Property On Gurgaon-Sohna Road:Buy or wait ?

Gugaon-Sohna Road is well connected, and is close to areas offering massive employment opportunity. Should you buy at today’s prices?

A 20-minute drive from Dhaula Kuan along National Highway 8 takes you to Rajiv Chowk in Gurgaon. Take a left turn here and you reach Gurgaon-Sohna Road where about 20 developers have either already built, or are currently developing, an estimated 8,000-10,000 apartments.

Development on Sohna Road started in 2004. The price of group housing then was a very affordable Rs 1,200-1,500 per sq ft. Today the price range in the secondary market is Rs 2,800-3,700 per sq ft (builder prices are much higher).

End-user driven

In the last one year the market has become largely end-user driven. Says Rajan Ahuja, director, Realty & Verticals, a Gurgaon-based real estate consultancy: “A lot of demand comes from people who would like to buy a house in Delhi but can’t. Today the price of a 1,800 sq ft floor in south Delhi colonies like GK I, GK II, and Defence Colony is about Rs 1.5-1.9 crore. A similar apartment on Gurgaon-Sohna Road is available for Rs 70-80 lakh.”

A key driver of demand is the employment generated in Gurgaon

Demand also comes from people who want a second home, either for spending their weekends, or for renting out. NRIs and professionals working in Gurgaon’s corporates also account for a large portion of demand. In several high-end complexes, corporates have bought apartments in bulk to house their senior executives.

Price correction

While there are a lot of prospective buyers in the market, affordability has become an issue because of the combination of high prices and interest rates. Which is why prices have largely remained stable or declined marginally during the last six months. Says Jayant Varma, executive director-north, Knight Frank India: “Apartments have seen a small correction of about five per cent over the last six months.”

In the case of plots, the correction has been larger. According to Pradeep Mishra of Zion Global Consultants, “The peak value in and around Sohna Road, which prevailed six months ago, was Rs 30,000-35,000 per sq yd. Since then prices have declined by about Rs 5,000-7,000 per sq yd.”

Mishra attributes two reasons for the price correction. “More speculation took place in plots, hence the correction there was also sharper,” he says. A second reason, according to him, is Haryana Urban Development Authority’s (HUDA) stipulation that buyers will be fined if they don’t begin construction on their plots within seven years of allotment. This has affected investor sentiment adversely.

A notable feature of prices on Gurgaon-Sohna Road is that projects that are close to possession, or where possession has begun, command a higher price of about Rs 3,500-3,700 per sq ft. Projects where construction has not yet begun, or whose possession is slated for 2008 and beyond, command a lower price: Rs 2,800-3,000 per sq ft. “That’s because end-users prefer to buy apartments that are closer to completion,” says Mishra of Zion.

Yet another feature is the considerable divergence between primary and secondary market prices, which in the case of many projects could be as high as Rs 500-1,000 per sq ft.

Demand drivers

A key driver of demand is the annual employment generated within Gurgaon. According to a just-published Trammell Crow Meghraj report “Major IT-ITeS hubs in India”, Gurgaon has an existing inventory of 10.53 million sq ft of office space. About 2 million sq ft is currently under construction. In 2006 the net absorption of office space in Gurgaon was 1.6 million office space. (The IT-ITES sector alone accounts for about 75 per cent of annual office space demand). What the net absorption figure indicates is that there is a large influx of well-paid professionals into Gurgaon every year, which translates into strong demand for housing.

Positives

Gurgaon-Sohna Road has many positives. Its biggest strength lies in the massive employment opportunity available within a 10-15 km radius. Gurgaon’s leading commercial hubs, such as DLF Phase II and III, are barely 10-12 km away. Golf Course Road, another upcoming commercial hub, is 5 km away. Manesar, a major industrial township with 260 large industrial units and 8,000 small units, is 15 km away. The area demarcated for Special Economic Zones (SEZs) in the masterplan is at a 9-10 km distance.

Besides a good location, Sohna Road also enjoys very good connectivity. It is close to NH-8. Now that expansion of NH-8 will soon be complete, you will be able to reach the airport and Dhaula Kuan in about 20-25 minutes.

Moreover, the pricing on Gurgaon Sohna Road suits the upper-middle class. Says Varma of Knight Frank India: “This is the area that the upper-middle class can target. In other areas within Gurgaon, such as Golf Course Road, where a lot of supply is also coming, mostly premium apartments priced between Rs 1.5-5 crore are being built.”

Lastly, Gurgaon-Sohna Road offers the promise of quality lifestyle. Says Brijesh Bhanote, VP, Sales & Marketing, Vipul: “The projects being developed by private developers are well-planned, and offer amenities that will make your life hassle-free.” The environment here is also pollution-free.

Weaknesses

While Gurgaon-Sohna Road has much going for it, a visit to the area reveals the shortcomings. Infrastructure, for one, is not up to the mark. Sohna-Gugaon Road was to be six-laned and then eight-laned, but very little progress has happened on this project. With thousands of apartments to be delivered within the next year or two, the current road will not be able to cope with the expected volume of traffic.

The roads inside the sectors are also not properly developed. And the lack of public transport means that you are hamstrung unless every member of your family owns a car.

Should you buy?

If you are buying for self-use, go ahead and buy, otherwise wait.

There are two contrary opinions that you must weigh before making a decision. According to Mishra of Zion, “Wait for three months. Developers will start announcing projects in the newly demarcated sectors. The likely pricing will be Rs 2,200-2,600 per sq ft in sectors that are 8-10 km away from Gurgaon-Sohna Road. These new sectors will offer you an opportunity to buy something at a good location but at a much lower price.” According to Mishra, all that supply in the new area 1.75 lakh apartments by his estimate will also dampen prices in the established sectors.

Ahuja of Realty & Verticals is not so certain. “If the new sector is close to an established sector, it will command a comparable price. Only in far-off sectors, such as those near Pataudi or Jhajjar, will prices be much lower. Moreover, developers will not bring in so much supply at one go that prices in the existing sectors will be affected. They will release supply very slowly so that prices remain steady. After all they have bought land at high prices and want to make a profit.” Ahuja suggests that if you have the money, buy now before prices appreciate further in future.