What Property Price Fall? India’s Biggest Developers Dismiss Demonetisation Fears


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Home buyers are expecting a fall in property prices post demonetisation, but developers say that will not happen.

DELHI: Panic, fear-mongering and conjectures. Just a few words that describe what’s been happening around the country after what some are calling the ‘fateful announcement’ on the night of 8th November. With this move, the government intended to wipe out ‘black’ or unaccounted money from the country. But no one including those who made this decision could have predicted the outcome. Real estate, the sector alleged to be the reservoir of black money, has been severely impacted. Most property transactions so far involved a cash component aka black money which could amount to as much as 30% to 50% of the total cost of the home. But thanks to demonetisation, that trend may have come to an end, with real estate transactions across the country coming to a halt. In such a situation, home buyers are predictably waiting for property prices to fall. 

Also read- Property Prices In Delhi-NCR To Fall Thanks To Demonetisation

Also read- Will Demonetisation Cause Mumbai’s Property Prices To Fall? 

However, India’s biggest developers are sticking to their guns and are dismissing all talk of prices crashing. Here is what they have to say.

“NO BETTER TIME TO BUY” – Brotin Banerjee, MD & CEO of TATA Housing

“There has been an unwarranted fear mongering with regards to the impact of currency demonetization on the real estate industry. One can understand that a certain segment will feel the pinch – but the greater impact of this move will be the wind given to the aspirations of thousands of home buyers who firstly, have a fierce desire to buy their first home and secondly, have the utmost faith in real estate as an asset class. Even before this announcement, the primary housing market was being driven by easy access to home loans. The housing credit market has been growing at a CAGR of approximately 19 percent.  Demonetization, coupled with the implementation of RERA will make the buying process for consumers more transparent. With this move, the government has done right by the consumer and there has never been a better time to buy your dream home.” 

 

“EXPECT A BOOST IN SALES” – Rajeev Talwar, CEO of DLF

“While transactions in the sector are likely to go down in the short run as the currency matrix undergoes a massive change, the organized sector will surely benefit on the back of higher compliance with tax laws and regulation. The primary market is largely driven by reputed developers and thus, it is unlikely to get affected as they deal through transparent banking channels. The impact will be seen more in Tier II and Tier III towns, where the proportion of unaccounted money in both primary and secondary sales is higher. The demonetization move will also help reduce expectation of unrealistic pricing in the market and boost sales in the medium to long run.”

 

“MORE PEOPLE WILL INVEST IN REAL ESTATE” –  Niranjan Hiranandani, Co-Founder & MD of the Hiranandani Group

“There will be much more interest to invest in real estate. Suppose you have invested your money into real estate rather than keeping it in currency signed by Mr. Raghuram Rajan or Mr. Urjit Patel, at least you can be sure that real estate will pay, even if the promise to pay on the currency note is dishonored. Overall if the whole world is going to go through deflation that means India will go through deflation and that also means prices will come down. But then everything else will come down, interest rates will come down. If overall demand comes down than real estate will come down.”

“SALES WILL PICK UP BY FEBRUARY” – Suresh Krishn, President of CREDAI – Chennai 

“There won't be any impact in the Chennai real estate market. I am really surprised seeing many people writing about how 20-30% of the prices will come down.  But let me explain the Chennai market. 80% of the flats are less than a Crore and for all these most of them use home loans as they want to avail the income tax benefits. So there is no cash transaction in 80% of sales. In the luxury segment, yes cash element is involved. Yes that will be affected. Tier II and III cities, where majority of transactions are via cash, will be impacted. But I believe this is a temporary phenomenon. In another 2 months everything will normalise. Sales will come down definitely 20-30%. By February with the Budget we will be able to know what the price index will be like.”

These statements coming from some of the biggest players in the market establish one thing for sure- that there will be downward pressure on the property prices. But don’t expect prices to crash. Experts believe that developers with the financial might will continue to hold on to inventory along with bailing out cash-strapped players to avoid a free fall in prices. We all will be waiting and watching in anticipation.  

 

Edited by Nikhil Narayan Sivadas

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2 thoughts on “What Property Price Fall? India’s Biggest Developers Dismiss Demonetisation Fears

  1. Happy to see the leading developers are reaffirming themselves with words  that there will not be any price correction / No fall Being organized sector, Being a primary market, they being a reputed developers, Due to transparent banking channel processing, implementation of RERA, etc. there will be no impact in the Chennai real estate market..  But the reality is throughout India there is a very modest price correction to the extent of 25% to 30% as on yesterday.  A Property in Delhi which was advertised for Rs. 3.25 Cr. during First week of Nov. 2016, before demonetisation,  has been advertised now for R.s2.25 Cr., i.e. post demonetisation.  The property in a prime locality in South Delhi is still to be sold even after 30% price reduction.  Even though some of the state governments are encouraging  people to go for propriety transaction assuring them that Rs.500/ and R.s1000/- will be accepted by the state Registration Department hardly any transaction  took place,  All these are clear indication that the price correction is inevitable; the real estate sector will undergo a major revamp.  With the Black money removed from the circulation, and all transaction really becoming transparent, with the kind of huge unsold apartments on hand with most developers, in order to realize the capital fast, than loosing on interest, the shrewd developers may themselves offer good discount, and reinvest on new land proprieties  available at attractive rates now…. Hence real estate prices irrespective of  either Metro  or Tyre –I, or II cities  will witness a minimum price correction in the range of 25% to 50%

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