1. Demonetisation impact: Residential sales likely fell 35% in Nov-Dec period; Sobha Developers to DLF, all hit by note ban

Demonetisation impact: Residential sales likely fell 35% in Nov-Dec period; Sobha Developers to DLF, all hit by note ban

Major real estate companies are expected to witness a decline in sales in the October-December quarter, with home sales slumping by an estimated 35% during the months of November and December, post demonetisation.

By: | Mumbai | Published: January 25, 2017 7:47 AM
real-estate-l A report by HDFC Securities said industry major, DLF is expected to report sales drop of 32% on a year-on-year basis. Mumbai-based realty company, Oberoi Realty might see deeper cracks, with sales tumbling by 70%

Major real estate companies are expected to witness a decline in sales in the October-December quarter, with home sales slumping by an estimated 35% during the months of November and December, post demonetisation. Bengaluru-based, Sobha Developers’ third quarter pre-sales of just 0.6 million sq ft has set a precedent for the sector in general and fuelled a widespread alarm that companies like DLF, Godrej, Oberoi Realty, Prestige Estates and Brigade will cumulatively account for housing sales tumbling by at least 25% this quarter, three sector analyst concurred.

A report by HDFC Securities said industry major, DLF is expected to report sales drop of 32% on a year-on-year basis. Mumbai-based realty company, Oberoi Realty might see deeper cracks, with sales tumbling by 70%; sales for Sobha Developers is expected to drop by 23%, the same report stated.
Sobha’s competitors Brigade and Prestige will also see a fall in sales by 16% and 9%, according to this estimate. Profits, on an aggregate basis is expected to drop over 20%.

According to a report by Kunal Lakhan, vice president (real estate), Axis Capital, sales that are accounted for this quarter are ones that were transactions made in October, the main festival month; hardly anything can be attributed to the month of December, when the impact of demonetization was in full swing.

Another analyst with an international brokerage fund said since the first week of November, no company has launched a project and home sales have crashed. Still, for the quarter, Bengaluru witnessed a decline of 21% in pre-sales, faring much better than other key markets, where sales declined up to 50%, the report by Axis Capital said.

“The slump in sales volume is because people are postponing purchases on hopes that property prices will come down,” said Kamlesh Rao, CEO at Kotak Securities.  It is clear that tempering interest rates will not invigorate sales in a meaningful manner. The management of Sobha Developers said it has not reduced prices in any of its projects and ruled out any possibility of price correction as it believes prices in Bangalore remain affordable.

  1. T
    T.A.P.Krishnan
    Jan 26, 2017 at 5:26 pm
    Every sector has its ups and downs and so is the housing sector. Its not always that the government comes out with measures to rescue a particular sector. The housing sector certainly needs some impetus from the government by way of permitting enhanced deductions both for prinl and interest paid on the housing loans availed and this is required more for the for the affordable cost housing and certainly not for for luxury housing or flats. Real estate prices across the country have increased to very unrealistic and unimaginable levels due to which housing prices have increased drastically and its time a drastic correction takes place. Ironically, there seems to be a thinking that there is huge demand and therefore anything can be a price that can be demanded for the price of land. such a correction would take place only when impetus from the government is given only to houses that defines a fundamental need and not for anything that has the nature of luxury. It would be unfair that people want to invest in houses costing more than a crore of Rupees yet expect the government to give them subsidies through tax deductions for prinl and interest on the housing loans. simply put, where there is a propensity to pay for a luxury housing, there must be a ability to pay taxes as well.
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