Developers prefer Delhi to Mumbai

Softening interest rates and improved liquidity are increasing the demand in India’s residential segment, says a report on the Indian real-estate sector prepared jointly by the Federation of Indian Chambers of Commerce and Industry and Ernst & Young.

According to analysts, the two-pronged strategy employed by builders, improving balance sheets and focusing on developing self-funded projects, have helped the market pick up.
Demand in the residential segment saw a revival due to availability of small-sized affordable apartments and decline in property prices throughout the country. But the commercial, retail and hospitality segments were still struggling due to subdued demand from the IT/ITES sectors and multinationals, which are halting expansion plans in the country.

“In the aftermath of the global economic slowdown, most retailers have deferred their expansion plans in India,” the report said.

As developers shifted their focus to self-funded projects due to the liquidity crunch, many even cancelled hospitality projects. “This has resulted in the widening of the demand-supply gap in hotels in the country,” the report stated.

The report ranked New Delhi as the most preferred destination for real-estate developers and investors. Mumbai, which came a close second, scored better on the business environment index.