A year after demonetisation, housing sales are yet to recover. According to data sourced from real estate consulting firm PropEquity, across markets of Mumbai, Bengaluru, National Capital Region (NCR), Chennai and Ahmedabad, sales recorded in August are still 25% less than last November when the note ban was rolled out. Despite the recently concluded festive season, sales at best have been muted. Launches, too, were impacted following the overall tepid sentiment. For instance, in Mumbai launches dropped from 1,046 units in November to just 225 units in December last year. Ten months later, launches stood at 200-odd units. In Bengaluru, more than 1,000 units were launched last November. However, August data show that levels reduced to a mere 487 units.
Any recovery from historic low levels requires big bang stimulations, argued sector experts. Instead, in the last one year, the real estate sector has had to deal with a series of disruptions. “Except for tempering mortgage rates, there has not been any meaningful trigger for recovery to kick-start,” said Sharad Mittal, head of Motilal Oswal Real Estate Fund. If anything, the implementation of RERA and GST have negatively impacted sales. “Instead of focusing on measures that will activate sales to recover from the demonetisation lows, developers have had to focus on making their projects RERA-compliant and look for JDA opportunities,” said Mittal. Moreover, a slew of cases that has come up for resolutions at the National Company Law Tribunal have eroded buyer confidence.
“There is fear among homebuyers regarding solvency of a developer,” said Mudassir Zaidi, executive director (north) at Knight Frank India. So much so, that instead of new launches, people are preferring to move into ready apartments to mitigate construction risk. “They are following the principle that it is better to pay a premium rather than risk their hard-earned money in an under-construction project,” Zaidi added. But the real impact of demonetisation was perhaps felt in the secondary or resale market. In fact, in the days following the note ban, it was believed the hit will be limited to this segment, as it’s traditionally dominated by cash transactions. This, however, quickly turned out to be a foolhardy theory.
Ripple effects shaved off more than 35% sales with developers selling close to nothing in the weeks following demonetisation. On the resale market, the impact of sales could not be immediately determined as it is highly fragmented but experts opine that cash transaction dependency has reduced. “Cash transactions have certainly reduced in the secondary market. To that extent, demonetisation has been successful in what it set out to arrest,” said Anuj Puri, chairman of Anarock Property Consultancy. Corroborating his opinion, Surendra Hiranandani, chairman and MD at House of Hiranandani, said, though there hasn’t been a significant price drop in the primary market, there has been more rationalisation in the secondary market.
Ease of payment schemes, freebies and hidden discounts, which flooded the market just after demonetisation, continue to be the preferred marketing tools for developers to deal with the twin impact of GST and RERA. Still, it probably will take more to move the market in favour of the developers.