Sudhir Pai, CEO, Magicbricks.com, says that demonetisation has pushed the probable buyers of real estate to defer purchases, but the developers are still holding onto the prices even as it is a terrible market for a seller. Pai talks with FE’s Surya Sarathi Ray in an interview. Excerpts:

How has demonetisation changed the real estate market?
The past two years had not been good for the real estate sector. When demonitisation happened, the sector was just coming off the Diwali period which generally sees increase in buyers’ activity. Usually, we see a spike in transactions during this time. Demonetiasion has led to an expectation among the buyers that prices will come down. Hence, a lot of people who were possibly looking to buy have deferred their purchase plan. So, the immediate effect on real estate has been the deferment of sales. But, neither the buyers nor the sellers have disappeared from the market. As we stand in the middle of December, activity level has almost come back to the September level. Buyers are still searching for homes. Similarly sellers are still looking to sell their homes. But, the number of transactions have clearly gone down.

If 100 flats were sold every day before demonetisation, what is the number now?
Sales are very city-specific and there is no general answer. But, based on our discussion with the builders, the number is down by 15 % to 50%. At Magicbricks, we don’t do the transactions. Buyers’ look for property here and then they connect with the developer. The number of buyers, as we can track them, has fallen 10%. Similarly, the number of listings on our portal is down by 13-14%. However, common sense suggest, the biggest hit is the secondary market. This is a terrible market for being a seller.

What is the impact of demonetisation on your business?
We are not in the transaction business. We only have the advertising revenue which comes from the owners who are selling their homes, property brokers, agents and the builders. Since it is an advertising business and not transaction business, we are not really affected as much as transaction business. Demonitisation took everyone by shock. Our business fell by 15-18% in the month of November. But, we are seeing a recovery from December onwards. We hope to do better than earlier.

Is there any impact on the rental market?
Earlier, if 100 people were looking to buy flats, 3% would end up in taking them on rent. Now, after the demonetisation, the number has gone up to 10%. More people are going for renting in the short-term as compared to buying. When there is little dip in sales, rentals are up. We are organising a rental mela. We feel rental market will be buoyant in the short-term and sale market will take a couple of months to recover.

Do you think that property prices have gone down?
There is an anticipation that the prices have dipped, but there is no evidence yet on that. If we see the listings on our website, there is no significant change in the prices. Developers are holding on the price in the prime market and in the resale market. We have no strong evidence that shows that the prices have started falling across the board. Prices will fall only on two cases – a) if the developer is in distress and b) if their input and other costs fall. Input costs have not come down. So, in the short-term, prices will fall if someone is in distress. Even if that happens, it will not happen across the board, but in some pockets.

How long can owners sustain?
There might be lot of distress, but most of the developers we are talking to say that they intend to hold prices. Owners have not started cutting prices yet. No one is going to act in a knee-jerk manner. Listed companies have little window to cut the prices as their margins hover between 8% and 15%. So, only if one is under distress, then only he will cut prices.

What are your future plans. Are you hiring?
This year we expect to clock around R180 crore revenue. Last year, it was R130-140 crore. Advertisement money is shifting from traditional media to digital media and we are benefiting from that. We have about 900 employees now. We are still hiring actively in product and technology verticals.