- Brokers in Mumbai are reporting an almost complete halt in real estate transactions in the city.
- The secondary market has been the worst hit, with price cuts of as much as 30% predicted.
- 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