It has been a year since demonetisation was announced on November 8, 2016. Although, like many other sectors, real estate too got impacted by it. However, as per Colliers Research, the demonetisation wave seems to have settled down and the prospect for the real estate sector looks promising. During the last one year, apart from demonetisation, the real estate sector witnessed several significant policy reforms such as the implementation of the Real Estate (Regulation and Development) Act in several states, nationwide implementation of Goods and Services Tax (GST), and amendments in the Benami Transactions (Prohibition) Act.
Here’s the impact of demonetisation on the different real estate sectors:
Commercial Market: Commercial leasing market remained unaffected from demonetisation while commercial strata sale was impacted to a certain extent. In the first nine months of 2017, about 28.9 million sq ft was leased, which was almost on par with the last year numbers. There was temporary slowdown in the overall transaction volumes in the first few months post demonetisation. However, a year after demonetisation, investor activity seems to be picking up on the back of improved investor confidence and several major transactions have been concluded. According to Colliers Research, the grade A income yielding commercial leased asset should remain in demand in the coming months as REITs are likely to start listing in 2018.
Residential Sector: In the residential sector, sales in the secondary residential market, especially in the luxury segment, were impacted post demonetisation. However, transactions in the mid-segment and affordable housing remained less impacted, and the buyer preference remained tilted towards ready-to-move-in houses. As per Colliers Research, the residential sector was impacted more because of state-wide implementation of RERA and GST. Developers were occupied with RERA and GST compliance and buyers were also in a wait-and-watch phase over the implementation of these two rules. Due to continuous support from the government and push of Pradhan Mantri Awas Yojana, the affordable housing segment should pick up as more and more developers and investors will try to invest in this segment.
“The residential real estate sector had been under stress even prior to the announcement of demonetization. For a sector that was accustomed to cash dealings, demonetization resulted in a massive slowdown in sale transactions in the immediate aftermath of the announcement,” said Amit Oberoi, National Director, Knowledge Systems, at Colliers International India.
Industrial Sector: Like any other sector, the industrial, logistics and warehousing sector went through a slump over an initial couple of months owing to the cash crunch brought along with demonetisation. However, of late, the growth of the sector has been accelerated with the roll-out of the Goods and Services Tax (GST). Implementation of GST acted as a catalyst for rise of warehousing market in India by eliminating multi-layered tax system and state borders, thus creating a fair marketplace across the country.
As per Colliers Research, the real estate market outlook looks positive in the long term. “We are positive about the prospects of all commercial, industrial and residential real estate markets in the long run and expect more fund flow from institutional investors and banks. Moreover, growth in e-commerce, retail, fast moving consumer goods (FMCG), auto and auto ancillary, chemical and pharmaceutical industries are driving the demand further and will push the enormous warehousing volume growth to the next level,” it says.