- Bangalore's secondary property market to be negatively impacted by PM Modi's demonetisation drive.
- Property registrations have come down to about 200 per day, compared to about 1,800 earlier.
- Primary markets supported by all-cheque deals and home loans to be relatively less impacted
BANGALORE: It has been a week since the demonetization ghost came to haunt us all. India's real estate market is learning to deal with its after effects and the end-user driven market of Bangalore is no exception.
The city is considered a realty haven where most home-buyers are from the IT or corporate sector and invest in the primary market, with homes purchased from developers and financed through bank loans. So it stands to reason that Bangalore may emerge unscathed.
“A white-collar city like Bangalore, where prices are already at the lowest cannot possibly witness a correction,” says Farook Mahmood, CMD at Silverline Realty.
While that may be true, there is no denying that the sudden decline in money supply expected to drastically impact the re-sale market, where profit -taking and commissions are mostly in the form of cash.
“You will see a huge correction especially in the residential market which will be, in my guess, be anywhere from 30% to 40% at current price levels. The velocity of sales will come down, especially in the residential segment. The luxury segment will get affected and the people's decision making will get delayed,” says Juggy Marwaha, MD – South India at JLL.
That is already evident when you look at the numbers from sub-registrars across the city. Sources in the Department of stamps and registration tell NDTV that property registrations have dropped to about 200 per day, compared to the 1,800-odd properties that used to be registered before demonetisation took effect.
Real estate brokers have been particularly affected by this drop in numbers, with many of them being left high and dry
“The registrations are not happening. Hardly about 2 to 3 registrations are going on at the sub-registrar’s office. People are not buying or selling their properties at the moment. And unless properties are registered, we brokers can’t get our commission,” says Irfan a broker at FBN Realtors.
Real estate experts claim that the pressure on the secondary market may see sellers cut prices, causing many home buyers to move away from the primary market, leading to a short-term dip in demand. In that way, Bangalore mirrors the trends seen in the Delhi and Mumbai property markets where transactions have almost stalled thanks to demonetisation. In Mumbai, there's almost a consensus that the high-value, secondary property market could melt by as much as 30% if not more. The impact is far worse in Delhi with ground reports indicating a 25% to 30% fall in prices.
Meanwhile, across India, real estate experts are predicting that speculative investment in the real estate sector will come down, as investors will be unable to use their black money reserves. This in turn may see prices come down as developers correct prices to appeal to the end-user. Land prices too are expected to see a similar trend.
This coupled with recent moves on the establishment of a real estate regulator (RERA) is expected to cleanse India’s real estate sector, bringing home buyers confidence back into the markets while hopefully kick-starting growth once again.
Edited By Nikhil Narayan Sivadas