Home sales have not recovered meaningfully since the low point of demonetisation last December, data sourced from real estate consulting firm PropEquity indicated.
Home sales have not recovered meaningfully since the low point of demonetisation last December, data sourced from real estate consulting firm PropEquity indicated. In Mumbai and Bengaluru, the number of units sold are just about on par with sales last December, which witnessed the lowest level of home sales after the government decided to discontinue big notes and crack down on black money last November. In the national capital region (NCR), sales are still 26% lower when compared to December last. In Mumbai, sales are just about the same, a percentage point lower, and similarly, in Bengaluru, sales are 7.3% lower than last December. Experts pointed out that the industry had barely digested the effects of demonetisation when the GST and RERA were rolled out. After demonetisation, the residential sector picked up in March, but in May, RERA got implemented and GST kicked in a couple of months later. According to a report by Knight Frank released in June, residential launches in the top eight cities of the country declined by 41% to 62,738 units in H1 2017 compared to 1,07,120 units in H1 2016. The decline was 9% compared to the demonetisation period of H2 2016 when 68,702 units were launched. Ahmedabad and NCR bore the brunt with launches falling by 79% and 73%, respectively.
Industry watchers feel stimulation to be key for recovery. “Except for mortgage rates, there has not been any trigger for meaningful recovery to kick in,” said Sharad Mittal, head of Motilal Oswal Real Estate Fund. Since May, instead of focusing on measures that will activate sales, developers have been busy making their projects RERA-compliant or looking for lucrative JDA (joint development agreement) opportunities, Mittal added. Moreover, as Mudassir Zaidi, executive director (north) at Knight Frank India pointed out, homebuyers are no longer confident to invest their hard earned money. “At the moment, there is a fear about solvency of a developer and so people are willing to pay a premium rather than invest in an under construction project,” said Zaidi. Accordingly, the inquiries in the market are in favour of ready to move in apartments, he added.
Although RERA was established to allay such fears, its implementation is still in its nascent stages. “It is known that developers have delayed their projects by one or two years and the regulator has accepted the new deadlines submitted. So the feeling among buyers is that at the moment, developers have enough rope,” said Zaidi. Besides, speculative buying, which has always been a big piece in the total annual transaction activity, has been negligible as asset prices have not risen. Going by estimates, the green shoots seem nowhere in sight. Ratings agency Crisil said that demand is unlikely to revive in the next 12 to 18 months as the fundamental problem of low demand from end-users is likely to persist. Recently, though, developers launched projects offering easy pay schemes and hidden discounts during the festive season but no gamechanger is anticipated. Overall, another agency ICRA, said that developers will continue to adopt caution and not launch too many new projects.