New Delhi: Gurgaon, the popular suburb of choice for the well-off and often a barometer for India’s housing boom, could see a glut of high-end residential homes in the next two years, say real estate consultants, because the bulk of the buying was done by those looking to sell the homes on completion.

Housing rates in Gurgaon are often a measure of home prices in tonier Indian suburbs

Most of the high-end residential projects launched a year ago are expected to be completed by 2009-10. According to real estate consultancy firm DTZ, Gurgaon could see cumulative supply of high-end residential units increase from around 1,500 units in 2006 to nearly 10,000 units by then.

Real estate consultancy firm Jones Lang LaSalle Meghraj also agrees that there will be an oversupply within the next two years.

The demand for high-end apartments is mostly investor-led and they currently comprise 60% of the total customer base. “Only 40% of buyers are actual end-users," Sahel Pramendra, managing director, North India, Jones Lang LaSalle Meghraj, said.

The growth of Gurgaon has largely been led by the demand for quality residential and commercial space near Delhi, and prices have tripled in as little as three years, making it an attractive investment for those looking for a quick gain.

Gurgaon, often a measure of home prices in tonier Indian suburbs, has seen the development of many premium residential apartments with extra amenities such as swimming pools, acres of landscaping, private lifts and jogging tracks. According to DTZ, 25% of the existing and upcoming residential developments in Gurgaon are in the high-end residential segment.

India’s largest developer DLF Ltd as well as other big developers such as Unitech Ltd, Emaar MGF Land Ltd, Parsvnath Developers Ltd have all developed or are developing high-end residential apartments in Gurgaon. The price of high-end spaces ranges from Rs2 crore to up to Rs10 crore, depending on the size and the amenities.

DLF’s luxury home project, The Magnolias, has large centrally air-conditioned apartments which vary in size between 5,825 sq. ft and 10,000 sq. ft. Located inside the DLF golf course, the homes cost between Rs5 and Rs9 crore.

The apartment complex has facilities such as a club with swimming pool, steam and sauna facilities, tennis and squash courts.

The demand for such high-end homes might, however, not keep pace with the increase in supply, says DTZ. “Demand for high-end homes is always limited in any residential market due to its high capital values," notes Vivek Dahiya, director, DTZ.

Investors buy apartments at the time of the launch of the project and exit the project as it nears completion. “Most of the investors who bought units in 2005-06 would be looking at exiting the investments in the next two years unless they would like to hold on for rental returns," Dahiya said.

For its part, Unitech said about 80% of the demand for high-end homes up until last year was mostly from investors, though that is now changing. Current bookings are mostly user-led as five-year-high interest rates are squeezing speculators out of the market.

Developers, however, maintain that there won’t be an oversupply. According to Suncity Projects Pvt. Ltd, there will be only 2,500-3,000 units of high-end homes in Gurgaon by 2010, far less than estimated by the real estate consultants.

“Around 60-70% of our luxury home project La Lagune in Gurgaon is booked," said Ajay Aggarwal, director, Suncity Projects. “The demand for such homes is strong." He didn’t say whether these bookings were investor-led or for those buying to live in these homes.

DLF did not comment as the person who can speak to the media on this was not reachable.

The demand for residential apartments is also strongly linked to the supply of office space, notes Bhaskar Basu, vice-president, sales & marketing, Unitech. “We expect a supply of about 21 million sq. ft of office space in the next three-four years and going by this, the demand for high-end homes should be strong."

Emaar MGF also declined to comment as it is on the threshold of an initial public offering and the Securities and Exchange Board of India rules do not permit the company to comment during this period.

Real estate consultants, however, say that despite the growth in neighbouring office space, supply of high-end homes is looking like it will exceed demand and lead to a softening of prices. There might be a 10% reduction in prices, depending on the project and the location, according to Jones Lang LaSalle.

According to DTZ, the growth in prices of high-end homes is already tapering.

For instance, for the DLF Icon project in Gurgaon, the increase in the price per sq. ft from its launch in 2004 to 2006 was 33.48%, while the change in price from 2006 to 2007 is just 7.14%. “We will not see double-digit increase in prices of high-end homes anymore," Basu said. “The increase in prices will now be in single digits."