Will Demonetisation Cause Mumbai’s Property Prices To Fall?


Black Money, Currency Ban, Demonetisation, Note Ban, PM Modi, Corruption, Real Estate, India, Mumbai, Property Prices, Falling Prices
Real estate transactions in Mumbai have almost stopped, as buyers and sellers come to grips with demonetisation.
Highlights
  1. Brokers in Mumbai are reporting an almost complete halt in real estate transactions in the city.
  2. The secondary market has been the worst hit, with price cuts of as much as 30% predicted.
  3. Falling prices in the secondary market will see prospective home buyers move away from the primary market.

MUMBAI: Last week when Prime Minister Modi announced the demonetisation of Rs 500 and Rs 1000 notes, the entire nation was caught off guard. The real estate sector which thrives on cash transactions was the worst hit. In Mumbai, India's most expensive property market, real estate transactions have almost come to a halt.

“Our website which was rating around 1500 to 1700 people a day has come down to about 400 people a day. Enquiries which used to number 30, 40, 50 a day has come to about 5 to 7 enquires a day, which are also not always genuine. Going forward, there will be a 50% to 70% slow down or a no transaction period, because everyone wants to straighten their businesses out at the moment,” said realtor Sandeep Sadh who is the CEO of Mumbai Property Exchange.

There's almost a consensus that the high value, secondary property market could melt by as much as 30% if not more. 

“Prices will come down in areas like Bandra, Khar, Santacruz, Juhu and on the south Mumbai side, it will happen in areas like the Nepean sea road and Peddar road among others, where a was large element of cash transactions were taking place. On the other hand if you look at areas close to commercial hubs, for instance Bandra East or BKC, where you have mainly banking professionals who are end-users buying homes by taking loans, there you will not see much of an impact,” said Paresh Karia, founder of real-estate broking firm Easy2ownEstate.

However, developers have dismissed these claims and say the demonetisation will only have a short-term impact, which will not affect the cheques only, first sales transactions that make up the primary market.

“This move will make the industry more reliable and engaging for foreign investors. The unorganized and secondary market will be the most impacted by this decision.  With this banks will be flushed with funds and this will reduce interest rate and improve the GDP as well. Given this, sales will pick up. We as developers just need to ensure that we continue to provide quality homes to the buyers in time,” said Navin Makhija, managing director of The Wadhwa Group.

While that may be true, real estate experts say demonetisation will have a domino effect which no one will be able to escape.

“The secondary market will of course feel the impact more and faster. But that also means that the same number of buyers may slightly tilt towards buying from the resale market or the secondary market at a corrected price. That means the primary sales that were anticipated from these buyers is going to go away. All developers are concerned about this, even if they are not dealing in cash and are always going for clean and accountable cheque transactions,” said Ashutosh Limaye, national director of research at real-estate consultancy JLL India.

Most industry participants are keeping their fingers crossed, and praying that primary sales fuelled by employment generation will escape the demonetisation tsunami. But as the Prime Minister mentioned on his Facebook page recently, real estate prices need to come down to make housing affordable. And this couldn’t be truer for a city like Mumbai, where the idea of a common man owning a home is near impossible. 

Edited By Nikhil Narayan Sivadas

 

Also Read:

Demonetisation Impact, Bangalore’s Property Markets Take A Hit

Property Prices In Delhi-NCR To Fall Thanks To Demonetisation

Home Prices Fall As Demonetisation Hurts Chennai’s Real Estate Market

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23 thoughts on “Will Demonetisation Cause Mumbai’s Property Prices To Fall?

  1. Real estate came down everywhere in india after demonetization. after 1995 -2000 bcoz booming of IT sector, demand for sites, homes was raised, real estate people capitalised that unnecessary hype was created for land & home prices. it was easy for those who had black money as it was only cash transactions but difficult for honest people of industry. so kudos to modi's efforts in curbing black money. price reduction will occur in all sector but more importantly in real estate.

  2. Correction of atleas 45% was long overdue in bombay. Prices has to b made realistic. Common middle-class shud b able to afford the prices. I hope this govt cracks down illegal properties owned by many in India

    1. what we need is to create incentives for people to move out…the retiring group for instance…with the money they will receive from the sale of their apratment in mumbai…they could live at a resort for the rest of their lives…like the man said "i like room service". we need to create a concept…60 and free. peopel in some countries move to places like florida once they are no longer required to work. if we could move an entire generation to move out…thats the solution to creaking infrastructure, high prices, overcrouding, pgeon holes apartment, etc…will release the pressure for sure. the line has to keep moving.

  3. The sales by the investors in the secondary market was reinvested into primary sales at pre launch stage. When this money rotation stops due to reduction in secondary sales… the primary market should collaspe. With Rera and incomplete existing projects developers may come under liquidity stress with fall in primary sales.  This should see a fall eventually in primary market.

  4. Bombay is an overcrowded, smelly, filthy, dying city, why would anyone in their right mind will buy property there for crores? The pigeon-hole, micro-apartments in Bombay costing crores is a slap on the middle class. Price correction in not only Bombay, but also Bangalore and Pune is long overdue.

