Surviving DeMo

Geetu Vaid

While the first fortnight of November, 2017 did refresh the chilling memories of days after Demonetisation, for the realty sector it was a time for  stocktaking. With black money playing an important role in property transactions across the country the maximum effect of demonetisation was seen in this sector as the initial months of 2017 saw a virtual blocking of real estate deals. While the commercial segment did not see much impact, it was the residential segment that suffered the most as it was almost a norm to pay 30 to 40 per cent of a home’s value in cash in order to avoid paying taxes. No wonder then that the weeks following Demonetisation were depressing. The last quarter of 2016, saw a 44 per cent drop in sale volumes in eight major cities as compared to those in 2015 and it was the lowest level since 2010.  

Even in the first nine months of 2017 the situation remained rather grim as top 10 realty destinations, including Gurugram, Noida, Mumbai, Pune, Ahemdabad, Chennai, Bengaluru etc witnessed a considerable dip in the sales. According to data provided by PropEquity these cities saw an average sale drop of around 36 per cent with Bengaluru witnessing a whopping 45 per cent dip. Though lack of cash was one of the major factors in derailing the residential market, especially the secondary sale scene, buyers dissatisfied with delays and financial crunch being faced by developers had also contributed to the slowdown.   

However, in spite of a tepid festive season the property market is now on a revival path as market watchers see positivity building up. Talking about the one year of demonetisation and its impact on the real estate sector Dr. Niranjan Hiranadani, President, NAREDCO says, “Past one year was like a roller coaster ride for the sector. But fortunately things have stabilised as of now. Demonetisation has led to greater efficiency and transparency and the developments of the past year have helped the sector.” According to  Anshul Jain, Country Head & Managing Director, India, Cushman & Wakefield,“Demonetisation, and other regulatory and legislative reforms have helped in structured development of the sector in the past one year. The immediate impact of these has been a significant rise in investment in real estate from PE and FIIs. The end user sentiments and activities, are slowly on the rise as developers are meeting their demand of creating more affordable and mid segment housing.”

Deepak Kapoor, President, CREDAI Western UP says, “In the first few months post demonetisation there was a temporary slowdown in the overall sales volume. However, a year later, the market seems to be picking up, on the back of several policy changes and low home loan interest rates. Market movement indicates that there would be price correction in the residential market in next 2 to 3 months as the industry is getting a boost by cleaner sources of fund raising”. 

Pankaj Goel, Secretary, CREDAI NCR, “Sales volume in the secondary residential market, especially in the luxury segment were a bit impacted, but now the market has revived. Actually the sale volume for the residential market has increased in the suburbs of Delhi-NCR”. 

Increased investments in real estate over the past few months with investors seeking JDAs and JVs with developers, more launches over the next 12-18 months and a boost to affordable housing have been the direct fallouts of the notebandi exercise. Thus, one can safely say that for the end users demonetisation has been a favourable move as it has reduced the role of speculators in realty market.  The sector is moving confidently towards consolidation and more organised phase — which is a positive horizon. 

Dip in Absorption (units) Source : PropEquity

Cities January 2016 January 2017 Change

        to Sept 2016 to Sept 2017

Gurugram        11,275 7,266      -36%

Noida          4,931 2,932     -41%

Pune                 40,366 24,622    -39%

Ahmedabad 22,643 13,169    -42%

Chennai         11,012 6,897    -37%

Bengaluru           37,200 20,505    -45%

Mumbai            9,974 7,722   -23%

Hyderabad            13,572 9,489  -30%