Demonetisation hits Mumbai property, sales plunge to 6 years low

By: | Updated: January 10, 2017 8:32 PM

Property sales registration in the country’s commercial capital Mumbai touched a six-year low in November, data from state’s director-general of registrations show.

As expected, demonetisation has hit the real estate sector hard. (Reuters)As expected, demonetisation has hit the real estate sector hard. (Reuters)

As expected, demonetisation has hit the real estate sector hard. Property sales registration in the country’s commercial capital Mumbai touched a six-year low in November, data from state’s director-general of registrations show. The month saw a mere 3,799 property sales transactions registered. Such a low number of sales registrations in November was last recorded in 2013, when it stood at 3,842, which itself was a three-year low.

This confirms that consumers are adopting a wait and watch approach towards buying property as there’s a perception that prices will come down in the wake of demonetisation as the scope of cash component for payment that was not recorded has reduced.

However, registration numbers come with a lag and some purchases made may get be reflected later, and hence figure in the December 2016 onwards data.

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Developers have been quick to read the writing on the wall and have come up with innovative schemes and discounts.

However, it seems that so far had less than spectacular success in attracting buyers.

Samantak Das, national director (research), Knight Frank India, told FE that sales in November and December have remained under pressure. “The month of November was bad and even December numbers are nothing great,” Das said.

Given the slowdown, analysts feel that the trying times for the real estate sector will continue. According to a December 28 report from Kotak Institutional Equities, demonetisation will result in lower sales volumes, which will reflect in lower collections resulting in slowing construction and servicing of liabilities.

“Market-wide volumes could correct over the next two to three quarters by 10-30%. This will delay projects of several unorganised developers further, as availability of credit is limited,” it said.

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FE has been reporting that sluggishness in residential property sales is visible in the secondary market sales predominantly, but even the primary market has not remained untouched from the absence of cash in circulation.

Realty brokers say that in the secondary market, despite owners’ willingness to offer steep price discounts of nearly 20%, buyers have turned fence sitters, bringing sales to a near-grinding halt.

Abhishek Upadhyay, a broker from the suburb of Borivali, says buyers are waiting till the shortage eases. “There is no cash with anyone so there is no question of sales,” he said.

In Mumbai’s western suburb of Goregaon for instance, where the price of a 1,000-1,100 square feet apartment ranges between Rs 1.60 crore and Rs 2 crore, a 10% discount is available right away. Similar is the situation even in Navi Mumbai.

Navi Mumbai, which is considered a popular location for buying residential property among end users, has seen a sharp dip of 45% in registrations post demonetisation, according to a recent report from 99acres.com.

The property portal observed that the high-ticket market of Mumbai was among the most affected due to demonetisation because of the large share of cash-driven luxury and ultra-luxury segments. “Enquiries and sales took an immediate hit after the announcement,” it said.

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