    1. Because Mumbai is a cosmopolitant city. People of different caste have no issues finding the right job. Where talent is valued. Its the financial capital of India. In 2001 there were 11 million people and in 2011 there were 22 million people. Maybe in 2021 there could be 30-40 million. Its high time people find jobs in their own city if they dont like Mumbai. Often people complain about Mumbai but dont want to leave their job.

        1. Please packup and move to Delhi dear, why to stay in Mumbai when its no more finanial capital. You ppl will talk but when it comes to gng back to home town some where in the UP or Bihar village, you will not move out of Mumbai. This pigeon hole will become a mansion for you. Go back and let the ppl of the city live happily.

          1. Bang on target reply… Mumbaikars are more eager to see the migration out of Mumbai.  Migration in is causing too much stress on the infrastructure. A cash cow is what Mumbai is for politicians and builders who control the cash flow to them through FSI and other regulatory controls. People are finding it hard to buy home with current prices and many are living on ever increasing rents which are high despite the huge inventory of unoccupied flats. Only shrinking population in Mumbai can bring some correction to the madness of the realty sector in Mumbai.  If demonitization can really cause drop in prices, then it will be one more positive aspect of it.  

        2. can a young girl travell alone at 11 p.m. alone without fear ? come to mumbai in midnight and youll see how free and open minded this city is . at 11 p.m. you will find females travelling,dinning out ,going out with friends without coming back home raped,

  5. big talks but big failures… if everybody cries for real estate black money and real estate deals in cash, where are the culprits.. it is as good as giving clean chit to these builders,,, everybody thumping high for Modi,, but where is the actual culprit , should we ask these questions or simply raise praises without any genuine answers…if whole india supports anti black money or anti corruption, then which india is coruupt??

  6. The price decrease will be temporary only. If it is permanent, then the economy is real bad. Realestate price falling due to demonetization is negative effect and not postive effect.

  7. As soon as demonitization took place on Nov 8th in a weeks time the developers raised the prices of their apartments on the real estate sites. Apartments in Mumbai those were at 1.3cr were increased to 1.54. Those in 1.8cr -> 2.4cr and the 3cr ones 3.5. (Builders such as Godrej, Lodha .) Now after few months if they reduce the prices by say 10lacs.Common people (fools) would feel the prices have corrected and they are getting a discount. They may negotiate further by more 5-10 lacs.Yet the builders are in profit. So the people who are having high hopes that the property prices would fall in couple of months should stop dreaming. At least in Mumbai were land is scare and more business opportunity. If the real estate crashes throughtout India. Then most likely the prices would fall by a few percentage. Overall 10-15%.So if you are getting a 1.5cr apartment for 1.15cr , 2..4 cr for 1.5cr and 3.5 cr for 2.7 then the prices seem to have fallen by margin around 10%. 

  8. Mumbai has a historical and psychological reputation of being the city of dreams but with Smart cities coming up and post demonetisation government will have more funds to work on emerging tier 2 cities. Mumbai with its clumsy infrastructure and stressful lifestyle will see buyers opting out of mumbai. Also with payment gateways and IT revolution there is no need to concentrate service industries in Mumbai. Buying properties in Mumbai at such high prices can be nightmare for investors more particularly when this city has just two escape routes i. e.  Dahisar toll naka and bandra sion route in a disaster situation. Mumbai can be a place for tourist attraction and historical value. 

  9. As a layman can you explain how rates will decrease, As builders may have incured losses (as Said Mumbai builders deal in black money) so due to Demonitisation they may  lost cash kept with them, either they will run away leaving uncomplete projects or try to recover their losses by increasing the price the consumer will always remain on receiving end of the policy.

  10. Agree that Government Demontisation strategy will do wonders in the coming future but regret that currently it has caused chaos among the lower middle class and for those living hand to mouth life. I am an NRI indian and remit a fixed amount every month to a maid who served us for around 20 years, now retired and settled in Hyderabad. Sadly, she is unable to encash the remitted amount for the past 2 weeks. Upon visiting the Bank, she was told that the remitted amount has not yet been posted on the system hence one can imagine her plight whereby she is living on borrowings from her neighbours and relatives. Wonder how long one will be deprived of their own funds!!

  11. Whatever happens in Rating people love to live in Mumbai. I have many couligues in my office from Delhi and are not interested to go back. Others who went to Delhi from Mubai out of compulsion are eager to come back on first clue from Company even with less salary. This is the situation, people love Mumbai.Few points1. Mumbai is a safe city in India.PEople can travel till 1-2AM in the night/morning.2. Anyone / everyone can afford the living in Mumbai.3. There is a job for anyone comes to Mumbai.4. People are sober and keep it up to themselves and do not interfere unnecessarily on others matters.5. Most people are honest and did not misguide people. I can keep writing it like an essay. But the buildr lobby took the advance of this and facing the chin music.

  12. there is no possiblity of fallin prices more than 10% to 15% as if prices will fall over 30% then NPA WILL INCREASE AND IT WILL FALL MORE AND INDIAN BANK WILL SEE SUBPRIME.