A Month After Demonetisation, Real Estate Has Many Positives To Look Forward To

The strategic decision to scrap high denomination currency notes to tackle corruption has given mixed results in its first month. While banks have started facing a cash crunch, there have been big hauls of 'black money' by tax sleuths. The real estate sector's reaction has been subdued. A month has passed and the real estate market is gearing up to bounce back into action, most probably in the short run.

PropGuide looks at the present scenario and brings you the complete picture of what happened post demonetisation.

Primary market remains steady

Primary sales market across all major cities, has remained unaffected by the change. Primary market pertains to new launches of apartments, plots and commercial properties that are available for sale. Most buyers while opting for properties in this segment do so using home loans and similar non-cash transactions and therefore the segment has been least affected. The only impact has been an increase in the duration of the purchasing cycle which has prompted sellers and developers to offer lucrative offers to maintain buyer interest.

Who is feeling the pinch?

It is the secondary market, the unorganised-developer group and high-end property segment that has witnessed maximum turbulences. As per reports, the registration of properties has seen a decline by nearly 30 per cent while sales have dropped by about 20 per cent. Tier-II and Tier-III cities are the most hit by the process. The government's move has also created a temporary stagnancy which has augmented the rate of unsold inventory of residential properties. To achieve optimum liquidity, smaller investors and builders might direct their efforts in offloading their inventory.

Future predictions

The real estate sector so far has been cautious in its reaction to demonetisation. However, the outlook is positive. The move will bring in more genuine buyers and the market expects a boost in demand once the economy settles down. With increased liquidity home loan rates are also expected to drop which is good news for first-time buyers. Experts and analysts are of the view that interest rates on housing loans will be curtailed to a substantial level and that will prove to be a breather for buyers.

RERA to boost transparency

The proposed implementation of RERA, by mid next year, will further create more transparency by strictly monitoring unethical practices taking place in the industry. Regarding land transactions, Kishor Pate, CMD of Amit Enterprises Housing Ltd. said the sector will see a correction. “Land transactions, which have historically been driven by cash, are taking a major hit and we can expect a correction of 20-30 per cent in land valuations in the unorganised sector. Lower land costs in emerging areas and smaller cities will eventually result in lower cost of budget housing, as developers will assuredly pass on the benefit of these savings to their customers. Pricing is a critical factor in the current market environment, and no player will lose the chance to offer more benevolent price tags in order to secure business,” said Pate. Despite these challenges, builders and broker agencies are hopeful that the future of the Indian realty market will be bright as far as investment is concerned, guaranteeing higher capital appreciation.