market has  become unaffordable, buying home in Delhi-NCR has become a distant dream today amidst sky-rocketing prices.

Examining  the new residential launches over the past two years in metropolitan areas, particularly in Delhi NCR( Noida, and Gurgaon), a clear trend emerges.

(a) Large-sized apartments with sizes around 4000 sq.ft. and more

(b) Luxury features such as air conditioning and imported marble coupled with with fancy interiors, modular kitchen, wardrobes etc.

(c) Launch prices starting at ₹15,000 per sq.ft with capital costs ranging from INR 5 crores to 15 crores.

Imagine a scenario where both husband and wife are working, each earning a minimum salary of ₹2 lakh per month: even then, they cannot afford these apartments or they have to compromise on sizes or move to the location in the  outskirts – Tier 2 cities. Further ,rentals  have skyrocketed, exacerbating the struggles of the middle class, causing significant stress.

Meanwhile, builders are facing pressure because both affordable and premium housing have become scarce. The cost of land and basic construction materials has soared.These factors collectively contribute to the non-feasibility of developing  homes under affordable segment.To remain in business, the only viable strategy is to add luxury specifications and sell at higher prices.

But then  the big question is where are we heading.We are heading towards a situation similar to that of Western or developed economies. In New York City, expenses are so high that even CEOs are forced to explore living in New Jersey and beyond. In Central London, affordability is a distant dream for most, pushing people to reside further east or west of the city centre, accessible by tube railway.

Going forward, middle class will inevitably have to consider Tier 2 cities. Whether you like it or not, the robust infrastructure work over the last decade, including new metro systems, roads, expressways and airports, has made travel quicker and more convenient. Make the most of it.Top IT companies are actively establishing workspaces in these locations to tap into local talent, thereby saving on resource costs and reducing office space expenses.

You might wonder, who is then buying these newly launched houses especially when all the new launches get sold out on the day they are introduced. The answer lies in the boom in stock market /commodity market and gold and silver over the past two years. Land prices have surged significantly, prompting people to book profits and invest in these new properties. Most buyers are investors willing to put down an initial 15-30% and then sell before the next instalment—a risky proposition. There are hardly any end-users entering at these prices.

The message is loud and clear for my middle-class colleagues: secure your residential needs in a Tier 2 city of your choice before the frenzy spreads. If you are fortunate, you will find work opportunities in the chosen city; otherwise, rely on the improved transportation systems for your commute. So, head for Tier 2 cities for your home before it gets late.

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