The impact of demonetisation, compounded by RERA, GST and other reforms, has disrupted India’s real estate market severely. The numbers of newly-launched units and sold units have been continuously falling over the last one year. However, an uptick was witnessed in the overall sales rate in the recent few months, which was predominantly led by transactions in ready-to-move-in properties. The secondary sales market continues to display slow momentum, while the luxury segment has shown only slight improvement — primarily in ready-possession options in select projects by reputed developers.
“There was a notable departure in the nature of inquiries from buyers, who were more interested in ready-to-move-in projects and projects that are in the final stages of construction. Developers have followed a cautious approach and focused on clearing their ready-to-move-in units rather than launching too many new projects. It is evident that that market will take some more time to regain it old movement,” says Anuj Puri, Chairman, ANAROCK Property Consultants.
On the positive side, the funneling of unaccounted monies into the real estate sector has become virtually impossible because of the demonetization move, which means that future growth in the sector will be based on much sounder and more sustainable fundamentals than ever before.
In fact, “all property purchases today already take place on the basis of transparent cheque payments and legal online payment gateways in the post-RERA era. Real estate transactions happening on the basis of cash, or with any significant cash component, are inevitably going to be questioned by the authorities. Nobody wants their property investment to fall under scrutiny for untoward practices,” informs Puri.
Price growth has largely been stagnant, and there also have been selective corrections at the level pf projects and micro-markets. According to ANAROCK Property Consultants, post demonetisation and other reforms, the average property prices (capital values in Rs/sq ft) across all major cities in India have been almost stagnant. While a few cities such as MMR, NCR and Chennai have witnessed minor corrections in price, other cities — namely Bangalore, Pune, Hyderabad and Kolkata — have shown a small upward movement. The subdued demand and huge unsold inventory have led developers to maintain competitive prices to offload their existing inventory faster and complete their ongoing projects sooner.
While comparing the Q4 2016 quarter during which demonetisation took place with Q3 2016, it becomes evident that there has been around 60% decrease in new launch supply, and a nearly 32% decline in sales. However, on the positive side, the number of unsold units has reduced by nearly 6%. This indicates that developers are more focused on selling off their existing inventory rather than going on a new launches spree.
“Definitely, many developers have been proffering hard discounts or making offers which more or less translate into discounts, which comes to the same thing. By the same coin, developers with strong capital bases and with projects in highly desirable locations have not had to resort to discounts and can wait for stronger demand to once again drive price growth,” says Puri.
From a consumer’s perspective, due to demonetization, the influx of liquidity in the system has ensured attractive home loan rates which are at their lowest in almost a decade. Owing to the ongoing transformation, developers have also been offering attractive rates and payment plans to draw potential buyers. “It is a great opportunity to book homes and cash in on the deals offered by developers. They can purchase a property of their choice by doing full cheque payment. Once the market stabilizes after these few months of disruptions, we anticipate a robust recovery in both the primary and secondary residential market,” says Surendra Hiranandani, CMD, House of Hiranandani.