Table of Contents
Priyansh Jain, a textile merchant from New Delhi, has an independent three-storeyed property in upmarket Pitampura locality. He has a large joint family and is now looking to sell his property and relocate to a bigger house. However, over the last one year, he has seen a drastic fall in property rates. “What was selling for Rs 20 crores at one point of time in 2015, was in the range of Rs 8-10 crores, in 2016. The recent demonetisation has added to the problems of the property market it seems,” says Jain.
The situation seems similar in other metro cities and tier-2 cities. Take for example the case of Mumbai’s upmarket Bandra region, where high-end properties have seen a correction of more than 10%.
“Given that old currency notes are no longer valid, home buyers/investors using unaccounted wealth to carry out transactions in cash, are facing a tough time and developers accepting cash components are facing a higher liquidity crunch than those accepting all payments through cheque/ bank transfer,” says Anuj Puri, former head of JLL India.
Regions and segments that have been worst hit by demonetisation
The National Capital Region (NCR) has been hit more than the Mumbai Metropolitan Region (MMR), on account of the presence of a large number of investors. As evident, it is the high-priced properties that have been hit the most.
“High priced properties in upmarket localities where there was always a premium, have been most impacted as transactions using cash are not possible now,” says south Delhi-based real estate broker, Manish Gupta.
Unlike Delhi, in upmarket Mumbai, property rates have either corrected or have remained stagnant, since mid-2016, says a broker of real estate agency Mumbai Estate Brokers, requesting anonymity.
“It is mostly the premium properties that have witnessed maximum correction. Owners of regular properties are in a wait-and-watch mode, as they are not getting the desired appreciation in property values. This segment however, has not seen any correction, although prices have remained stagnant,” he adds.
Impact of demonetisation on land transactions
Land parcels too, seem to be facing the brunt of demonetisation. For example, Jaipur, which has traditionally been a market with oversupply, has now witnessed a drop in sales of plots and independent properties.
Among land transactions, the farmland segment remains the worst hit. “Most agricultural land transactions involved a cash component, which got affected after PM Modi’s announcement on the evening of November 8, 2016,” says Puri. A similar scenario prevails in cities such as Lucknow, Nagpur, Indore and Ahmedabad, where land transactions have seen a dip on account of the demonetisation.
What lies in store, for home buyers?
The current slowdown is expected to continue for 2-3 quarters, with luxury and premium properties witnessing poor response from actual buyers. In general, the real estate market will continue to see healthy levels of transactions, mostly in the under-construction apartment segment.
Surendra Hiranandani, chairman and managing director, House of Hiranandani, points out that “Home buyers can get excellent deals in the market, as the industry has just begun to adjust to the new rules. This holds true, especially for the first quarter of 2017, as most developers will look to sell their existing inventory. So, consumers must make the most of this opportunity and finalise on attractive deals.”