“The impact of demonetisation compounded by RERA, GST, and other reform have disrupted the market severely,” says Anuj Puri, Chairman of Anarock Property Consultants. As we mark one year of demonetisation, he shares his valuable insights in an exclusive interview with Nikunj Joshi of RoofandFloor Bureau.
Here are the excerpts.
1. Over the last one year, what changes have the real estate sector witnessed post demonetisation?
Post demonetisation and other reforms, the average property prices across all major cities in India have almost been stagnant. While cities such as MMR, NCR, and Chennai have witnessed minor corrections in price, other cities – namely Bangalore, Pune, Hyderabad, and Kolkata – have shown a small upward movement.
The subdued demand and huge unsold inventory have led developers to maintain competitive prices to offload their existing inventory faster and complete their ongoing projects sooner.
When compared to Q3 2016, the last quarter of 2016 recorded a dip of about 60% in new launch supply and nearly 32% decline in sales.
However, on the positive side, the number of unsold units has reduced by nearly 6%. This indicates that developers are more focused on selling off their existing inventory rather than going on a new launches spree.
2. What are your views on DeMo and its impact on the real estate sector?
The secondary sales market continues to display slow momentum while the luxury segment has shown only slight improvement – primarily in ready-possession options in select projects by reputed developers.
The impact of demonetisation, compounded by RERA, GST, and other reforms, have disrupted the market severely. The numbers of newly launched units and sold units have been continuously falling over the last one year. However, there has been an uptick seen in the overall sales rate in the recent few months.
This uptick is predominantly led by transactions in ready-to-move-in properties.
There was a notable departure of inquiries from buyers, who were more interested in ready-to-move-in projects and projects that are in the final stages of construction. Developers have followed a cautious approach and focused on clearing their ready-to-move-in units rather than launching too many new projects.
It is evident that that market will take some more time to regain it old movement. On the positive side, the funnelling of unaccounted monies into the real estate sector has become virtually impossible because of the demonetisation, which means that future growth in the sector will be based on much sounder and more sustainable fundamentals than ever before.
3. Some have argued for a switch to a cashless economy. Is this practical from a real estate perspective?
It is logical. In fact, all property transactions today take place on the basis of transparent cheque payments and legal online payment gateways in the post-RERA era.
Nobody wants their property investment to fall under scrutiny for untoward practices.
4. How do you think this transition has been for the sector? In future, can we expect crypto-currency like Bitcoin to be used in real estate?
The viability of any currency to transact in real estate in India would depend on whether or not the RBI and Government recognise it as valid tender. So far, that is not the case. In fact, the RBI was considering the notion of launching an Indian crypto-currency but apparently does not see much benefit from doing so.
The Indian real estate market is currently in the process of transiting from being a rather opaque and largely unregulated market to more transparent and organised one. As part of this process, cash flows need to be accounted for at every level. This is definitely not possible with money in the form of a currency whose origins and antecedents can, almost by definition, not be established.
5. What about property values? Has there been a market correction?
Price growth has largely been stagnant. Many developers have been proffering hard discounts or making offers which more or less translate into discounts, which comes to the same thing.
6. Top three trends that were predominantly seen in the sector post-demonetisation.
- Slackening of buyer activity in the resale and luxury segment
- Stronger buyer-focus on RERA-compliant projects and developers
- A continuing trend of the market favouring buyers rather than sellers
Your advice for RoofandFloor readers.
“If you are a buyer, understand from the current market dynamics that you are in the driver’s seat.”
If you’re an investor, understand that you will need an investment horizon of at least 4-5 years to start seeing sizeable capital appreciation. All said and done, it is an excellent time to invest in properties to rent out.
