Delhi Bungalow Sells for £17m in Property Boom

India's booming economy scaled new heights today when a bungalow on Delhi's leafy millionaire's row sold for 1.5bn rupees (£17m).

Indian steel magnate Sanjay Singhal brought the house on one of Delhi's most desirable streets, from the Dutch government. Until recently it was the home of the Dutch deputy ambassador.

With no swimming pool and little to offer in terms of luxury, analysts say the price is all about the "location, location, location" in the suburb known as the Lutyens Bungalow Zone. Some of the city's most sought-after property is found in the zone which was built by architect Sir Edwin Lutyens during the twilight of the British Raj, with sprawling bungalows intended to house India's elite.

Many of the plots remain untouched, while others have been built over. Being inside the zone means that Mr Singhal's new home will escape the ugly development that blights much of Delhi's skyline.

"This is a trophy property because there are few properties that ever come on to the market," said Sanjay Verma of Delhi-based property consultants Cushman & Wakefield. "If you are an aspiring tycoon then this is why you want to live there. Nearby you have the homes of Lakshmi Mittal and Sunil Mittal [Indian telecoms billionaire]."

Mr Singhal's advisers said that the reason for the purchase was a "practical one". "[Mr Singhal] rents a home in Delhi and he wanted a place of his own. It is a very simple accommodation with few bedrooms. The house is just enough for his two daughters, son and wife," said RK Rastogi, an executive with Mr Singhal's company, Bhushan Power and Steel.

The price tag puts the home among the city's most expensive, just behind a 1.8bn rupee plot bought last year by industrialist-politician Naveen Jindal.

India's housing shortage is reaching a critical stage. Its cities lack 12m homes, according to Cushman & Wakefield, which forecasts demand for 400 new townships for 200 million people by 2011.

With India's economy among the world's fastest growing and a dearth of decent homes, property prices have shot up. DNA, a newspaper in Mumbai, recently reported that American Express had sold a flat for 215m rupees this year and quickly decided to sell its remaining properties.