New Delhi: Housing sales were hit badly and prices fell post demonetisation but the realty sector benefited from the move as it led to greater transparency in the market, say property developers and consultants.
Land and luxury housing deals were severely affected after the demonetisation of Rs 500 and Rs 1,000 notes, announced on November 8 last year, as such transactions generally involved black money component. A step forward has been taken and the vision is to make India a USD 10-15 trillion economy, DLF CEO Rajeev Talwar said when asked about the impact of notes ban. “The step taken last year should have been named e- monetisation,” he added. He said the positive impact on real estate is that “now even secondary transactions have converted to banking channel as there is no cash available”.
Talwar said the housing sales have been down for last 4-5 years and it is not because of demonetisation. The approval process for real estate projects needs to be streamlined for faster execution, he said. NAREDCO President Niranjan Hiranandani said that past one year not only witnessed demonetisation but also other big policy developments like the implementation of RERA as well as taxation reform, GST. “To be honest, all of these have had their own share of teething troubles, but fortunately so far things are under control,” he said.
“Demonetisation has led to greater efficiencies and transparency in the real estate sector and we welcome this,” he added. Hiranandani said the net impact of demonetisation, Real Estate Regulatory Act (RERA) and the Goods and Services Tax would be positive, leading to increased transparency and accountability in the sector. CBRE Chairman (India & South East Asia) Anshuman Magazine said: “While it (demonetisation) did result in some short-term pain for the sector there has been no long term negative impact.” The demonetisation coupled with RERA and GST has boosted investors confidence, he added.
“Residential transactions initially fell but are coming back. Overall, it has proved to be a good move for the sector,” Magazine said. Knight Frank India Chairman and Managing Director Shishir Baijal said that a year back when the government decided to derecognise high denomination currency, momentum in the real estate sector came to a grinding halt. “There was widespread heartburn across stakeholders but somewhere the industry was hopeful about a greater good in store,” he said. While the industry grappled, two more structural reforms – the RERA and the GST – came into effect earlier this year, he said.
“Time and again the back-to-back policy regulations reinforced a slowdown of sorts in an already sluggish market,” he said, adding that the residential sector in particular was the worst affected. New projects dried up, home sales slipped to newer lows and piles of unsold stock remained untouched, Baijal said. The festive period also passed by without bringing any cheer to the sector, he pointed out. He added: “Today when we look back at this year full of reforms, it gives us a much more matured view on demonetisation and the subsequent policy interventions by the government. The short to medium term impact of this new order is likely to be much more than we had expected.”
Earlier, Knight Frank released its latest findings of the Real Estate Sentiment Index for Q3 2017 (June–September 2017) which plummeted to 39-month low and said that housing sector would continue to be under pressure for next 6 months. “Going forward I feel that the next 12 to 18 months are likely to be the ‘under observation’ period for the real estate sector. Industry stakeholders should spend the period in reorienting businesses in line with the new order,” Baijal said.
According to Knight Frank report, housing sales during H1 2017 declined 11 per cent to 1,20,755 units while launches dropped 41 per cent to 62,738 units as against the year-ago period. Co-working space operator Skootr Founder and CEO Puneet Chandra said demonetisation and efforts from the government to restrict black money and its digital policy have boosted the confidence of legitimate businesses. Manju Yagnik, Vice-Chairperson of Nahar Group, said “Demonetisation was a difficult move for many to deal with. However, it has greatly contributed in the standardisation of the pricing in the sector.” It has also helped in creating a cleaner image for real estate, she added.