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Rocketing property prices in India's fast-growing capital

From John Defterios, CNN
January 6, 2014 -- Updated 0217 GMT (1017 HKT)
STORY HIGHLIGHTS
  • Roughly 200,000 people move to live and work in the Indian capital, New Delhi, every year
  • The cost of luxury property in some of the cities most prosperous areas has rocketed as a result
  • Some homes in the most exclusive areas can fetch prices of up to $100 million

One Square Meter explores the leading architectural designs, city plans and demand for property investment in emerging markets. Join CNN's John Defterios as he visits some of the world's most dynamic cities for an insight into the fast-paced world of real estate development.

(CNN) -- It's one of the fastest growing cities in the world situated in one of the most rapidly developing nations.

Every year, roughly 200,000 newcomers arrive in the Indian capital of New Delhi. Some head to the city's sprawling informal slums while others land in more upmarket residential areas.

This vast influx of people has contributed to a chaotic urban scene, a burgeoning population of almost 13 million people and a boom at the higher end of the city's housing market.

Why people buy here is they see a potential for appreciation and a stable return because the demand in the city is ever increasing
Rahul Rewal, propery expert

Around 50 years ago, residents in neighborhoods like Lutyens in south Delhi's leafy inner suburbs paid rents of just $5 per month.

Today, this same area hosts properties that market for $100 million each. Nearby districts such as Lajpat Nagar (where a two-bedroom house sells for $300,000) and Nizamuddin (where a similar property can go for $950,000) have witnessed a similar surge in prices.

World's tallest residential tower

See also: Where are the world's most expensive luxury properties?

With so little space available, demand so high and restrictions that limit the height of new housing units, developers have been forced to get creative when constructing new properties.

Some have been forced to make the most of tight locations.

"We took six to eight months to complete this project," explained Namrata Malkani, a developer whose family bought a small plot of land and developed a compact yet modern four-story apartment block between two old, crumbling houses. "We have partly sold it," already she proudly adds.

Read more: Can micro-home offer housing solution?

Improvements in the surrounding area and investments in local services meanwhile have helped make the neighborhood a more desirable place to stay, Malkani revealed.

"Because of the drainage it was (previously) difficult to stay here because it was smelly," Malkani said. "But the government has invested a lot into bringing up gardens and covering these drainages, which is why the property prices here have increased now."

See also: A new star on the rise in Mumbai's property market

And they have increased considerably.

Homes such as Malkani's sell for roughly $4,000 per square meter ($371 per square foot). With a total area of 75 sq m (807 sq ft) this means the asking price for Malkani's two bedroom house comes in at $300,000.

Yet according to local estate agent, Rahul Rewal, these high prices still equates to a smart investment.

"I don't see value in terms of size here," Rewal said. "But why people buy here is they see a potential for appreciation and a stable return because the demand in the city is ever increasing," he added.

For the 2.3 million people (17% of the city's population) residing in New Delhi's close by slum neighborhoods such ostentatious concerns remains a far cry from reality.

Those with the means, such as Rewal and Malkani, however, expect to see more growth in their respective investments as the New Delhi population increases further.

Eoghan Macguire contributed to this report

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