The Delhi Metro and its Impact on the Local Real Estate Market
The capital city of New Delhi lies within India’s second largest metropolitan area simply called Delhi. With a population of approximately 14 million, Delhi ranks second behind Mumbai as the largest city in the country. Today, Delhi’s extended population is approaching 22 million people, and has created crowded conditions with extremely high demands on the public transportation element.
Delhi Metro to expand over three more phases
This led to the development of the Delhi Mass Rapid Transit System, or Delhi Metro as it is known. The success of this transport network that began operations in December 2002 now sees it as not only the public transportation of choice, but the model itself has become the standard for the development of other systems across India. And yet the current metro system, known as Phase I, is itself set to grow with another three phases, scheduled for completion in 2010, 2015 and 2020. By the time Phase IV is operational, the Delhi Metro will have found its place ahead of the London system as the largest public rail network in the world.
It is easy to see why these four phases of the transportation network, together with the northern and southeastern suburb developments included in the Delhi Metro Masterplan 2021 have impacted and will continue to impact the real estate industry of the area.
Connectivity and commuting within the city and in the NCR areas of Gurgaon and Noida will become a piece of a cake and the economic effects are being felt already. For example, the onset of the Metro has increased the land prices and apartments built by Unitech Ltd. and DLF, one of the foremost private building companies which own huge tracks of land in Gurgaon.
The incredible pace that the growth rate of the area has been exhibiting is having a beneficial economic effect, especially where the real estate market is concerned. It is also having a very positive effect on the entire job market, as the unemployment rate continues to drop in the major industries of the automotive, health care, and technology sectors.
Delhi relatively way more expensive than Chicago
SeekingAlpha, a website that primarily targets investing, conducted an intensely rigorous study of what is going on in the greater Delhi metropolitan area using US cities such as Chicago and Las Vegas as a basis for some of the comparative analysis. The results as they relate to real estate are simple stunning.
The median price for a 2 bedroom, 1,000 square foot condo in Delhi is priced at about $200,000 USD, compared to $400,000 for the same size dwelling with similar amenities in Chicago. Incidentally, the team that conducted the research for the study claimed that the main reason they used Chicago and Las Vegas as the comparative cities was based on projected expansion into adjacent geographical areas.
Delhi’s current expansion seems to be targeting northerly and southeasterly segments of the adjacent geography. What is very interesting is that even though the prices in Delhi are about 50% lower than similar properties in Chicago, the US city has a median income that is roughly 50 times greater than that of the greater Delhi area, making Delhi relatively 25 times more expensive than Chicago when local income is taken into account!
A bubble in the making?
When you look at the comparative prices of land, whether agricultural, commercial, or residential, it is nothing short of phenomenal. Faridabad, Haryana, adjacent to New Delhi is compared to the prices of land in New Jersey, being adjacent to New York. An acre of land in New Jersey averages about $12,000 USD. If you want an acre of land in Haryana, it will cost you a whopping $250,000 USD.
When you think about the old adage of “what goes up must come down”, it really makes one wonder about the possible nightmarish consequences of speculation in such a volatile market.
The Wall Street Journal recently published an article about a person who had made billions gambling against the real estate bubble bursting in the Delhi area. The man was claiming that there has never been an investment-grade mortgage bond that has defaulted yet even, though many experts are predicting that the region is headed for economic woes. Supposedly, the mortgage experts are too caught up in the housing industry to notice what is going on in the soaring market.
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