“Demonetisation has impacted the resale market, which is otherwise flush with transactions involving black money or unaccounted cash. Consequently, the number of transactions in the secondary market has come down,” explains Vijay Gupta, CMD, Orris Infrastructure.
“Demonetisation could reduce the gap between actual transaction rate and the prescribed circle rates. It has now made the market a buyer’s market, as the scarcity of cash has led to a correction in prices. However, its long-term impact is yet to be ascertained,” says Gupta.
With transaction volumes in the residential sector being affected over the short term, it may be an opportune time to invest. “In the current scenario, where transaction volumes are less, developers value cheque deals and are ready to give attractive investment plans and discounts. Moreover, home loan rates are already in single digits and there is a high probability that it may further reduce. Other investment avenues, such as fixed deposits and gold, have become unattractive due to lower returns,” points out Surabhi Arora, senior associate director – research, Colliers International.
Impact of recent policy changes
Demonetisation is likely to bring greater transparency in the organised sector and shall be a blow to the unorganised sector. The implementation of the Real Estate (Regulation and Development) Act (RERA), which aims to protect consumers’ rights and impose higher penalties for delays and defaults, will improve accountability of real estate developers. The reduction in home loan interest rates, also augurs well for home buyers. “Affordable housing will receive a fillip, with measures like the RERA and the Akarma Sakrama (the Karnataka government’s scheme for owners of flats and plots to pay a penalty and have their buildings regularised). Such measures will lead to more clarity in the business and good products will see an increase in price points over a period. Hence, buyers should invest now to get the best deals, as sentiments are a little low at present,” maintains Zahed Mahmood, director of Silver Line Realty Pvt Ltd.
What type of property should buyers opt for?
“Smaller configurations in rapidly-developing urban suburbs, always have high demand from the rental perspective and they are easy to exit. Thus, they make a better bet for investment, especially if one is a small investor. Investing in plots may yield a higher return in the long term, but they have their inherent risks as well,” says Arora.
Both, commercial and residential real estate, have their own merits and demerits. “While residential real estate gives definite appreciation, commercial real estate is for those who can take risks and have substantial capital. Depending on the appetite and the objective of investment, one can look at the two segments.
As the market is now likely to be more end-user-driven, instead of investor-driven, there will be a surge in demand for ready-to-move-in properties. In terms of projects one should look at developers who have a good track record of completing their projects. Projects nearing completion or those that are part of a major infrastructure project, are a good bet,” advises Gupta.
This is the right time to invest, for those planning to invest in projects by reputed builders who use formal and legal channels of financing, agrees Ashwinder Raj Singh, CEO – residential services, JLL India.
“Many developers will be looking to achieve better liquidity for their future projects, making the first 1-2 months of 2017 an ideal period for buyers to negotiate favourable terms. The expected implementation of RERA by mid-2017, will bring a lot of compliance-related cost escalations for developers, forcing them to raise prices, even if they do not wish to,” he elaborates.
“One should always consider the budget and look for the right kind of property. Real estate will always remain the best asset to buy and invest. The only problem is that real estate is not as liquid as other asset classes such as gold. One needs time and patience to buy or sell real estate,” concludes Gupta.