1. Demonetisation to bring down property prices, premium housing developers to be hit most

Demonetisation to bring down property prices, premium housing developers to be hit most

While predicting property prices to come down on account of demonetisation of Rs 500 and Rs 1000 notes, Fitch Ratings has said real estate developers with greater exposure to premium projects would take the biggest hit on account of the government's move aimed at curbing black money.

By: | Published: November 11, 2016 1:24 AM
It said that builders who are exposed to projects in the National Capital Region (NCR) are likely to be hit most, because the region is known to have a greater reliance on cash-based transactions. (Reuters) It said that builders who are exposed to projects in the National Capital Region (NCR) are likely to be hit most, because the region is known to have a greater reliance on cash-based transactions. (Reuters)

While predicting property prices to come down on account of demonetisation of Rs 500 and Rs 1000 notes, Fitch Ratings has said real estate developers with greater exposure to premium projects would take the biggest hit on account of the government’s move aimed at curbing black money.

“The negative impact is likely to be more pronounced on sales of higher-end, premium property which is targeted by high-net-worth individuals and investors, rather than entry-level housing targeted by first-time homebuyers which are more often purchased by salaried individuals with limited undeclared income. Therefore homebuilders with greater exposure to large-ticket premium property projects are likely to be the most affected,” Fitch Ratings has said.

It said that builders who are exposed to projects in the National Capital Region (NCR) are likely to be hit most, because the region is known to have a greater reliance on cash-based transactions.

“We expect residential property prices and property sales to fall, as consumers attempt to work out how best to declare their wealth,” Fitch has said.

It said that the negative impact on builders is likely to last for the next 12-24 months.

Shishir Baijal, Chairman & Managing Director, Knight Frank India said real estate sector will come under intense pressure on account of the demonetisation. “Prices coming down to more reasonable levels in the residential property market cannot be ruled out. In the immediate future, the sector will be under serious pressure with volume and number of transactions in residential and land markets seeing a substantial downward trend. While it cannot be denied that the impact of this move will be felt in primary markets, secondary markets along with tier-II and tier-III cities will also take a hit,” Baijal said.

Arjun Basu, CEO & Co-Founder of Doorkeys.com, also feels that property prices would come down. “The secondary market will bear the biggest impact of this war against black money. The market was already in distress with a massive inventory overhang, and sellers are looking at the liquidation of their inventory at the earliest. This will benefit the consumer as the price for secondary or pre-owned properties are bound to spiral down. This will lead to more aggressive negotiations but also greater scope for transparent transactions. We laud this development”.

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