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  1. Demonetisation impact: Residential sales likely fell 35% in Nov-Dec period; Sobha Developers to DLF, all hit by note ban

Demonetisation impact: Residential sales likely fell 35% in Nov-Dec period; Sobha Developers to DLF, all hit by note ban

Major real estate companies are expected to witness a decline in sales in the October-December quarter, with home sales slumping by an estimated 35% during the months of November and December, post demonetisation.

By: | Mumbai | Published: January 25, 2017 7:47 AM
real-estate-l A report by HDFC Securities said industry major, DLF is expected to report sales drop of 32% on a year-on-year basis. Mumbai-based realty company, Oberoi Realty might see deeper cracks, with sales tumbling by 70%

Major real estate companies are expected to witness a decline in sales in the October-December quarter, with home sales slumping by an estimated 35% during the months of November and December, post demonetisation. Bengaluru-based, Sobha Developers’ third quarter pre-sales of just 0.6 million sq ft has set a precedent for the sector in general and fuelled a widespread alarm that companies like DLF, Godrej, Oberoi Realty, Prestige Estates and Brigade will cumulatively account for housing sales tumbling by at least 25% this quarter, three sector analyst concurred.

A report by HDFC Securities said industry major, DLF is expected to report sales drop of 32% on a year-on-year basis. Mumbai-based realty company, Oberoi Realty might see deeper cracks, with sales tumbling by 70%; sales for Sobha Developers is expected to drop by 23%, the same report stated.
Sobha’s competitors Brigade and Prestige will also see a fall in sales by 16% and 9%, according to this estimate. Profits, on an aggregate basis is expected to drop over 20%.

According to a report by Kunal Lakhan, vice president (real estate), Axis Capital, sales that are accounted for this quarter are ones that were transactions made in October, the main festival month; hardly anything can be attributed to the month of December, when the impact of demonetization was in full swing.

Another analyst with an international brokerage fund said since the first week of November, no company has launched a project and home sales have crashed. Still, for the quarter, Bengaluru witnessed a decline of 21% in pre-sales, faring much better than other key markets, where sales declined up to 50%, the report by Axis Capital said.

“The slump in sales volume is because people are postponing purchases on hopes that property prices will come down,” said Kamlesh Rao, CEO at Kotak Securities.  It is clear that tempering interest rates will not invigorate sales in a meaningful manner. The management of Sobha Developers said it has not reduced prices in any of its projects and ruled out any possibility of price correction as it believes prices in Bangalore remain affordable.

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